When does a hobby become a business?

What's the difference between holding a perpetual "Yard Sale" every weekend and selling items on eBay? Some folk who use eBay as their storefront may find out the big difference is regulation, bureaucracy and the tax man.

eBay has grown from being a place for small time exchange of goods to BIG BUSINESS, with some 135 million users transacting business worth $34 billion last year, according to info from an Associated Press tax article circulating around. And this includes not only established legal businesses and "Mom & Pop" incubations, but also, I'm sure, other less than legal enterprises as well. Considering how often I'm sold bootleg videos of scarce movies I want, the counterfeiters must love it.

I had envisioned a need for an eBay back in 1997, when I suggested on the usenet the formation of "virtual co-operatives" and what I call "hassle free enterprise zones." The rest of the country might have been doing well, but the Louisiana economy was in the pits. In response to a comment by John Gerits, then moderator of misc.business.marketing.moderated, I wrote:

What you are talking about here is a virtual co-operative, an online mall. And a different thread undoubtedly. ;) Good idea, but a tough sell. But that's what marketers do, right? Setting up co-operatives is what the Peace Corps sometimes does overseas in 3rd World countries ... it doesn't get funding or many paid volunteers in the U.S. Central L.A. isn't as exotic as East Timor I guess.

You're going to have some resistance because one of the benefits of being 80 years old and selling your homemade pralines in front of the store, or doing ornate fingernails in your kitchen or selling holiday wreaths at the fleamarket, etc. is that it's in the underground economy. It's positive business, doesn't require extra police and it buttresses the income structure of these lower income groups ... but it's also illegal as hell, at least in the U.S.

No business license, no monthly reports to the state/locality, no corporation, no tax id, no reporting of income made from selling pralines, no health certificate, no FICA payments, no building inspections, no sales tax charged or paid, no paperwork to fill out, etc., etc., etc.

Legitimizing these grassroots operations into an online co-operative means that you draw attention from the powers that be. And just the thought of that occurring means these folk will run from you like you had the plague. As soon as government gets involved, there goes their ricebowl. The last thing they want or need is some bureaucrat sticking their nose into the tent. As soon as that happens, the whole thing crumbles. Utopia dies.

Now logically, it makes sense to let these businesses incubate and grow as best as possible without government interference. I'm waiting for a "hassle free" enterprise zone.

The more they can earn from selling pralines or wreaths without the encumbrance of bureaucracy, the less tax dollars necessary to support them, the more they can spend on their kids, etc. If they can find semi-legitimate businesses to operate instead of turning to drugs, theft and prostitution, the government ought to be happy. After a certain stage, if they make it, they have to find larger, legitimate quarters and hire employees. But since their business while incubating at the kitchen table can cut into the pie of larger businesses that are funding government, crackdown. One person pissed off and the dominoes tumble.

Main street businesses already are up in arms about the internet ... it scare the bejesus out of them. They need sidewalks, and tax dollars pay for those sidewalks. And local government needs to build sidewalks for those businesses. But if that mainstreet business is selling pralines and paying taxes, and that 80 year old lady is on the web selling pralines and not paying taxes, someone's going to be yelling about the inequity. And, since the tax dollars that mainstreet business pays also pays for police, courts and the licensing bureaus, who do you think comes out on top in the battle for king of the hill?

The social dilemma is finding a middle ground that allows small business to incubate in the eBay-like environs and then spring forth, established, while preventing the anonymity of an internet storefront to protect the criminal, perhaps terrorist enterprise. But that's going to be a tough fight. If you're running an underground internet business selling pralines for "egg money," odds are you won't stand a chance without a federal sugardaddy.

And don't count on the Small Business Administration to be that beltway protector. It's an ineffectual joke, a sham on the American enterpriser and a tax dollar sinkhole at best, a political favor payback piggybank at worst, and has been a project for pork ever since its formation:

TESTIMONY

Prepared for delivery to the House Committee
on Government Reform and Oversight
Subcommittee Management, Information, and Technology
June 6, 1995

by
The Honorable Donald H. Rumsfeld
Suite 405
400 North Michigan Avenue
Chicago, IL 60611
(312) 645-0251
------------------------------------------------------------------------

THOUGHTS FROM THE BUSINESS WORLD ON DOWNSIZING GOVERNMENT

-clip-

The Small Business Administration continues to dodge reform. It was not even ten years old during my freshman term, yet, in a 1963 article on pork barrel spending, Life magazine exposed the SBA as a new "device for soaking up money and getting rid of it." Based upon its early track record, we should have had the good judgment to close down the SBA decades ago. I hope that this Congress will have the courage to act this year. It is never to be desired, but given the current budget situation, good intentions and throwing money at problems hoping some of it will stick and do some good is unacceptable.

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I've updated yesterday's post "Yeah, you try to hide 150,000 Easter Eggs."

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He actually admitted it:

"I know I could use less gas."
Andy Rooney, 60 Minutes
Commentary, March 27, 2005

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Porn spam Easter egg of the day:

Not poetry or a joke, today's piece of literature is a nonsense short story I received in a piece of spam trying to sell me prescription drugs ...

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