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Mon Apr 7 2008 22:13:18

PESA eBay Group, A Nonprofit of Convenience

By: Ina Steiner

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There was a fallout at the eBay seller organization called PESA (Professional eBay Sellers Alliance) more than a year ago when the Board surprised members by saying it was not going to pursue non-profit status and would instead distribute shares to some members. So imagine my surprise when I received a press release from the organization calling itself as a "non-profit trade association" more than a year later.

I wrote to PESA Executive Director Jonathan Garriss for clarification. Garriss said that PESA had "planned to convert the non-profit corp to a regular shareholder corp. Because of the mess that it stirred up, and the fact that members only saw conflict problems, we did not change the corp structure."

An email dialog ensued, leaving me with as many questions as when I started.

Garriss pointed me to the "About Us" page on the PESA site. There, it says "PeSA has not applied for 501(c) non-profit status. Our incorporation as a non-profit corporation was established in 2005 and is symbolic of our mission."

He also said, "I think its very important to differentiate between a non-profit corp and a 501c6 IRS organization." Doing some general research, I couldn't find anything that explained the difference, so I asked Jonathan to explain or to put me in touch with PESA's accountant to explain what that meant. Here is his reply:

Hi Ina,

That seemed to be a resend of the email I responded to a couple of weeks ago. We've discussed this issue at length last year, which you also reported on. The facts are the same as they were a year ago and my previous answer is very detailed about the corporate structure. I'd also refer you to the state corporate regulations for filing a non-profit corporation. I have volunteered alot of time for PESA and I have never billed PESA for my time nor been paid anything except for reimbursing direct expenses I paid on behalf of the organization. I believe that sellers need to work together to change the eBay marketplace for the better, which is one of PESA missions. I'd be glad to discuss how eBay can help its sellers, but an old politics story does not benefit sellers.

Sincerely,

Jonathan

In doing some research to figure out the requirements of an organization filing a non-profit in New Hampshire, where Jonathan had previously said PESA had filed as a non-profit corporation, I discovered that the state does not verify the tax status of corporations.

PESA was formed initially as the eBay Elite, though it registered with the state of New Hampshire as "E-Commerce Merchants Alliance Inc." Those records have never even been updated, and there is no organization in the state corporation database known as Professional Ebay Sellers Alliance.

This got me wondering under which name PESA was filing taxes, so I sent an email to Jonathan, "Does PESA file taxes?" Jonathan did not respond.

Does it matter to me if PESA lacks transparency - after all, eBay sellers have a choice in whether they belong to PESA. Well, as editor of an industry publication, I must adhere to AuctionBytes longstanding policy of verifying the non-profit status of an organization that claims it.

Jonathan stated in his last email to me, "I have volunteered alot of time for PESA and I have never billed PESA for my time nor been paid anything except for reimbursing direct expenses I paid on behalf of the organization." However, his own private company owns ECMTA, which markets to PESA members and is piggy-backing on the PESA summits. I find this troublesome and believe it's a conflict of interest to have an executive director of a trade organization promoting his own project to those members. This is particularly true in light of the issues PESA members raised in 2006 about financial, tax and accountability issues at the organization.

I welcome PESA members, the Board and the Executive Director to fill in the gaps, and I hope that this blog entry does not open the door to bashing high-volume PowerSellers in the comments. Rather, I hope it opens a dialog in which more information is shared, which as a writer and publisher, I believe is always a good thing.




Comments (22) | Permalink

Readers Comments

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: ebayperson

Mon Apr 7 23:30:14 2008

I find this article troubling especially when I have noticed how much good press you give to IMA and its founder.  Why would you now do this timing-wise when the PESA Summit is coming up and the founder of IMA has personally trashed PESA on the eBay boards recently.I hope that you ''investigate'' BOTH groups thoroughly especially in the area of business ethics of founders, conflicts of interest, etc. etc. etc.  Frankly, neither is very impressive and neither has a huge seller base at this point.  But only one is nasty to the point of embarassment in his vitriol over the other in public and you know who that is.  Be careful who you align yourself with Ina.

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: Im4profit

Mon Apr 7 23:52:21 2008

My understanding is that 501(c) is part of the IRS code (federal) and simply relates to the federal income tax status of a corporation. As such, request 501(c) tax exempt status is optional -- the request (if granted) simply means that most forms of income to the organization would not be taxed federally. Donations to a 501(c)6 trade organization are not deductible as they are with 501(c)3 corps.

It doesn't ruffle my feathers much that PESA hasn't requested 501(c)6 status from the IRS, as long as they are filing federal income taxes, honestly reporting all income, and paying any taxes due.

It does bother me that (as you are reporting) PESA is the subsidiary of a for-profit corporation owned by a member of PESA's board. No ''trade association'' should be the direct holding of any individual or corporation that is a member of the trade group. That absolutely has the appearance of a conflict of interest. If PESA wants to be considered a trade organization, every member of the PESA board should act immediately to eliminate any such appearance or hint of impropriety.

As long as PESA is so structured, its credibility and intent is drawn into question.

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: dimes

Tue Apr 8 00:40:19 2008

Geez, I really had no interest in this story until reading these comments.

Now it's starting to get interesting.  What's IMA, a splinter group from PeSA?

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: Dan

Tue Apr 8 00:43:58 2008

Ina,

I earned a BA in Nonprofit Organization Administration in 2005 and I am also an ebay seller.

By legal definition, a US based non-profit organization must have approved
501(c)3 status to be called an offical, legal, tax-exempt NON-PROFIT organization.

All non-profits, must have this status and also make annual tax filings in conjunction with this.

This is all very easy for anyone to research. If any organization isn't officially a ''501(c)3'', they aren't what anybody in the nonprofit world would call a nonprofit. I just wanted to clarify this.

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: Unhappy Powerseller

Tue Apr 8 00:57:39 2008

THANK YOU INA for all you do, staying on top of issues in the online merchant industry and tracking its key players and up-and-comers. Continue On!! Although some may argue that certain subjects aren't story worthy but others may see it differently, so don't stop; that would only be a disservice to many.

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: Dan

Tue Apr 8 01:07:09 2008

Here is the distinction between a nonprofit orgainizaion 501(c)3 and a group that is only a 501(c)6:

501(c)(6)
The 501(c)(6) is specifically reserved to chamber of commerce organizations, economic development corporations, real estate boards, trade boards, professional football leagues (e.g., the NFL), and other types of business leagues. They are characterized by a common business interest, which the organization typically promotes. Organizations under this category are exempt from most federal income taxes. Donations to a 501(c)(6) are not tax deductible as charitable contributions, as is the case in the 501(c)(3) category.

501(c)(6) organizations may engage in limited political activities that inform, educate, and promote their given interest. They may not engage in direct expenditures advocating a vote for a political candidate or cause. Donations to 501(c)(6) organizations are not required to be disclosed.

501(c)3
The three principal classifications of 501(c)(3) organizations are as follows:

A public charity, identified by the Internal Revenue Service (IRS) as ''not a private foundation,'' normally receives a substantial part of its income, directly or indirectly, from the general public or from the government. The public support must be fairly broad, not limited to a few individuals or families. Public charities are defined in the Internal Revenue Code under sections 509(a)(1) through 509(a)(4).

A private foundation, sometimes called a non-operating foundation, receives most of its income from investments and endowments. This income is used to make grants to other organizations, rather than being disbursed directly for charitable activities. Private foundations are defined in the Internal Revenue Code under section 509(a) as 501(c)(3) organizations which do not qualify as public charities.

A private operating foundation is a private foundation that devotes most of its earnings and assets directly to the conduct of its tax exempt purposes, rather than to making grants to other organizations for these purposes. Private operating foundations are defined in the Internal Revenue Code under section 4942(j)(3).


[edit] Charitable deductions
Under IRC Section 170, individuals giving to 501(c)(3) organizations that are either public charities, private operating foundations, and certain private foundations may deduct contributions representing up to 50% of the donor's adjusted gross income if the individual itemizes on his tax returns. Individuals giving to 501(c)(3) organizations that are private foundations may generally deduct contributions representing up to 30% of their adjusted gross income. Corporations may deduct all contributions to 501(c)(3) organizations (regardless of foundation status) up to an amount normally equal to 10% of their taxable income.

501(c)(3) status for charities and the related section 170 deduction for donors are important to many charitable groups. Some individuals and groups (and virtually all foundations) will not give to a charity if it does not have 501(c)(3) status (as no tax deduction would be allowed). Therefore, loss of this status can be harmful (if not fatal) to a charity's existence.


Examples of 501(c)(3) organizations
Prominent 501(c)(3) organizations include:

American Red Cross
Goodwill Industries
Habitat for Humanity
Salvation Army
United Way


PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: mi2high

Tue Apr 8 02:11:49 2008

I am a PESA member and was on the forum boards hosted at ebay when this all came to light. I was also a new member so it was not all that emotional for me. I understand the hard feelings and it seems to be the off-shoot group IMA is doing fine and even thriving. Good for them. I am not  member of MIA and don't plan on joining. I am perfectly pleased with PESA and hope great things for the hard working people in charge. I hope they get rich. I could care less if it is for profit or not. It is PESA and invaluable to me. I appreciate all they have done for me and it's been nice to have a new(recent) members on the forum with some great ideas to share. Anyway, PESA can have my money, they can do whatever they want as far as I'm concerned. Keep up the good work!

Thank you,

Alice

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: 659304

Tue Apr 8 04:19:18 2008

Ina, you're being played the fool by IMA.  PESA not-for-profit, non-profit, whatever. The issue is the head of IMA and his neverending need to badmouth PESA.

[Violating material removed at request of copyright holder]

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: nomatter

Tue Apr 8 08:24:34 2008

Does any of this really matter?  If you get value from being a member of a group, stay in the group.

If you get no value from the group, leave the group.

The petty fighting, politics and tax status frankly mean nothing to me.  If it helps my business, I'm for it.  If it doesn't, I am against it.

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: PESA Member

Tue Apr 8 11:21:14 2008

I joined PESA when they were still called the eBay Elite and remain a member today. Non profit status has it's pros and cons and I trust PESA's BOD has made the proper decisions for the future of PESA however full transparency  would put this matter to rest for good.

What I will never understand is why when questions of this sort are asked of PESA instead of simply answering the questions honestly we are exposed to comments trashing the other group.

PESA I really doubt anyone cares one way or the other. Please, just post the facts and put this matter to rest permanently.





 

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: PESA Member

Tue Apr 8 11:53:00 2008

I often times read auction bytes for information and to keep abreast of the industry.

I was disheartened to read this and see the accusatory wording.  PESA has been a benefit to myself and in the outreach to Ebay should be viewed as a benefit to all sellers as well as buyers.  Your article implies none of the positives and I don't believe it represents the reporter in a positive light.  The impression on my read of this article is that the reporter has an agenda.  I would hope that the goal of auction bytes is reporting, which isn't what this article appears to be.

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: anonymousman

Tue Apr 8 12:46:15 2008

While I understand the need for 'investigative reporting,' I think this story should've been fleshed out a bit more and written in a more unbiased manner.  Did you contact anyone besides Mr. Garriss?  Did you do any research of your own?  Do you understand the legal distinctions?

Both groups have flaws and I'd rather see an analysis of those flaws than nitpicking over tax status.  Just b/c you're a non profit doesn't mean you're free of conflicts of interest.

In choosing a group, tax status isn't the first thing on my mind, but rather how do those group members treat each other (and non members) in public and behind closed doors?  While I'm a member of both groups, only 1 group conducts themselves in a way that I find appealing.

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: Not IMA or PESA

Tue Apr 8 13:21:19 2008

I, for one, welcome this spotlight being directed at PESA. While I think a seller's organization is needed in this environment, the resistance to transparency seems to indicate that things haven't always been handled well within PESA.

There are archives of PESA posts that will give quite a bit of background here:

http://www.therossshow.com/search.php?searchid=110834


http://www.therossshow.com/showthread.php?t=6129&highlight=pesa

Thanks
Ina! Never stop asking questions!!

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: Im4profit

Tue Apr 8 14:14:35 2008

Has PESA ever published an annual report? According to these bylaws PESA published (http://www.gopesa.org/bylaws.htm though they look a little old) they are to publish annual reports on their website.

http://doj.nh.gov/charitable/index.html

New Hampshire also has filing requirements for non-profits (whether they are 501(c) or not). I do not believe that PESA can file a 990 or 990-EZ postcard since it's not a 503(c).

Just so it is said... I've never been a member of PESA or IMA and only care because PESA -claims- to be a trade association representing a trade I participate in. HOWEVER, the lack of transparency makes them appear to be anything but a non-profit trade association.

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: mi2high

Tue Apr 8 14:34:40 2008

I just love how there are so many MIA people available to TALK FOR STEVE!
On the PS board at ebay, here, there, anywhere anything is being discussed along comes someone that knows exactly what Steve thinks, feels, and will say in the given situation.

Ina,

I was almost warming up to the idea that there might be some information of value here and begin reading more often. Lately the net is full of too many opinions by unqualified, uninformed, and over enthusiastic bloggers that's not worth reading. I remember when this site started. If this story is the way of things to come here I think I'll pass.

Thank you,

Alice

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: Dues Paying PeSA Member

Tue Apr 8 15:21:04 2008

I'm a dues paying member of both PeSA.

It has been approx. a year since I have been able to get on the PeSA boards. My password doesn't work and after numerous emails, I'm still not able to get into the group's website.
If my plea for help is answered, I'm told it is something to do with AOL but it seems that I get every other PeSA email.

My experience is that PeSA is mainly interested in the dues. They sure profited from my membership as I can't even precipitate in the group.

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: Patricia

Tue Apr 8 17:13:37 2008

I'm not bashing PeSA but I'm a small seller who pays her taxes faithfully.  If they need to pay tax I hope they're doing so!

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: Dues Paying PESA Member

Tue Apr 8 17:59:57 2008

To the other dues paying PESA member that posted.  I imagine you were as grateful as I am that current paying members had their dues waived for the entire 2008 year.

I have found PESA support to go above and beyond for members.  There is  contact information to reach a live person and receive immediate assistance.  This eliminates the need to play email tag and ''precipitates'' the need to vent unnecessarily.

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: Mary Ann

Tue Apr 8 18:17:43 2008

Non-profits are required to make their most recent federal tax return (Form 990) available for public inspection. All you have to do is ask them for it, and they have to send a copy to you. They may charge a reasonable copying fee. If they refuse, or do not send a copy, you may file a complaint about them with the IRS. Here is a link to the IRS about public disclosure:

http://www.irs.gov/charities/article/0,,id=96430,00
.html

PESA eBay Group, A Nonprofit of Convenience   PESA eBay Group, A Nonprofit of Convenience

by: Isa

Tue Apr 8 18:51:25 2008

I agree with Dan!  If they are not a certified 501(c) they have no business calling themselves ''non-profit''!  The 501(c)3 designation is essential to any non-profit's claim to veracity.  I work exclusively with non-profits and we will not work with anyone who does not have 501(c)3 status.  Unfortunately there are people out there who will try to scam people and say that they are a legitimate charity when they aren’t.  The 501(c)3 status is the best tool we have in weeding those people out!

Some posters have insinuated that this is just an issue of semantics.  It’s not!  It is really very unfortunate that we have to have these designations, but as I said, it’s the best tool we have in differentiating legitimate organizations from those that are not.

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