Buyers win B&O ruling
OLYMPIA — In a class-action case that could eventually affect many recent car buyers throughout the state, Washington’s highest court on Thursday ruled that it was illegal for a Spokane auto dealership to try to pass its business taxes on to shoppers.
“The tax is not a tax on customers,” Justice Richard Sanders wrote on behalf of six of the state Supreme Court’s nine members. “… The Legislature simply considers the B&O (business and occupation) tax a cost of doing business.”
One-third of the court disagreed, saying that businesses routinely include the cost of their overhead in their prices.
“Most tax-paying businesses aim to make a profit,” Justice Barbara Madsen wrote in a dissent.
The case involved Spokane resident Herbert Nelson, who in 2002 bought a used, red Volkswagen Cabriolet from Spokane dealer Appleway Chevrolet, Inc.
Nelson negotiated a final price — $16,822 — only to discover that the dealership had tacked on an extra $79 for the B&O tax.
He paid it under protest. Then he filed a lawsuit, arguing that Washington’s unique “B&O” tax is a tax on businesses, not a pass-through tax that can be directly assessed on buyers.
A majority of the court agreed, saying that it’s lawful to charge a customer for the tax, but not to tack it on after a final price has been negotiated.
One of Nelson’s attorneys, Spokane lawyer Brian Sheldon, said that he’ll ask the court for “a reasonable amount” for Nelson’s time and effort testifying in the case.
“It’s not a matter of him obtaining a windfall in this case,” Sheldon said. “That was never the point.”
As far as potential refunds for other buyers, Sheldon said his firm will be trying to contact all buyers from the Appleway auto group who were charged the itemized B&O tax. The extra charges started around 2001, he said.
A second, broader, class-action case is also pending, Sheldon said, that names any auto dealer in Washington who added a business and occupation tax charge onto auto buyers’ bills. That case had been stayed, pending the outcome of Nelson’s case.
Appleway’s Seattle attorney referred questions to an Appleway spokesman in Florida, Marc Cannon. He had little to say about the company’s next move, if any.
“We see some inconsistencies” in Thursday’s ruling, Cannon said, declining to elaborate. “We’ll have further comment as we continue to review it.”
Thursday’s decision upheld court victories for Nelson in Spokane County Superior Court and at the Court of Appeals.
In earlier rounds of the court fight, the dealership argued that it fully disclosed that the “B&O overhead assessment” would be charged. It said that Nelson got a good deal because the sales price was less than advertised. And it said it based the fee on state Department of Revenue guidelines from 2000.
“We didn’t all of a sudden one day make this up,” Cannon told a Spokesman-Review reporter two years ago.
When the Court of Appeals ruled against Appleway in 2005, Qwest Communications said it would stop adding a B&O surcharge onto Washington customers’ long-distance phone bills.