Office of Governor Gary Locke
FOR IMMEDIATE RELEASE - August 3, 2000
Contact:  Mike Gowrylow, Department of Revenue, 360-753-7624 (pager 360-413-2849)
Alt Contact:  Mark Varadian, Department of Licensing, 360-902-3609 (pager 360-971-4525)

Locke directs state agencies to make life easier for car buyers

OLYMPIA - Gov. Gary Locke today directed the state departments of Licensing and Revenue to adjust their new automated licensing valuation system to accommodate variations in average prices buyers pay for used cars, especially older ones in poor condition.

Locke said he has directed the agencies to take the following steps immediately:

Continue using the automated system but grant county auditors and licensing subagents more flexibility to accept bills of sale on lower-valued vehicles.

Develop and distribute to auditors and subagents a "rights and responsibilities" brochure that explains to car buyers how the vehicle use tax system works and their options should they disagree with a valuation.

Study in greater depth why 7 percent of the vehicle values reported by the system were substantially higher than the sales price.
Provide buyers with additional options for certifying that the stated sales price is accurate, including having both the seller and buyer sign an affidavit.

Some car buyers complained that the newly installed system sometimes overstated the value of their vehicles for purposes of determining the use tax due. Use tax, which is applied at the same rate as the sales tax, has been due on private vehicle transactions since 1935.

Preliminary analysis of the new system installed in late July indicates that it accurately values 93 percent of car transactions, but cases have arisen where older cars in poor condition aren't worth nearly as much as the average retail values used to compute the use tax. In these situations, buyers have several options for proving that the car is worth far less than a car in average condition would bring.

The automated system follows exactly the same rules as the manual system that preceded it, but some people mistakenly believe that this represents some new or higher tax on vehicle transactions, Locke said.

The automated system was developed at the direction of the Joint Legislative Audit Review Committee (JLARC), which in 1998 conducted an audit that concluded that use taxes were not being applied consistently and equitably across the state by auditors and their subagents. In some cases, agents were accepting bills of sale that fraudulently understated what the buyers actually paid for the vehicles.

Vehicle fair market values are based on data provided by National Market Reports (NMR). NMR is an industry standard source that has been in the business of vehicle valuation since 1911. It specializes in providing valuation services to local, state and federal governments and the private sector.

"Creating a fair and equitable system is an admirable goal, but in doing so we need to make sure we don't impose unreasonable burdens on the taxpayers who buy these cars," Locke said. "We need to give people a greater benefit of the doubt."

Locke noted that both the old and new systems allow the sales price to be as much as $2,000 below the average market value of a baseline vehicle, and don't count options that would make the vehicle worth more. Both systems also allow a buyer to justify a lower value by obtaining a dealer appraisal, repair estimate or a Department of Revenue field inspection.

In response to complaints, the agencies already have advised subagents to accept other vehicle valuing systems, including NADA and Kelley Blue Book, if they show lower average retail values for a given vehicle.

"Nobody will be asked to pay use tax on more than the true market value of a vehicle," Locke said. "Nonetheless, it's clear that this system needs some fine-tuning, and I expect that tuning to begin immediately."

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