Auto dealer sued over B&O tax

A second Spokane County lawsuit against a statewide auto dealer will try to gain class-action status, now that a judge has ruled that passing along the business and occupation tax to customers is illegal.

That suit, filed by Spokane residents Theron and Marcia Johnson against Camp Automotive, says the company and its parent, Lithia Motors Inc., of Medford, Ore., illegally added a B&O surcharge to the purchase price of vehicles between 2001 and 2005.

A Spokane judge recently issued an oral ruling agreeing with the Johnsons and saying that Camp also violated the state’s Consumer Protection Act.

Attorneys for the Johnsons hope to certify the lawsuit as a class-action effort and include potentially thousands of other customers who also paid B&O surcharges.

Brian Sheldon, one attorney representing the Johnsons, said the suit is nearly identical to the one filed in 2004 against Appleway Volkswagen over the same practice. In that suit, Spokane resident Herb Nelson said Appleway added about $80 to his final sales price by adding the surcharge.

In that instance, Appleway’s parent firm, Florida-based AutoNation Inc., agreed to pay a class-action settlement to thousands of state residents who purchased vehicles from its 14 state dealerships.

That settlement is expected to reach $7 million. However, it won’t be paid out until a state court approves the final settlement, once all repayment claims are turned in, said Sheldon. He said AutoNation mailed out forms to more than 45,000 past customers telling them they could be eligible for repayments.

The state Supreme Court affirmed Nelson’s verdict in April 2007.

The Johnsons sued Camp Automotive in 2005 after buying a car from Camp Chevrolet. They said the dealership added about $137 to the sales price through the B&O tax surcharge.

Robert Sacks, Lithia’s director of communications, said the company did not operate illegally by adding the B&O amount to sales.

Sacks said attorneys for Lithia believe the surcharge is legal in Washington if it is listed before the dealer arrives at the final sales price. In that case the surcharge is considered “negotiable,” and is thus not illegal, according to Sacks.

Nearly all Washington businesses pay the B&O tax.

Sheldon said Spokane County Superior Court Judge Kathleen O’Connor ruled earlier this month that Camp had acted illegally by adding the B&O surcharge paid by the Johnsons. She also ruled that Camp’s former practice – now no longer practiced by auto dealers since the Johnson verdict was decided – violated Washington’s Consumer Protection Act.

Following her written opinion, due out at the end of the month, the next step will be to try to make the Johnson suit a class action, similar to the Nelson suit.

The main difference between them, Sheldon said, is that the first lawsuit established the illegality of the B&O surcharge. This second suit could open the door to triple damages ordered by a court against any other dealerships that followed the same practice. That would include all of the other nine Lithia Motors dealerships in Washington, including Mercedes-Benz of Spokane, Sheldon said. It also would include other dealerships not yet named, he said.

“Not every dealer did this,” said Sheldon. The practice ended in 2005 after the Court of Appeals affirmed the first verdict on behalf of Nelson against Appleway.

Sheldon said the argument made by Sacks – that it’s legal to add the surcharge before coming to the final figure – is irrelevant. State law, he noted, doesn’t care when the surcharge is added and it must be seen as a company expense, he said.

Sacks said he would not comment on what Lithia’s next legal steps would be. “We have nothing to say until the court issues its written ruling. But yes, we might very well consider an appeal,” he said.