WSR 01-09-040

PROPOSED RULES

DEPARTMENT OF REVENUE


[ Filed April 12, 2001, 10:55 a.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 01-01-142.

Title of Rule: WAC 458-20-17802 Collection of use tax by county auditors and department of licensing -- Measure of tax.

Purpose: This rule explains how county auditors, their subagents, and the Department of Licensing determine the measure of any use tax due when a person transfers the certificate of ownership of a motor vehicle.

Statutory Authority for Adoption: RCW 82.12.045(6), 82.32.300.

Statute Being Implemented: RCW 82.12.045.

Summary: This rule explains that when a person transferring the certificate of ownership of a vehicle owes use tax, the county auditor, their subagent or the Department of Licensing will determine if the purchase price represents true value by comparing the purchase price against the average retail sale price of similar vehicles. The rule explains the circumstances under which the purchase price will and will not be presumed to represent the true value. It also explains the options a person transferring ownership may use to document true value when the purchase price is not presumed to represent true value.

Reasons Supporting Proposal: A 1999 Joint Legislative Audit Review Committee audit recommended that the guidelines for the collection of use tax by county auditors and subagents be incorporated into an administrative rule.

Name of Agency Personnel Responsible for Drafting: JoAnne Gordon, 1025 East Union Avenue, Suite #400, Olympia, WA, (360) 570-6120; Implementation: Claire Hesselholt, 1025 East Union Avenue, Suite #400, Olympia, WA, (360) 570-6124; and Enforcement: Russell Brubaker, 1025 East Union Avenue, Suite #400, Olympia, WA, (360) 570-6131.

Name of Proponent: Department of Revenue, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: This rule explains the collection of use tax by the county auditors, their subagents, and the Department of Licensing as prescribed by RCW 82.12.045. This rule explains that when a person applies to transfer the certificate of ownership of a motor vehicle acquired without the payment of use tax, the county auditor, its subagent, or the Department of Licensing will collect use tax based on the value of the article used. The rule explains that the value of the article used is generally the purchase price. However, under circumstances that the purchase price does not represent true value, the value of the article used must be determined as nearly as possible by the retail-selling price of similar vehicles in same area.

The rule explains that county auditor, its subagent, or the Department of Licensing will verify that the purchase price represents the true value by using an automated system to compare the purchase price to the average retail selling prices of similar vehicles. The rule also describes the conditions under which the purchase price will be presumed to represent true value and the conditions under which the value will not be presumed to represent true value. In those situations where the purchase price is not presumed to represent the true value, the rule explains that the person may pay use tax based upon the average retail value as indicated by the automated system or the person may document true value using one of five options. The rule discusses each option and provides examples.

Proposal does not change existing rules. Currently, there are no administrative rules discussing the collection of use tax by county auditors, their subagents, and the Department of Licensing. As outlined above, the Department of Revenue proposes to adopt WAC 458-20-17802, a new rule.

No small business economic impact statement has been prepared under chapter 19.85 RCW. A small business economic impact statement is not required because the rule and the proposed amendments do not impose any requirements or burdens upon small businesses that are not already specifically required by statute.

RCW 34.05.328 does not apply to this rule adoption. The proposed rule is not a significant legislative rule as defined in RCW 34.05.328.

Hearing Location: Capitol Plaza Building, 4th Floor, Large Conference Room, 1025 East Union Avenue, Olympia, WA, on May 30, 2001, at 9:30 a.m.

Assistance for Persons with Disabilities: Contact Barb Vane no later than ten days before the hearing date, TDD 1-800-451-7985, or (360) 570-6182.

Submit Written Comments to: JoAnne Gordon, Department of Revenue, P.O. Box 47467, Olympia, WA 98504-7467, fax (360) 664-0693, e-mail joanneg@dor.wa.gov, by May 30, 2001.

Date of Intended Adoption: June 7, 2001.

April 12, 2001

Claire Hesselholt, Rules Manager

Legislation and Policy Division

OTS-4761.2


NEW SECTION
WAC 458-20-17802   Collection of use tax by county auditors and department of licensing -- Measure of tax.   (1) Introduction. The department of revenue has authorized county auditors and the department of licensing to collect the use tax imposed by chapter 82.12 RCW when a person applies to transfer the certificate of ownership of a motor vehicle acquired without the payment of sales tax. See RCW 82.12.045. This rule explains how county auditors, their subagents, and the department of licensing determine the measure of the use tax. This rule does not relieve a seller registered with the department of revenue of the statutory requirement to collect sales tax when selling tangible personal property, including motor vehicles. RCW 82.08.020 and 82.08.0251. The use tax reporting responsibilities of Washington residents in other situations and the general nature of the use tax are addressed in WAC 458-20-178 (Use tax). The various use tax exemptions provided by chapter 82.12 RCW are discussed in WAC 458-20-17801 (Use tax exemptions). The application of tax to vehicles acquired by Indians and Indian tribes is discussed in WAC 458-20-192 (Indians -- Indian country).

Vehicle licensing locations and information about vehicle titles and registration are available from the department of licensing on the Internet at: http://www.wa.gov/dol/, under "vehicles list." This information is also available by contacting the local county auditor's office listed in the government pages of the telephone directory.

(2) What are motor vehicles? For the purposes of this rule and the collection of use tax by county auditors, their subagents, and the department of licensing, the term "motor vehicle" includes all motor vehicles, trailers and semitrailers used, or of a type designed primarily to be used, upon the public streets and highways, for the convenience or pleasure of the owner, or for the conveyance, for hire or otherwise, of persons or property, including fixed loads, facilities for human habitation, and vehicles carrying exempt licenses. RCW 82.12.045(2).

(3) What is use tax based on? For purposes of computing the amount of use tax due, the value of the article used is the measure of tax. The value of the article used is generally the purchase price. If the purchase price does not represent the true value of the article used, the value must be determined as nearly as possible according to the retail selling price at place of use of similar vehicles of like quality and character. RCW 82.12.010.

(4) Use of automated system to verify measure of tax. When a person applies to transfer the certificate of ownership of a motor vehicle, county auditors, their subagents, or the department of licensing must verify that the purchase price represents the true value. In doing so, county auditors, their subagents, or the department of licensing compare the vehicle's purchase price to the average retail value of comparable vehicles using an automated system. The automated system identifies the average retail value using a database that is provided by a regional industry standard source specializing in providing valuation services to local, state, and federal governments, and the private sector.

In limited situations, the automated system's database may not provide the average retail value for a motor vehicle. For example, the automated system's database does not provide average retail value information for collectible vehicles or vehicles manufactured between 1970 and 1980. In the absence of an average retail value, county auditors, their subagents, or the department of licensing will determine the true value as closely as nearly possible according to the retail selling price at place of use of similar vehicles of like character and quality. To assist in this process, the department of revenue and the department of licensing may approve the use of alternative valuing authorities as necessary.

(5) What happens when the purchase price is presumed to represent the true value? County auditors, their subagents, or the department of licensing will use the purchase price to compute the amount of use tax due when the purchase price represents the vehicle's true value. County auditors, their subagents, or department of licensing will presume the purchase price represents the vehicle's true value if one of the following conditions is met:

(a) The vehicle's average retail value, as provided by the automated system, is less than $3,000.

For example, a person buys a motor vehicle for $800. The automated system indicates that the vehicle's average retail value is $2,900. The purchase price is presumed to represent the vehicle's true value because the average retail value is less than $3,000.

(b) The vehicle's purchase price is not more than $2,000 below the average retail value as provided by the automated system.

For example, a person buys a used motor vehicle for $4,500. The automated system indicates the vehicle's average retail value is $6,000. When compared to the average retail value, the purchase price is not more than $2,000 below the average retail value. Consequently, the purchase price is presumed to represent the vehicle's true value.

(6) What happens when the purchase price is not presumed to represent the true value? If the vehicle's purchase price is not presumed to be the true value as explained in subsection (5) of this rule, a person may remit use tax based on the average retail value as indicated by the automated system or substantiate the true value of the vehicle using any one of the following methods.

(a) Industry-accepted pricing guide. A person applying to transfer a certificate of ownership may provide the county auditor, a subagent, or the department of licensing with documentation from one of the various industry-accepted pricing guides. The value from the alternative industry-accepted pricing guide must represent the retail value of a similarly equipped vehicle of the same make, model, and year in a comparable condition. The purchase price is presumed to represent the vehicle's true value if the purchase price is not more than $2,000 below the retail value.

For example, a person buys a vehicle for $3,500. The automated system indicates that the vehicle's average retail value is $5,700. An industry-accepted pricing guide shows that the retail value of a similar equipped vehicle in a comparable condition of the same make, model, and year is $5,000. When compared to the retail value established by the industry-accepted pricing guide, the purchase price is not more than $2,000 below the retail value. Consequently, the purchase price is presumed to represent the vehicle's true value.

(b) Declaration of buyer and seller. A person applying to transfer a certificate of ownership may provide to the county auditor, a subagent, or the department of licensing a Declaration of Buyer and Seller Regarding Value of Used Vehicle Sale (REV 32 2501) to substantiate that the purchase price is the true value of the vehicle. The declaration must be signed by both the buyer and the seller and must certify to the purchase price and the vehicle's condition under penalty of perjury. The department of revenue may review a declaration and assess additional tax, interest, and penalties. A person may appeal an assessment as provided in WAC 458-20-100.

The declaration is available from the department of revenue on the Internet at http://dor.wa.gov/ under "other forms and records." It is also available at all vehicle licensing locations, department of revenue field offices, or by writing:

Department of Revenue

Taxpayer Services

P.O. Box 47478

Olympia, WA 98504-7478

(c) Written appraisal. A person applying to transfer a certificate of ownership may present to the county auditor, a subagent, or the department of licensing a written appraisal from an automobile dealer, insurance or other vehicle appraiser to substantiate the true value of the vehicle. If an automobile dealer performs the appraisal, the dealer must be currently licensed with the department of licensing's dealer services division or be a licensed vehicle dealer in another jurisdiction.

The written estimate must appear on company stationery or have the business card attached and include the vehicle description. The person performing the appraisal must certify that the stated value represents the retail selling price of a similarly equipped vehicle of the same make, model, and year in a comparable condition. The department of revenue may review an appraisal and assess additional tax, interest, and penalties. A person may appeal an assessment as provided in WAC 458-20-100 (Appeals, small claims and settlements).

(d) Declaration of use tax. A person applying to transfer a certificate of ownership may present to the county auditor, a subagent, or the department of licensing a Declaration of Use Tax (REV 32 2486e) to substantiate the true value of the vehicle. An authorized employee of the department of revenue must complete the declaration. Determining the true value may require a visual inspection that is not available at all department of revenue locations.

(e) Repair estimate. A person applying to transfer a certificate of ownership may present to the county auditor, a subagent, or the department of licensing a written repair estimate, prepared by an auto repair or auto body repair business. This estimate will then be used to assist with determining the true value of the vehicle. The written estimate must appear on company stationery or have the business card attached. In addition, the written estimate must include the vehicle description and an itemized list of repairs. The department of revenue may review an appraisal and assess additional tax, interest, and penalties. A person may appeal an assessment as provided in WAC 458-20-100 (Appeals, small claims and settlements).

The purchase price is presumed to represent the true value if the total of the purchase price and the repair estimate is not more than $2,000 below the average retail value. For example, a person purchases a vehicle with extensive bumper damage for $1,700. The automated system indicates that the vehicle's average retail value is $6,000. An estimate from an auto body repair business indicates a cost of $2,500 to repair the bumper damage. The purchase price is presumed to represent the vehicle's true value because when the total of the purchase price and the repair estimate ($4,200) is compared to the average retail value, the total is not more than $2,000 below the average retail value ($6,000).

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Washington State Code Reviser's Office