Fred’s Appliance Inc. agreed to pay nearly $449,000 in taxes, penalties and interest for selling service contracts without being registered by the state of Washington.
The Spokane-based company sold 39,520 of the plans to Washington customers over an 11-year span, collecting $13 million in premiums, according to a consent decree signed by the company and the Office of the Insurance Commissioner.
The state regulates the service contracts sold by Fred’s Appliance as insurance policies, the consent decree said. Companies selling insurance policies must pay a 2 percent tax on premiums.
State officials opened an investigation after receiving a consumer complaint.
Ryan Holzapple, assistant general manager for Fred’s Appliance, said company officials worked cooperatively with the state as soon as they were notified of the problem.
Fred’s Appliance sold the contracts as “protection plans” and considered them an extended warranty, not an insurance product, Holzapple said.
“We didn’t realize there was an extra tax,” he said.
Fred’s Appliance is working to comply with state regulations, so it can resume selling the service contracts, the consent order said. The contracts cover parts and labor for repairs on appliances sold by Fred’s. Customers can get an in-store credit if they don’t use the service contract.
Meanwhile, Fred’s Appliance continues to honor the service contracts it previously sold, Holzapple said.
Fred’s Appliance has 11 locations, with stores in Washington, Idaho and Montana.
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