Nothng More Than An Investment

recent ebay announcement:

"The Future: Collectibles

The market for trading cards and collectibles continues to accelerate, and ebay is the biggest trading platform for these categories. Our headline announcement today was the ebay Vault, coming next quarter. This is a 31 thousand square foot, secure storage facility and digital marketplace for trading cards and collectibles, with plans to expand into luxury goods.



Why this is such big news

Once an item is in the ebay Vault, customers know their valuables are secure and "instant sale" becomes possible. While many customers will keep their items in the vault for years, once it is in the Vault then ownership can transfer from seller to buyer in a matter of seconds – without the need to re-authenticate, re-package or ship the item anywhere. This unlocks a new way to engage with ebay: imagine instantly buying and selling cards and sports memorabilia as a great new rookie lands a play in the final minutes of a tight game.



Within a few years, we expect the Vault will hold up to $3 billion in assets, which would make it one of the largest stores of non-governmental assets in the world. Keeping high-value inventory within the ebay ecosystem is great for everyone, and the Vault will make other planned features possible, like fractionalization."

May be of interest to some people, but if you are a serious collector of high value material would you not want to hold it yourself?
Most collectors of high value material may find it better to have their own safe.

Also how much do ebay want for the privilege of holding your item? If you do not pay, will they then sell your item to cover their costs?

How much more cash do ebay think they can get out of collectors in addition to the current fees?

Will they charge insurance as well?

ebay is copying similar strategies by firms like PWCC (trading cards), and other intermediaries. It's really most useful for collectibles with a high churn rate, like sports cards and coins. In certain cases having them keep physical possession relieves the buyer of paying certain import duties or sales taxes (like the Swiss used to commonly offer with works of art: kept at an airport, they were considered "in transit" even if for decades, and the buyer thus paid no import duties to their home country. In the US, each state has a sales tax varying from 0-13.5%). And as they said, since the chain of custody isn't broken, one doesn't have to regrade or reauthenticate.

More for traders/flippers/those in the business, than those who collect for enjoyment.

I would assume someone in the vault is very adept at opening my newly acquired package and making absolutely sure that the item received and being stored there is, in fact, the one I purchased…

For the time being, it's only for (third-party graded) trading cards. So yes, that's easy.

This is a continuation of ebay's pursuit of emulating Amazon which we have been talking about for the last few years (and has been communicated in their Annual Reports).
Don

Presumably these will be kept in some free port. What did Delaware, boys?

This will make things easier as besides collecting sales tax (as appropriate) for a transaction, ebay can easily report to the proper taxation authority the sale, profit and withhold the correct amount for taxes while sending same to the taxing authority. Certainly eliminates that pesky paperwork tracking for the honest sellers.

PWCC is located in Oregon (sales tax free) which is one of the ways they are able to make it work. I read ebay's statement regarding sales tax ("Sales taxes will not be charged for items sent to or traded within the ebay vault. Owners are responsible for remitting applicable taxes upon withdrawal. When you sell or purchase a card that is shipped from the ebay vault, ebay will collect sales taxes as required.") but don't fully understand what it means practically.

Regarding fraud and authentication. PWCC themselves were caught up in a scandal where they sold altered/repaired cards and got them past grading services. But I think it mostly affected their retail sales (on ebay) and not their vault service. Seems like vault would open up more opportunities for this type of fraud because card could be sitting for years or longer before anybody notices.

Does the way stamp authentication work make it easier to falsify authentication for stamps than cards? Graded cards are encapsulated (although sometimes people are able to tamper with and swap the card, or just make a fake slab). I never fully wrapped my head around the way stamp grading works. They don't encapsulate it but just give you a photo, so what prevents somebody from subbing different (possibly altered or repaired) stamp which looks similar to one on certificate. Unused stamps do not look unique--and for used stamps you can fake cancellations and it seems like you could make a convincing copy of a used stamp according to a picture. Especially if you are operating on a budget of thousands of dollars per stamp.

I think that the perforations make stamps fairly unique.
Don

Stamps are like fingerprints to me. The centering of the stamp along the x-y axis's, tiny anomalies in the printing and as Don says, the perforations make it hard if not impossible to substitute a stamp for the pictured stamp. And then there is provenance which for expensive stamps is likely to be available in some form.

One thing that happens because stamps are for the most part not encapsulated is a change in condition after the certificate is issued. It is uncommon but does happen.

As mentioned with PWCC, alleged fraud is possible but as far as the big expertizing bodies (PF, PSE, PSAG and APEX) I can think of only one scandal in the 90's that involved pay-for-play.

The main issues usually lie with the sellers. Certs can be and are faked. That is where having access to expertizing bodies databases come into play. Being able to look up a cert is a great tool. Don's Stamp Smarter has an extensive database of PSE certs and the PF has their own online. PSAG does not and I am not sure about APEX.

"Lost" certs are an issue whereby there is a good cert for an item, but a negative cert is lost. Which brings us to the crux of the matter.

Most of the fraud happens in the listing component of a purchase. Taking possession may be when you find out that you have been duped but it is usually too late by then. If you DO NOT take possession of an item, I am not sure that you would know that you have been swindled until you sold and you might not know then nor might the new owner be aware. Especially if it was a transfer within the Vault. How could you?

For now.

On February 14, 2022, the California Franchise Tax Board issued extremely aggressive income tax guidance that appears to create a substantial risk to any non-California seller who elects to use the ebay Vault. In Technical Advice Memorandum 2022-01 (TAM 2022-01), FTB announced it is limiting the protection of Public Law 86-272 for internet retailers who sell products to California customers. Public Law 86-272 (PL 86-272) is a 63-year-old federal law prohibiting the states from imposing net income taxes on sellers of tangible property when the activities of the seller are limited merely to solicitation. Many internet retailers have claimed exemption from California's income tax because their online presence has previously been deemed to be mere solicitation. As a reminder, California has among the highest income taxes in the world, with a top marginal tax rate of 13.4% and a proposal to raise it to 16.8%.

The FTB's new guidance limits PL 86-272 protection for online retailers. The TAM expands the list of "unprotected activities" to include many common aspects of internet retail sites, such as:
• Providing post-sale assistance regarding products via electronic chat or e-mail customers initiate by clicking on an icon on the website
• Placing of certain "cookies" onto the computers or other electronic devices of California customers
• Transmitting code to a California customer to upgrade or repair previously purchased products
• Selling extended warranties over the internet site
• Maintaining the taxpayer's inventory at the warehouse of a marketplace facilitator (such as Amazon)
• Selling digital video and streaming services

Many of these activities are integral to the operation of a retail internet site. In light of this guidance, taxpayers should review TAM 2022-1 to consider impacts to their California PL 86-272 positions. California's guidance closely follows the Multistate Tax Commission's updated guidance regarding internet selling, which was issued last August. Many additional states can be expected to adopt similar guidance going forward. Internet retail businesses should closely monitor this activity across the states and continue to review PL 86-272 positions.

In case it is not clear from the foregoing, this policy position means that California may seek to confiscate new INCOME tax remittances from non-California internet sellers, not more SALES tax. To avoid this draconian result, internet retail stamp sellers may wish to immediately review how their servers interact with customers and reconsider any plans to use the Vault. It would not be inappropriate to implement location-based checking of IP addresses and block all access of computers with IPs that resolve to California locations, to avoid having the seller's server set cookies on those machines.

Sellers may also wish to scrupulously ensure that California FTB cannot establish personal jurisdiction (for purposes of a tax enforcement lawsuit) over the seller. That is, the new guidance says one thing, but FTB also has to find a valid way to haul the seller into the California courts, or impose a valid lien. Sellers who annually attend WESTPEX, for example, with no other contact with the state, may have sufficient "minimum contacts" with California to permit a California court to exercise "long-arm" jurisdiction over the seller.

Chris - Many thanks for that informative rundown vis-a-vis tax implications. Great stuff.

Just to underscore, the below does not include what the Federal Income taxes take in addition.




The State of California sales tax rate varies by locale from the lowest of 7.25% to a top of 10.75% based upon the statewide rate of 7.25% plus any added county sales tax rate and any city or special local area tax rate. The eight areas at 10.75% are all located in the western portion of Alameda County California which adjoins the San Fransisco Bay across from the city and county of San Francisco. In California, Alameda County has the second highest rate of registered Democrats, after San Francisco County. The added county, city and local (e.g. A special sales tax for the counties served by the Bay Area Rapid Transit District, aka: BART) rates are usually passed by an election vote.

California also has just installed a law that if you owe the FTB $20,000.00 or more, payment must be made by wire AND from then on all state income tax payments of any amount for the balance of the taxpayer's life subject to California income tax must be wired. There is a one time exception for life upon the sale of a primary residence. They also cause the taxpayer to forfeit any tax refund due if filing of taxes was delayed beyond a certain time even if filing within the three year period standard for federal and all other state jurisdictions.

California has the highest poverty rate and largest number of people living in poverty thus needs to collect its money as fast as possible and at the highest rate possible.

California remains the state with the highest poverty level in the US, according to a September 2021 report from the US Census Bureau.

In the report, three-year poverty level averages were calculated for each state and the District of Columbia using the supplemental poverty measure, which found that 15.4% of California residents lived in poverty from 2018 to 2020. Only the District of Columbia had a higher rate of poverty — 16.5%.

The supplemental poverty measure expands on the official poverty measure, which was developed by Social Security economist Mollie Orshansky in the 1960s, by accounting for cost of living, work and medical expenses, tax credits, and government programs designed to assist low-income families and individuals.

By comparison, California's three-year poverty level average has considerably decreased from 17.2 % in 2019, and 18.1% in 2018. https://www.businessinsider.com/cal...ureau-2021-9

Interesting how this discussion veered from the ebay vault to poverty rates in democratic states. It would be nice to keep this a stamp-centered discussion forum.