Used-car dealers go after individual sales - East Valley Tribune: News

Used-car dealers go after individual sales

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Posted: Tuesday, August 25, 2009 7:53 pm | Updated: 1:50 am, Sat Oct 8, 2011.

The next time you buy a used car from a guy up the block, the state may take a bite.

State lawmakers are weighing a proposal by the Arizona Automobile Dealers Association to require anyone who sells a used car or truck to collect the state's 5.6 percent sales tax. It's the same levy that dealers have to add to their own prices.

The move could get a fight - and not just at the Capitol.

Lawmakers had instituted a similar tax in 1984. But faced with voter revolt and an initiative drive to kill the levy, they quietly repealed it themselves two years later.

But Bobbi Sparrow, president of the dealers' group, said the idea has something going for it now that it did not more than two decades ago: The state desperately needs the money to balance its books. And Sparrow figures that the tax could bring in $94 million a year.

That possibility has gotten the interest of Senate President Bob Burns, R-Peoria.

He pointed to the resistance within his own party to a push by Gov. Jan Brewer to ask voters to temporarily hike the state sales tax to help bridge the gap between expenses and tax collections. Burns said lawmakers need to look at other revenue sources, including taxing car sales.

From Sparrow's perspective, the issue is equity.

Technically speaking, Arizona does not have a "sales tax" but a "transaction privilege tax." The difference is the former is levied on the buyer; the latter is imposed on the seller as part of the cost of doing business.

State law requires anyone in the business of selling vehicles to pay the levy, which they normally pass along to customers. But the law, at least since 1986, exempts those who are not automobile dealers.

Sparrow said Arizona is the only state where the question of the tax turns on who is the seller. She said the state should either tax the sale of all used vehicles or tax none at all.

"It really hurts our business," she said. "That's why you see all of the vehicles sitting out on the street corners."

Sparrow said would-be buyers seem to know the difference. She said that's why some dealers trying to sell cars run classified ads in the newspaper simply listing their phone numbers, "posing as a consumer."

Sparrow said there were more than 259,000 used vehicles that changed hands in person-to-person transactions last year. That, she said, amounts to more than 31 percent of all used-vehicle sales in the state.

The balance, she said, is split almost evenly between new-car dealers who also sell used cars and used-car lots.

That inequity would increase if Brewer gets her way and voters impose a 1-cent surcharge on the state sales tax in 2010 and 2011, with a half-cent hike in 2012.

At 6.6 percent, a dealer selling an $8,000 vehicle would need to add an extra $488 to the price of the vehicle in sales taxes.

Lawmakers approved a similar tax in 1984, also at the behest of the Arizona Automobile Dealers Association. Lawmakers at the time said the proceeds - then estimated at $13 million a year with a 4 percent sales tax - would help finance prison construction and operation.

Sen. Debbie McCune Davis, D-Phoenix, said if lawmakers pursue the tax, they will get the same reaction they did more than two decades ago: a petition drive to repeal it.

McCune Davis, then a state representative, said there is a "substantial difference" between a sale made by a dealer and one made by an individual.

"It's the difference between doing business and collecting tax on a business transaction and doing a personal sale," she said. "I mean, what happens next? We go to yard sales and have taxes collected at that point?"

Sparrow, however, said she believes the levy would get a different reaction this time around.

"This is a different point in time," she said. "We have to find a new tax in this state because people want to also pay for education, police, etc."

Anyway, Sparrow said, the tax isn't broad enough to spark concern.

"You as a consumer every year are not going to pay for a private sale of a vehicle," she said.

"Maybe you've never even bought a vehicle like this," Sparrow said. "So it's not a reoccurring tax every single year to one person."

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