Accepting trade-ins doesn't mean you need a business license, it just means you need to balance the worth of the trade in with the allowance you give.

One possible honest explanation for the amount of bikes he sells may simply be that he knows people in several states. I used to swap items around with friends in other states. If you live in an area where certain items are high dollar, and a friend lives in a place where those same things are dirt cheap, you can sometimes make a decent income buying in one state and selling in another.
Some of the prices I see on craigs list in different cities makes it sound worthwhile to buy a truckload of bikes here and make a run out to California.

Ken.

edit, After taking a quick peak on CL for richmond, might load up a few when I head to Virginia next week!