N.C. FINDS MONEY CAN BE MADE ON INTERNET

State Auctions Off Surplus Property And Items Seized From Drug Dealers

RALEIGH -- The Baywatch Barbie belonged to a drug dealer, but Dan
Fredregill didn't care.

The Kernersville man paid $31 for it and four other dolls on an eBay
auction and figures they are worth triple that sum. He can thank the state
of North Carolina for that.

North Carolina has discovered what millions of people and a growing number
of states have found: It pays to use Internet auction sites such as eBay.

In the past several months, the state sold about 125 pieces of surplus
property and items seized from drug dealers, raising $8,735. That's much
more than traditional auctions would have brought in, said Jeff Nance,
director of state surplus property.

The auctions have worked out so well, the state is expanding the things it
sells, including expensive diamond jewelry and an old helicopter. Online
auctions, while still covering just 5 percent of the state's inventory, may
even lead to North Carolina creating its own Internet auction site.

"When you have the right things to sell (online), you can do pretty good,"
Nance said.

Here's why states find the Web so attractive: They can sell things faster
than if they ran a costly traditional auction, and can reach a worldwide
audience of millions, rather than dozens. That boosts prices.

Now South Carolina is reviewing ways to sell state surplus items online.
The state hopes to begin those auctions this year, said Michael Sponhour, a
spokesman for the surplus property agency.

And this fall, the N.C. treasurer will go on eBay to start auctioning off
unclaimed property left in safe deposit boxes or lost in hospitals, said
Shirley Fowler, who oversees the property.

About two years ago, Oregon became the first state to try an Internet
auction. California, Georgia, Maryland, Michigan and Pennsylvania, among
others, followed suit.

Like many newbies, North Carolina entered the online world cautiously.

It tried out different auction sites about a year ago, offering surplus
patrol cars and racing helmets, with little success.

People still want to kick the tires in person, Nance said. So after a few
weeks, the state concentrated on the sealed-bid system in which customers
made offers through the mail. That's the way the office typically handles
auctions, and those generated $26 million in sales in the past year.

But North Carolina got a boost on eBay from ill-gotten gains.

The state taxes illegal drugs and seizes dealers' property to satisfy the
tax debt, said Ron Starling, director of the N.C. Drug Tax Division at the
Department of Revenue. Most proceeds return to law enforcement, while 25
percent goes to the state's general fund.

About six months ago, the Revenue Department dropped its traditional live
auctions that attracted several hundred people and asked Nance to dispose
of seized drug property.

The property provided a valuable lesson: Memorabilia usually sells well on
the Internet. North Carolina sold the My Fair Lady Barbie series for
$162.50, a basketball card album for $66 and a Dale Earnhardt plate for
$18.50. The market has been flooded with Earnhardt items since the racer's
death this year, driving down prices, Nance said.

"It's a lot to learn when you play the eBay game," he added.

Take gas masks, for instance.

A California man bought 1,200 surplus tear gas masks from the state for $1
each in a sealed auction. That got Nance wondering what they would fetch on
eBay. The answer: $44. For one.

North Carolina now is studying whether it should launch its own auction
site, said Tom Runkle, chief information technology services planning officer.

Nance, however, likes the built-in audience of 30 million registered users
for eBay, the only site the state uses. It also can cost $200,000 a year
for the state to maintain its own site, he said.

Fredregill often participates in state auctions and likes the option of
using the Internet instead of driving to Raleigh to see what's available.
He's happy with his purchases, as are customers from Texas to Alaska to Hawaii.

"This is all so new," Runkle said of the auctions, "but we've come to love it."

There are some pitfalls in online auctions, however, including bidders who
never pay.

Like any other participant, North Carolina must turn over 2percent of each
sale to eBay. The site also charges minor fees, depending on how an auction
is displayed.

North Carolina does not pay or charge sales tax for its deals on eBay or in
sealed bids. Under state law, North Carolina is considered an occasional
seller and is exempt from the tax as would be any individual who sells
something on the Internet every now and then.

Nance wanted to experiment with eBay and put a Highway Patrol surplus Bell
helicopter online with a six-figure reserve, meaning it can't be sold
unless the minimum price is met. Even drug dealers benefit when their
property goes on the Web, according to Starling. Quick sales and big prices
help erase the debt from the taxes on their drugs.

But not everyone fares well - all of the Barbies belonged to one dealer's
spouse.

"I bet he's in bad graces with his wife," Nance said.

The best-selling Barbies to date involved a "Wizard of Oz" collection with
Dorothy and the gang.

They started at $15, closed at $330 and went to a woman from Kansas.