Topeka ? Thousands of used-car buyers in Kansas would get an estimated $10 million in tax breaks or refunds under a recommendation made Monday by a legislative panel.

The measure approved on a voice vote by a House-Senate committee on taxation would repeal a new law that has driven up sales taxes on thousands of car deals among individuals.

“We were trying to get everyone to pay their taxes and we messed up,” said state Sen. Les Donovan, R-Wichita.

In 2003, a state audit found nearly half of the vehicles sold by one individual to another were reported at significantly less than market value so the buyer could avoid paying sales tax on the full amount. With 180,000 private transactions per year, the state was losing an estimated $7.5 million to $13 million annually, the audit found.

So this year, the Legislature passed a bill that said the sales tax on such transactions would be assessed on whichever was greater, the stated selling price or the valuation as determined by the state’s property tax code.

The law took effect July 1, and lawmakers immediately started hearing from angry consumers.

People who were getting good deals on used vehicles, sometimes because of damage, were having to pay taxes on a much higher valuation.

“This law singled out buyers of clunkers and junkers,” said Rep. Harold Lane, D-Topeka, who asked the committee to recommend repeal of the law. He said the measure had become “the most despised law of the 2004 legislative session.”

On Monday, a steady stream of disgruntled taxpayers armed with tax bills and car titles told the committee about getting a good deal on a used car only to suffer sticker shock when going to the courthouse to pay sales taxes.

Terry Claudell of Overland Park had a typical case. His daughter purchased a 1997 Acura with 104,000 miles for $5,300. But he was told by the county treasurer that the car was valued at $10,579 and he had to pay $796 in sales taxes.

Vehicle sales tax law in limbo (8-26-04) Used-car buyers see sales taxes rise with new law (7-11-04)

“I don’t want to be penalized for being an honest person,” Claudell said.

The committee voted to recommend the full Legislature repeal the law when the 2005 session starts in January.

Committee members said they wanted to establish a process of tax collection on used-car sales similar to one in Pennsylvania.

In that state, if the sales price varies greatly from the Kelley Blue Book value, the state can require an explanation about the difference. If it is not satisfied, it issues an assessment for the difference.

Committee members also said they wanted the Legislature to approve refunds to Kansans who had been cheated since the new law took effect.

Though initial estimates said the new law would produce about $2 million in additional revenue per year, it is on pace to produce an additional $5 million per year and has been figured into the state budget for two fiscal years for total revenue of $10 million.

Donovan, a car dealer, also said the state property tax valuation system for vehicles should be overhauled because it was not based on actual depreciation of vehicles.

For example, he said, new cars are valued for state property tax purposes at their highest rate for two years. But those cars actually lose the biggest percentage of their value in those first two years.