On July 1, 2011, Louisiana Governor Bobby Jindal signed into law Act 389 which brought forward a large number of new regulations dealing with the sale of secondhand goods. The effective date for Act 389 was August 15, 2011. But, there has been a great deal of confusion surrounding this law which has made dealing with the numerous specific requirements within the law even more difficult for many small businesses in the state. In this post, I am going to try to peel back the layers of the onion and look at what requirements are actually present in the law and which ones were simply urban legend that popped up online. I also want to offer some explanation of some serious issues that will have to be dealt with by small business owners in trying to comply with the law. The law was difficult enough to understand without the addition of some misleading information from the internet.
Act 389 places a number of reporting and operational requirements on "secondhand dealers". A secondhand dealer is simply any business that buys, sells, or trades any type of used or junk property. There is no exemption for businesses who only deal with secondhand goods as a small part of their overall business. Take Gamestop for instance. They sell new video game consoles and games. But, they also will repurchase games, game consoles, and iPod products and then recondition those units and resell them to their customers. My kids love taking old games they are tired of playing to Gamestop and getting credit towards the purchase of new games. Under this system, Gamestop would be considered a secondhand dealer.
There are some exceptions provided in the law. The law does not apply to nonprofit entities, operations owned by state or local governments, used car operations, auto junk yard dealers, dealers at gun and knife and other hobby shows, or yard sales/garage sales as long as they are held at personal residences. So you Church's thrift store and Goodwill won't have to worry about where their donations came from.
Well now that we know who this law applies to - what are the requirements? First, a dealer must gather the following information from any seller of used or junk property:
- Name and address of seller
- Date and place of purchase from seller
- The distinctive number from the seller's driver's license, passport, military ID, or other identification issued by a governmental agency.
- Some sort of photograph of the seller that is sufficient for law enforcement to identify the seller
- A dealer may also obtain thumbprints from the seller in lieu of a photograph
- The license plate number of the vehicle used by the seller to transport the goods to the dealer
- A full description of all goods purchased from the seller - including the weights of any bulk goods purchased
- A signed statement from the seller that they own and obtained legally and have proper title to all the goods they are selling
The dealer in these secondhand goods will be required to maintain this information in either a manual ledger or electronic format for at least three years from the date of purchase. The information is to be made available for any law enforcement official to review at any time during the three month period. Obtaining this information as required is extremely important. Any dealer who fails to gather or maintain this information and produce a report required by a law enforcement officer that is researching some sort of stolen goods will be assumed to have knowingly received and resold stolen property. That dealer will then be subject to prosecution for dealing in stolen property.
These record keeping issues may seem very substantial and worthy of a lot of debate. However, the real intense arguments regarding this legislation centered around another section of the law. Act 389 and the related Louisiana Revised Statute 37:1864.3 state that a secondhand dealer cannot make payment to a seller of used or junk property in the form of cash. All payments to a seller must either be in the form of a check, some sort of electronic transfer (arguably including a store credit), or by money order. When some people read this prohibition, they misunderstood to whom exactly the word "Seller" in the law was referring. The law defines the "Seller" as the person selling the goods to the secondhand dealer for resale. But, some people thought the law was saying that it would be illegal to purchase used or junk goods from a secondhand dealer using cash. This issue actually went viral on the internet and panic ensued. People began wondering if they would no longer be able to use cash to buy products from Goodwill or at yard sales. The public was infuriated as a result of this misunderstanding. This was simply a misunderstanding of the actual law. But, misunderstanding or not, it caused a lot of chaos.
But, in reality, the law only prohibits a dealer from purchasing secondhand goods with cash. It in no way impacts how the dealer resells those goods to the general public.
Another prohibition in this law that may impact the lives of some people deals with the sale of secondhand goods to minors. It will now be illegal for a dealer to purchase any secondhand goods from any person under the age of 18. So, comic books, video games, or reconditioned iPods cannot be sold directly to a dealer by the minor. Going forward, a parent or some adult will need to make the sale for the minor and allow themselves to be the individual that is formally recorded and documented as the seller. That may be a hassle for kids trying to sell games at Gamestop. From now on, they will just have to take mom or dad along.
Another point under this law that may be more difficult for many small businesses is the prohibition of purchasing goods from a seller that is known to have been convicted of a burglary or theft. It may be hard for many dealers to know for sure that they are making purchases from allowable sellers. It would really be ridiculous for dealers to run background checks on every seller to make sure they aren't a known thief.
Also, this law could impact ebay or Craigslist dealers that resell goods that they purchase from any number of various sources. Many dealers troll around garage sales and through the Quick Quarter for used goods that they can then turn around and resell. These dealers will apparently be prohibited from making cash purchases for these goods. They will also apparently need to obtain the above noted documentation on each individual from which they purchase their items. This would make this sort of business almost impossible to operate in the State of Louisiana. Flea market sellers would have the same problem. They often find their goods for resale by traveling around with the Saturday morning yard sale crowd. I don't know how they will be able to purchase from yard sales when they are subject to these rules and regulations. According to the law, a yard sale is not a secondhand dealer. But, there is nothing in the law that says a yard sale is exempted from the definition of a seller to a secondhand dealer. This is definitely one area that needs to be addressed in the future regarding this law.
Well good luck to all you dealers in "one man's junk". I hope you can all find a way to easily comply with these regulations and find great success in the future.