Camp also faces suit over B&O collection

A second Spokane County auto dealership group has been sued for collecting business-and-occupation taxes directly from customers.

Attorneys for the plaintiffs say the new lawsuit will apply to many more dealerships around the state.

The Washington Court of Appeals in Spokane ruled last week that the Appleway dealerships in Spokane Valley improperly pass their B&O taxes to customers as line items on bills for vehicles, parts and service. That ruling forms the basis for this week’s lawsuit against the Camp dealerships in Spokane, which include Chevrolet, Cadillac, Subaru and BMW.

The new suit also names Camp’s Medford, Ore., parent, Lithia Motors. Lithia owns dealerships in a number of states across the country, including 15 in Washington. A Lithia spokesman didn’t respond to requests for comment.

Although the new lawsuit specifically names only the Lithia dealerships, it includes all dealerships in the state that tack B&O taxes onto customers’ bills. Other dealerships will be brought into court as they are identified, according to Seattle attorney Kim Stephens, whose law firm is spearheading the action.

Named plaintiffs in the new lawsuit, which Stephens hopes to have certified as a class action on behalf of all affected car buyers, are Spokane County residents Theron and Marcia Johnson.

Last October, Spokane County Superior Court Judge Kathleen O’Connor certified the lawsuit against Spokane Valley’s Appleway dealerships and their parent, AutoNation, as a class action.

O’Connor also ruled Appleway had violated state law requiring B&O taxes to be folded into the overhead costs of a business, not added to customers’ bills in the way sales taxes are collected.

The judge ordered Appleway to quit collecting B&O taxes with each sale, but her order was put on hold while Appleway appealed the decision. The Court of Appeals has not yet lifted its stay of O’Connor’s order, and Appleway has indicated it will ask the state Supreme Court to review the case.

Stephens said his firm may ask the Court of Appeals to lift its stay soon if Appleway doesn’t implement O’Connor’s ruling on its own. He said a new lawsuit was filed against other dealerships, instead of adding them to the Appleway lawsuit, to prevent delays in the refund of B&O taxes to Appleway customers.

An Appleway spokesman said the company’s method of passing B&O taxes to customers was based on a September 2002 memorandum from the state Department of Revenue that said the practice could be legal if certain precautions were followed. Assistant Attorney General Doug Walsh also outlined procedures dealers should follow if they chose to itemize B&O taxes on bills.

But, contrary to previous reports, Walsh’s opinion in July 2003 said his office took no position on the legality of the practice. Walsh warned that such a policy would be “fraught with risk of unfairness and deception.”

He said he was concerned that dealers wouldn’t subtract the tax from prices for cars, parts or service before tacking it onto customers’ bills. In effect, he said, dealers might collect the tax twice to increase their profits.