New Changes in Washington State Legislature

As you may well be aware, significant activity took place during the past Washington State Legislature’s session as it applies to you and your dealership. Below are some of the highlights.

Extended Warranties

As of July 1, 2005, retail sales tax will be due on extended warranties that are not included in the selling price of the vehicle. The gross sales price collected for selling extended warranties will now be reported under the retailing classification for the Business & Occupation Tax, with a corresponding deduction as a consignment sale. The commission received is reported under the service and other category for the Business & Occupation Tax.

Repairs subsequent to the sale of the warranty are taxed as a wholesale sale. And, any deductibles paid by the customer will continue to be taxed as a retail sale.

Gas Tax

The per gallon state fuel tax will increase by 3 cents July 1, 2005. Additional scheduled increases through 2008 total an additional 9.5 cents per gallon increase. This puts Washington State’s gas tax as the highest in the nation.

Weight Fee for Passenger Vehicles

A new weight fee for passenger vehicles, SUVs, light trucks and motor homes goes into effect January 1, 2006. The weight fee is to be collected on the initial registration and annual renewal for each vehicle.

  • $10 Up to 4,000 pounds
  • $20 4,000 - 6,000 pounds
  • $30 6,000 - 8,000 pounds
  • $75 flat fee for motor homes
  • Light trucks used for farm purposes will be exempted

New Washington State Estate Tax

The Washington state estate tax applies to persons who at their time of death had gross estates in excess of the exemption. For deaths occurring between May 17, 2005 and December 31, 2005, the exemption amount is $1.5 million. For deaths occurring in 2006 and thereafter, the exemption amount is $2.0 million. For taxable estates, the tax rate starts at 10%, with a top bracket of 19%. The new estate tax is stand-alone and not connected to federal law changes.

We suggest a review of your current Will and any Durable Power of Attorney arrangements. Washington specific language for funding of trusts to minimize tax may be needed in the Will. And, as Washington does not have a gift tax, updating the amount of gifting allowed under a Durable Power of Attorney for Washington may lead to additional planning opportunities.

F & I Salespersons Exempt from Overtime

Also, a recent court case (Gieg v. DDR, Inc., CA9, Dkt. No. 03-35619, 2005 WL 116325, 5/18/2005), made finance and insurance managers exempt from overtime. The court ruled that the Department of Labor rules applied to all commission-earning employees of a retail or service establishment and was not strictly limited to the salesperson that sold the retail goods.