Slippery People

You can...but should you?

We start this week with an interesting question that might be thought of as moral or philosophical, but is really just another example of the monetization of our hobby.

There are now a few different vault options for your expensive cards. For those unaware of how the vaults function, the concept is pretty simple. A vault is a depository in a state with no sales taxes that will take delivery of and hold a card for you. All states that charge sales and use taxes have loopholes in their tax laws that allow you to bring in items you have owned elsewhere without paying a tax, which makes perfect sense for the average job seeker who might move from Pocatello to New York with personal property in a U-Haul. Of course, since tax avoidance is the true American pastime, it did not take long for rich art collectors to realize that they could save a fortune by using that loophole, and art vaults were born. Ship your Picasso from the auction house to a vault somewhere with no sales tax, let it sit for a while, then bring it home tax free. Whoever bought that $236 million Klimt last month, you think they’re gonna pay another $23 million in sales taxes? Yeah, sure they are.

As cards went way up in value, the brains trust at PWCC figured out that they could start a card vault in Oregon and offer the same tax loophole to card investors. And the card vault was born. Currently, PSA/Collectors has a vault in Delaware; Fanatics has one in Oregon (the former PWCC vault that it acquired and renamed after realizing that there was an unavoidable doody smell wafting from the PWCC brand). A 10% discount can be a hell of an emollient for a sale. When I was selling a 1952 Topps Mantle, the buyer and I were at odds over the price because he would have had to pay nearly $4K in sales taxes had I shipped the card to his home state. He had me ship it to a vault instead.

The fees to withdraw an item from the PSA vault after 90 days currently are $7.98 plus insurance (more on this later). Sounds like a hell of a deal. It also sounds like a tax dodge that makes me ask why. I mean, if you can pay $40K for a card, should you be allowed to play this game when the guy buying toilet paper has to pay sales tax on it at the point of purchase? If I was at a conference of state governors, I would urge them all to close the loophole and end this practice.

The vault operators have taken the next logical steps. PSA’s withdrawal fees are waived when you consign the item for sale through one of PSA’s outlets, which include eBay, for 13% down to 7% for very expensive items (which can also be consigned to Goldin, which eBay now owns). Since many auction houses now charge 23% commissions, this sounds like another hell of a deal. PSA also has a function where you can accept a direct purchase offer through its app. You can even send PSA raw cards to grade and have them vaulted and sold directly.

[cue sound of fingernails on a chalkboard]

Wait, PSA will sell cards it grades straight from its own grading room and make money on the transaction? Well, I just have to be that guy and ask how that HYPOTHETICALLY might color the perception of neutrality on the part of PSA. We don’t allow judges with personal or financial stakes in the outcomes of cases to rule on those cases. I mean, even if a judge is a straight arrow, how can anyone trust the outcome of a case where a particular outcome might advantage the judge? Like the old country song goes: “We both broke the law/But it’s me that took the fall/It seems the judge and him were fishin’ friends.”

Now, let’s ramp that up a notch. What is to prevent PSA from bumping grades on cards submitted to it for auction in order to make more money on the commission when the order of magnitude of value increase can be 10X or better? This question recently surfaced. Various hobby chat boards reported that someone whose PSA submittal drew a bunch of nines sold the cards through PSA services and saw some of them promptly bumped to 10’s for the buyer to resell. PSA’s explanation was that the cards were reviewed and bumped under its normal processes. We all have stories of a PSA GOD (Grader Of Death) hammering the snot out of a submission only to have the cards graded properly when cracked and resubmitted. This has been a complaint about PSA for so long that some wags have suggested that PSA is an acronym for “Please Submit Again.” I have certainly had cards bumped on review and I know that any human judgment driven process will have an honest error rate. At least in those cases, the inconsistency is the outcome of a seemingly neutral process of PSA seeing the same raw card twice. I do not have any facts to indicate that anything corrupt went down in this instance, but I don’t think that matters when it comes to public trust in the integrity of a business. It is the perception of a bent process with this type of integrated grading and sales regime that is so corrosive to collector trust.

Oh, and remember that insurance thing? Well, one very pissed PSA vault customer reported that when he tried to withdraw his cards, he was charged an exorbitant insurance fee for the shipment. Now, insurance fees have been a big pet peeve of mine with auctioneers for quite some time. Many auctioneers charge an insurance fee as a percentage of the value of the cards sold. The issue I have with charging a straight percentage of the invoice for insurance is that it does not match the cost of insuring the items. The underwriting process is far more complicated than that and the premiums do not correlate with the hammer prices on items sold. Charging a variable percentage of sales for insurance can appear to tip from legitimate cost recapture to illegitimate hidden profit center. All that aside, don’t you just love the irony of there being hidden costs to a tax dodge?

On a completely different topic, Collectors announced that it is acquiring Beckett and will make it into another boutique brand. Which has worked out so well for SGC. Not that Beckett was all that anymore given its various scandals, but still, the Collectors amoeba has now absorbed all its rivals except for CGC. Unless/until Fanatics sticks in its blood funnel into the grading pool, I guess we are down to two authentication services. The bright side is that I won’t have to use Mr. Dremel to bust those brutal BVG slabs in the future once PSA smothers it to death with indifference, as it is doing to SGC.