Controversy continues to swirl around California's AB 1178, legislation that affects eBay drop-off stores.

The Assembly Bill made it out of the Committee on Business and Professions on Tuesday with a 6-1 vote. Assembly Speaker pro Tem Leland Yee (D-San Francisco/Daly City) authored the legislation that is supported by California Attorney General Bill Lockyer.

Assembly Bill 1178 would establish a statewide electronic reporting system by January 1, 2008, for pawnbrokers and secondhand dealers. It would also ensure that Internet auction "drop off" stores comply with state licensing and reporting requirements.

"AB 1178 does not regulate the internet, but rather it targets the sale of stolen merchandise at unregulated internet auction drop off stores that are popping up all over California," said Speaker pro Tem Yee in a press release dated April 26.

While Yee's statement suggests drop-off stores are currently unregulated, pawnbrokers and others say drop-off stores are already required to comply with current laws.

Robert E. Verhoeff, President of Best Collateral Inc. and the California Pawnbrokers Association, wrote in an email, "AB 1178 does not place any new reporting requirements on "Internet Drop-off" stores. They are already required to report under existing California law." He referred to section 21626 of the California Business and Professions Code that details which businesses are obligated to report their secondhand transactions.

Attorney General Lockyer and Deputy Attorney General Susan Duncan Lee issued an opinion on April 6, 2005, at the request of Bakersfield City Prosecuting Attorney Virginia Gennaro on whether a drop-off storeowner is required to hold a license as a secondhand dealer.

The Attorneys General concluded in their opinion that drop-off stores are required to be licensed as secondhand dealers if they own a drop-off store located within the state where secondhand tangible personal property is accepted for sale to be conducted on an internet auction website. (See the full opinion online in PDF format (http://caag.state.ca.us/opinions/published/04-1001.pdf).

The opinion cites California's Secondhand Goods Law (Bus. & Prof. Code 21500 - 21672) to regulate the sale or other disposition of secondhand goods.

Several pawnbroker business owners sent emails citing the Attorneys Generals' opinion as evidence that drop-off stores are already required to comply with the Secondhand Goods law. eBay spokesperson Hani Durzy said the opinion is not law and is not binding. "It is his opinion, and we disagree with that."

Lawmakers and regulators around the country are choosing to define eBay drop-off stores as either auctioneers, consignment stores, secondhand dealers or pawnbrokers. In many states, lawmakers view drop-off stores as auctioneers, while in California, the Attorney General states in his opinion that drop-off stores are not auctioneers. "A person who owns a drop-off store cannot reasonably be said to "recognize" bids as they are made in the course of an online auction. Instead, that function is customarily performed by proprietary software owned by the online marketplace website."

The latest amendments to AB 1178 were made on April 21, 2005. Adam Keigwin, Press Secretary to Assembly Speaker Yee, said "there may be new amendments next week."

When asked about the cost of creating the reporting database, Keigwin said, "at this point there is not an estimate, but all costs will be covered by the fees collected," referring to licensing fees set out in AB 1178.

Assembly Bill 1178 will now be referred to Assembly Appropriations Committee before heading to the Assembly floor.