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Full Version: California Resurrects Bill To Regulate Auction Drop-Off Stores and Consignments
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A bill (AB1178) that would require consignment sellers and auction drop off stores to be licensed was reintroduced in the California state assembly last week.

Full Assembly Documents associated with AB 1178 in the 2005-2006 Session:

http://www.leginfo.ca.gov/cgi-bin/postqu...er=ab_1178&sess=CUR&house=A&search_type=bill_update


Quote:SUMMARY  :  Provides for the creation of an electronic data 
          reporting system within the Department of Justice (DOJ) by 
          January 1, 2010, that will receive reports of tangible personal 
          property acquired by secondhand dealers and pawnbrokers and 
          specifies licensing fees that are to be used to fund the 
          creation and maintenance of the electronic data reporting 
          system.  Specifically,  this bill  : 

          1)Expands the definition of "secondhand dealer" to include 
            auctioneers that take possession of the tangible personal 
            property and coin dealers that trade in tangible personal 
            property.

          2)Exempts any person whose business is limited to the buying, 
            selling, or trading of secondhand clothing, or accepting 
            secondhand clothing on sale for consignment, from the 
            provisions of this bill if the person meets the following:

            a)  The person does not deal in furs, clothing ornamented 
              with precious stones or gems, or other similar clothing; 
              and,

            b)  The person has not been convicted of a theft-related 
              crime.

          3)Exempts "trade show" operators and vendors from the provisions 


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            of this bill.

          4)Excludes charities that receive tangible personal property as 
            a nonmonetary donation, participants at gun shows who are not 
            required to be licensed as a gun dealer, swap meet operators 
            or vendors, and junk dealers, from the definition of 
            "secondhand dealer."

          5)Subjects any person engaging in the business of a secondhand 
            dealer or pawnbroker, as defined, to the following fees:

            a)  A fee of $295 for processing a license application;

            b)  A fee of $50 for the purpose of licensing enforcement 
              that may be assessed by the local licensing authority 
              (i.e., local law enforcement);

            c)  An unspecified fee sufficient to cover the cost of 
              conducting a criminal offender record information 
              background check on an applicant for a secondhand dealer or 
              pawnbroker license (currently this costs DOJ $32); and,

            d)  A fee of $175 for the biennial renewal of a license to 
              be paid to DOJ.

          6)Provides that the fees specified in 5), above, shall not 
            increase at a rate greater than the legislatively approved 
            annual cost-of-living adjustment for DOJ's budget.

          7)Creates the Electronic Data Reporting System Fund and provides 
            that license application processing fees and license renewal 
            fees shall be deposited in this account and used for the sole 
            purpose of implementing and maintaining the electronic data 
            reporting system provided for in this bill.

          8)Adds tangible personal property that bears an identification 
            number, or that bears evidence of having had an identification 
            number, to the definition of "tangible personal property."

          9)Adds jewelry, sterling silver, sterling silver utensils, and 
            precious metals, stones and gems to the definition of 
            "tangible personal property."

          10)Provides that tangible personal property does not include the 
            following:

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            a)  Chattel paper, documents of title, financial 
              instruments, currency and money securities;

            b)  A business machine, as defined, that is taken solely for 
              repair and that is to be returned to the owner immediately 
              following its repair;

            c)  Goods acquired from outside the United States (U.S.) or 
              its territories and possessions; or,

            d)  Furniture, rugs, or used books.

          11)Requires secondhand dealers and pawnbrokers to report any 
            tangible personal property they acquire in the U.S. by 
            purchase or trade, or that they accept for sale on consignment 
            or for auction, to local law enforcement until the Attorney 
            General (AG) has certified that the electronic data reporting 
            system is operational.

          12)Requires all secondhand dealers and pawnbrokers to 
            electronically report every transaction involving the 
            acquisition of tangible personal property to DOJ via the 
            electronic data reporting system within 12 months from the 
            date the AG certifies that the electronic data reporting 
            system is operational (not to be later than January 1, 2010).

          13)Requires the AG to maintain the information contained in 
            transaction reports from secondhand dealers and pawnbrokers 
            and provides that access to this information is limited to 
            state and local law enforcement agencies.

          14)Prohibits any state or local agency from charging or 
            assessing a secondhand dealer or pawnbroker any fee, tax, 
            levy, license, or other assessment for reporting the 
            acquisition of tangible personal property.

          15)Requires the AG to consult with local law enforcement, 
            representatives of secondhand dealers, and representatives of 
            pawnbrokers on or before January 1, 2008, to work towards 
            developing a standard, statewide format to electronically 
            transmit reports to DOJ.

          16)Requires the AG to submit a report to the Legislature on or 
            before January 1, 2008, indicating progress made in the 


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            development and implementation of the electronic data 
            reporting system.

          17)Provides that a person who advertises as a secondhand dealer 
            or pawnbroker shall be subject to the licensing and reporting 
            requirements of this bill and shall be guilty of a misdemeanor 
            if he or she so advertises without holding a valid license.

          18)Provides that a district attorney or city attorney may bring 
            a civil action for any violation of provisions regulating 
            secondhand dealers, coin dealers, business machine dealers, 
            and pawnbrokers and that any civil penalties or fines 
            collected by a court shall be deposited with the county 
            treasurer in the county in which the court is situated.

          19)Makes technical and conforming changes.
         
          EXISTING LAW  :

          1)Defines a "secondhand dealer" as any person or entity taking 
            in pawn, trading, accepting for sale on consignment or for 
            auction, or auctioning, any tangible personal property, as 
            defined.
          Defines a "pawnbroker" as a person engaged in the business of 
            receiving goods in pledge for security for a loan.

          2)Requires secondhand dealers, as defined, and pawnbrokers to be 
            licensed by local law enforcement agencies.  Licensure is 
            denied to any applicant with a history of property related 
            crime, and that denial lasts for a period of two years.  The 
            law permits the local licensing authority and DOJ to charge an 
            initial processing fee, but does not specify the amount of 
            that fee.  For licensure renewal, the local licensing 
            authority may charge an unspecified fee and DOJ may charge a 
            fee not to exceed $12.

          3)Requires secondhand and coin dealers to hold for a period of 
            30 days any tangible personal property acquired before 
            disposing of that tangible personal property.  Pawnbrokers 
            must wait for a period of four months before disposing of 
            tangible personal property that is acquired.

          FISCAL EFFECT  :  According to Assembly Appropriations Committee, 
          DOJ estimates:
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          1)The following one-time costs to develop the electronic 
            reporting system, which it estimates would require 
            applications from 10,000 licensees in order to fully offset 
            cost:  $236,000 in 2005-06; and, 1.3 million in 2006-07 and 
            2007-08.

          2)The following costs to operate and maintain the system, to be 
            offset by biennial license renewals and additional license 
            applications:  $650,000 in 2008-09; $1 million in 2009-10; 
            and, $750,000 annually thereafter.

          3)One-time costs of $320,000 over three years to process 
            fingerprint checks for the initial 10,000 licensees, fully 
            offset by $32 fees, with minor additional costs thereafter for 
            new applicants, and also offset by fees.

          COMMENTS  :  According to the sponsor, the Collateral Lenders and 
          Secondhand Dealers Association, this bill will create a database 
          to track tangible personal property that law enforcement 
          agencies will be able to use to curtail the sale of stolen 
          goods, and the database will expedite the rapid recovery of 
          stolen property to its rightful owner.  The sponsor also 
          contends that this database will help prevent sales tax evasion 
          in secondhand transactions and strengthen consumer protections 
          in the secondhand market.

          The sponsor claims that a number of other states have created 
          reporting systems similar to the one provided for in this bill 
          and that this bill builds on SB 1520 (Schiff) Chapter 994, 
          Statutes of 2000, designed to establish a data reporting system 
          like the one in this bill.  The sponsor maintains that despite 
          the passage of SB 1520, California still has an inadequate 
          reporting system that is primarily based on manual inputs of 
          secondhand dealer transaction data into the state's Stolen 
          Property Tracking Systems.  The sponsor states that this bill's 
          intent is to make the electronic data reporting system a reality 
          so that the benefits of such a system may be realized.

          The sponsor notes that many secondhand dealers have expressed 
          concern because they believe this bill will impose new licensing 
          requirements upon them; however, the sponsor cites a recent 
          Attorney General opinion (No. 04-1001), issued on April 6, 2005, 
          that clearly states that operators of Internet "drop off" stores 
          are required to hold a license as a secondhand dealer.  Further, 
          the sponsor maintains that, while it is clear that any business 

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          dealing in secondhand tangible personal property is required to 
          have a license under current law, many of these businesses are 
          not in compliance.  The sponsor argues that this bill does not 
          place new licensing requirements on any business and that it 
          merely clarifies existing law and provides for the creation of 
          the electronic data reporting system.

          In support, the Los Angeles County Sheriff (LA Sheriff) 
          maintains that SB 1520 did not provide a funding source for the 
          data reporting system and, since its passage, plans for the 
          creation of the system have been in limbo.  The LA Sheriff 
          asserts that this bill "seeks to correct this issue by creating 
          an appropriate funding structure for the implementation and 
          maintenance of this electronic database."

          In opposition, the California Sate Auctioneer's Association 
          (CSAA) asserts that by adding the phrase "and who does not take 
          possession of the property" to the exemption granted auctioneers 
          under existing law, this bill will subject auctioneers to two 
          different regulatory regimes.  As a result, CSAA states that 
          auctioneers would be subject to all the burdensome reporting and 
          the 30-day holding period requirements of pawnbrokers and 
          secondhand dealers as well as the provisions of the regulatory 
          program pertaining to auctioneers.  Furthermore, CSAA argues 
          that auctioneers are not part of the problem with stolen 
          property that this bill is trying to fix.  CSAA contends that 
          the primary venues for fencing stolen property, in addition to 
          pawnshops, are flea markets and swap meets (which are exempted 
          from this bill) because they dispense cash on the spot.

          The California Coin and Bullion Merchants Association (CCBMA) 
          argue that this bill is "overkill of the first magnitude" and 
          that "it will seriously and adversely affect commerce in 
          California without providing any significant benefit in the 
          battle against traffic in stolen property."

          eBay argues that this bill expands the pool of sellers subject 
          to the secondhand dealer law despite a lack of credible evidence 
          that Internet marketplaces, sellers, or "drop-off" stores are a 
          significant repository of non-recovered stolen goods.  eBay 
          points out that sellers who use online marketplaces operate in 
          transparent venues that can be seen 24 hours a day, seven days a 
          week and that, as a result, such marketplaces are an undesirable 
          venue for the sale of stolen goods.

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          This bill increases fees and imposes fees and requirements on 
          more business owners.  Under existing law, the amount of the 
          licensure fee and licensure renewal fee for secondhand dealers 
          and pawnbrokers is left to the discretion of local law 
          enforcement, and DOJ is permitted to charge a fee not to exceed 
          $12 for licensure renewal.  This bill provides for an initial 
          licensure fee up to $295, a license renewal fee of $175, and an 
          unspecified background check fee to be charged by DOJ.  Local 
          law enforcement also may charge a licensing enforcement fee of 
          $50.

          Furthermore, this bill extends the existing licensure 
          requirement to coin dealers and business machine dealers who 
          deal in "tangible personal property" and auctioneers who "take 
          possession of" tangible personal property.  This extension not 
          only imposes fees upon business owners who currently are not 
          required to be licensed, but also imposes requirements upon 
          businesses that trade in tangible personal property.  This 
          includes a requirement to hold tangible personal property for 30 
          days before selling, trading, or otherwise dispensing of it.

          SB 1893 (Burton), of 2004, which died in the Assembly, would 
          have provided for the creation of the electronic data reporting 
          system within DOJ that would have been supported by licensing 
          fees on secondhand dealers, coin dealers, business machine 
          dealers, and pawnbrokers. 
A related article:

Quote:California residents who sell goods on eBay could have to pay a $295 fee and be regulated in the same way as pawnbrokers under legislation designed to crack down on the sale of stolen property.

The legislation being pushed by the state's 700 pawnbrokers would replace a cumbersome paper-based system of reporting transactions of secondhand-property sales to local law enforcement with a statewide electronic database paid for by dealers.

Opponents say the bill would impose needless requirements on consignment stores, auctioneers, eBay trading assistants and the drop-off centers sprouting up to help consumers sell items on the Internet.

Creation of the database is backed by the state Department of Justice...

full article: http://www.sfgate.com/cgi-bin/article.cg...HEGIM1.DTL&feed=rss.business