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Court Upholds Ordinance Requiring Secondhand Merchants to Submit Transaction Information to Police

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Ronald D. Richards Jr.
Foster Swift Municipal Law News
September 2009

Many municipalities have secondhand merchant operations in their boundaries. One municipality adopted an ordinance to require secondhand merchants to electronically report transactions involving secondhand or used personal property to the chief of police within 48 hours, and to pay a $2 fee per transaction reported. Feeling aggrieved, some secondhand merchants sued the municipality and claimed the ordinance was invalid. The Court of Appeals rejected the challenge and upheld the ordinance.

The Court first rejected the claim that the Secondhand and Junk Dealer Act preempts the ordinance. The merchants had argued that the Act preempted the ordinance because the Act only requires secondhand merchants to make weekly written reports to the chief of police, while the city ordinance requires reports to be made within 48 hours and in electronic form. The Court disagreed. It explained that since the Act requires reports to be submitted on a weekly basis and makes no mention of fees, the ordinance’s 48 hour and $2 per transaction requirements simply add to, but do not conflict with, the Act’s more general requirements.

The Court also rejected the merchants’ claim that they were unfairly singled out. The merchants had argued that the ordinance denies them equal protection because similarly situated entities, such as Goodwill and the Salvation Army, were not subject to the ordinance’s reporting requirements. The Court explained that the ordinance serves a rational basis: preventing trafficking in stolen goods. It added that while individuals and for-profit secondhand merchants stand to gain a monetary advantage by dealing in stolen goods, "[t]here is no monetary incentive for thieves to donate stolen goods or for nonprofit organizations to sell them."

Finally, the Court held that the ordinance’s $2 per transaction fee constitutes a valid user fee, rather than an unlawful tax, because the purpose of the fee is to provide a service rather than to generate revenue. USA Cash #1, Inc v City of Saginaw, __ Mich App __; __ NW2d __ (2009).