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Archive for Sunday, July 11, 2004

Used-car buyers see sales taxes rise with new law

July 11, 2004

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— When Salinan Rob Johnson bought his 1988 Nissan 300 ZX from an acquaintance, he knew the car needed work -- and a new engine.

Still, $500 for the car seemed reasonable.

It was when Johnson went after July 1 to register the car at the Saline County Treasurer's motor vehicle department that he felt surprised. And a little cheated.

Rather than paying sales tax on $500, Johnson was told he'd have to pay sales tax on $1,283 -- the amount the state says the car is worth.

That estimate of its worth was based solely on its make, model and year. It's also about 2 1/2 times what he paid for the car. As a result, he paid $91 in sales tax to register the car, $56 more than he would have paid based on the original selling price.

"They're determining what my car is worth when I didn't pay that," Johnson said. "How can they do that on money that hasn't changed hands?"

Johnson is one of many vehicle owners caught up in a change in the law that took effect July 1. Under the new law, the base for computing vehicle sales tax for a person who buys a vehicle from someone else, and not a licensed auto dealer, is the stated selling price -- or the property tax value of the vehicle, as classified by the state -- whichever is higher.

Legislators changed the law based on information gleaned by state auditors. They said the state each year was potentially losing millions in sales tax revenue, because buyers of privately owned vehicles were underreporting how much they had paid when they went to their county treasurer to register the vehicle.

"We anticipated that this would be a big change and there would be some reaction to it," Richard Cram, director of policy and research for the Kansas Department of Revenue, said Friday. "The tax doesn't depend on the stated selling price anymore if it's below the stated property tax value."

The state, until a few years ago, used to try to ensure accuracy by requiring each bill of sale be notarized, authenticating the sale price.

"The feeling was if people were going to misrepresent the sales price, making them put it on a notarized document wasn't going to make a lot of difference," Cram said.

The change has put clerks in county motor vehicle offices on the front line dealing with sometimes frustrated and angry customers. In response, the Saline County office has been giving those customers a list of the phone numbers and addresses of local legislators.

Rep. Josh Svaty, D-Ellsworth, thinks the law needs some fine-tuning and that Secretary of Revenue Joan Wagnon might need to step in with some compensation.

"The same thing happened with destination sourcing (for retailers) last year. ... It's unfairly burdensome on people," Svaty said. "I think this is far more reaching than I think anyone in the Legislature wanted it to be."

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