Do You Need An Auction License To Sell On Ebay?
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#147;I have been buying and selling stuff on eBay for years. Recently, I started taking consignments from people in town who don#146;t have the time or patience to sell stuff on eBay themselves. This business proved to be so profitable, I started taking out ads in local newspapers describing my business as an #145;eBay consignment shop#146;. Last week I received a nasty letter from my local Chamber of Commerce warning me that I was in violation of state law because I did not have an auction license. Do you really need such a license to sell stuff on eBay?#148;
Hoo boy, is this a hot issue right now!
Let#146;s begin with the basics. Just about every state requires that auctioneers obtain a license. This involves applying for the license, paying a fee, and (sometimes) taking a 20 or 30 hour training course at a nearby college. If you operate an auction house or barn where you take other people#146;s property on consignment and conduct #147;live#148; auctions, you will almost certainly have to get this license before you can bang your first gavel.
But what about online auctions? A growing number of states have been expanding their #147;auctioneer license#148; requirement to include certain online sellers as well. Why? Well, there are basically two reasons:
Consumer protection -- people who have problems with online auctions and who don#146;t understand the proper way of dealing with those problems (such as posting #147;negative feedback#148; on eBay#146;s Feedback Forum) register complaints with their state#146;s auction board, and the board decides to #147;do something about it#148;;
Greed #150; Internet commerce has cost the states tons of revenue from sales and other business taxes (which usually don#146;t apply to interstate sales), and the temptation to impose a license fee as an #147;indirect tax#148; on Internet auctions may be irresistible in states that are struggling financially.
So do you have to get an auction license to sell on eBay? It depends. You will have to call your attorneys or your state#146;s auction board (for a directory of auction boards in all 50 states, go to
www.a1auctions.com/licensing
), and ask them three questions, in this order:
What are the requirements for obtaining an auction license in your state? If it isn#146;t that hard or expensive to get one, it may be better to just #147;bite the bullet#148; and get the license so you can sleep better at night (and get a leg up on your unlicensed competition #150; your buyers will feel more comfortable knowing you are a #147;licensed#148; auctioneer).
If getting a license is too painful, does the license law apply to online auctioneers such as people selling stuff on eBay?
If the answer to question (2) is #147;yes#148;, does the law apply only to #147;consignment shops#148;, or does it apply to all sellers who regularly buy and sell stuff on eBay?
If all you are doing is selling stuff out of your attic on eBay occasionally, or helping your Aunt Irma clean out her basement and not charging her anything, you will almost certainly not be required to obtain an auction license. At the other end of the spectrum, if you are in the business of taking other people#146;s goods on consignment and selling them on eBay for a fee (as this reader seems to be doing, and as eBay Trading Assistants do), and your state requires online sellers to be licensed, you probably will be required to get one. The idea is that by taking other people#146;s goods, you stand in a position of trust (what lawyers call a #147;fiduciary relationship#148;) to your sellers, and have certain legal obligations to your sellers that you must take very seriously.
The #147;grey area#148; is in the middle: what if you are routinely buying stuff from wholesalers, paying for the goods up front (not taking them on consignment), taking title to them, and then turning around and selling them on eBay hoping to make a profit? After all, you could argue that such a person is not an #147;auctioneer#148; at all, but merely a retailer selling goods in interstate commerce, taking advantage of eBay#146;s software to find buyers who will purchase the goods directly from the seller without the intervention of an #147;auctioneer#148; or other third party. Unfortunately, the state license laws are frequently unclear on this point, and unless your state auction board has published crystal clear rules stating precisely that you do not need a license to sell on eBay or another #147;nationally recognized Internet auction service#148;, the only way you can be 100% safe is to get the license.
Here#146;s an idea: rather than call the auction board yourself and alerting them to what you are doing, have your attorneys make the call on your behalf. That way you will preserve your anonymity (lawyers, after all, cannot freely disclose to third parties who their clients are), and if your lawyers are any good they will know how to ask the tough questions in such a way that you are more likely to get the specific guidance you need.
If you still don#146;t get a straight answer, get the license. When it comes to government regulation of any kind, no matter how unfair, it#146;s always better to be proactive and make a good faith effort to comply with the law than it is to ignore the law and hope the regulators won#146;t catch you. Because sooner or later, they will, and with your luck, you will be the #147;test case#148; that people read about on the front page of their local newspapers.
Until the law in this area gets a lot clearer, it#146;s the best you can do.
Cliff Ennico (
cennico@legalcareer.com
) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at
www.creators.com
. COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. .Permission granted for use on DrLaura.com
