The official publication of the Washington State Independent Auto Dealers Association
on Bad Debt
to Federal Overtime
The Benefit of Benefits
to Collecting Past-Due
What Can I Expect
from a Department
of Revenue Audit?
2 | THE FRONT ROW | WSIADA.COM Jun/Jul 2016
The magazine of the
WASHINGTON STATE INDEPENDENT
AUTO DEALERS ASSOCIATION
707 Auburn Way South
Auburn, WA 98002
T: 253-735-0267 | F: 253-804-0844
E: [email protected]
J U N E / J U LY 2 0 1 6
J.T. Curry, Board President
Ken Williamson, Board Vice President/
Chapter President - Tri Cities
John’s Auto Mart, LLC
Emil Scarsella, Board Treasurer
Town & Country Auto Sales
David Randall, Board Secretary
Randall’s Auto Sales, Inc.
South Tacoma Auto Sales, Inc.
AJ Hamedian, Chapter President - North Sound
Excellent Choice Auto Sales, LLC
Rachel Frankel, Chapter President - Vancouver
Top Auto Brokers, LLC | [email protected]
Frank Tamez, Chapter President - Yakima
Auto Max USA | [email protected]
Becky Doolin, Chapter President, South Sound
Sunset Auto Wholesale | [email protected]
Vacant, Chapter President, Spokane
Arrotta’s Auto Max and RV | [email protected]
Todd C. Elliott, Executive Director
Colette Eilers, Member Services Associate
Ashlie Seipert, Member Services Associate
Michael McGaughy, Member Services Associate
Dana White, Member Services Associate
2 | Components of a Successful Business Office
5 | Changes to Federal Overtime Requirements Take Effect Soon
6 | 2016 Education Fairs
8 | Bad Deal on Bad Debt
10 | 7 Steps to Collecting Past-Due Payments ASAP
12 | Dangers of Spot Delivery
15 | Did you know the Department of Revenue will do a tax consultation?
18 | What Can I Expect from a Department of Revenue Audit?
20 | Service Provider Directory
21 | The Benefit of Benefits
22 | Read and Respond
THE FRONT ROW | WSIADA.COM Jun/Jul 2016 | 1
u MESSAGE FROM THE PRESIDENT
Components of a Successful
BY J.T. CURRY, MOTORS NORTHWEST
At Motors Northwest, we look at finance and insurance
as components of a successful business office. We run our
business office with three primary objectives in mind:
1. Protect the store and maintain compliance
2. Serve and protect the customer
3. Run as a profit center.
For a dealership to remain viable for an extended period
of time, staff needs to focus on all three elements and not
cut corners in any of the above.
Protect the store and maintain compliance is about having
the current information remain compliant and having the
right paperwork stored properly for subsequent reviews
by staff, accountants and representatives from either the Department of Licensing or the
Department of Revenue.
Serve and protect the customer…other than making money, isn’t that the reason you are in
this business in the first place? If you do not do #2 well, you likely will not be in business
very long since there is a competitor across the street or down the block who IS serving
and protecting customers. This is about understanding what the customer needs and
what he can afford, meeting those needs with the right vehicle and capturing the elements of the transaction on the right documents.
Run as a profit center. Sounds simple, make money doing what you love to do! However,
competition, regulations, the economy, the price of cars all make this a bigger and bigger
challenge. Stay organized, pay attention to the details of your business, use groups like
WSIADA to stay current on changes that positively and negatively impact our industry.
In this issue of the Front Row magazine we have gathered a variety of articles loosely
targeted on the finance and insurance elements driving a successful dealership. We are
quite proud of the fact that all but one of the articles was created by one of our associate
member sponsors. In future editions, we will continue to focus on articles written by our
own sponsors and dealers, centering on an editorial theme for each issue. Compliance is a
critical element of what we do as independent auto dealers and essential to the mission of
the association. There will always be something with an insurance or finance component.
Please thank these companies for
their generous support of our
bimonthly publication and mention
to them you saw them here!
17 ADESA Seattle
15 Credit Acceptance
16 DAA Northwest
10 Dealer Socket
3 LeMay America’s Car Museum
IFC LOBEL Financial
15 Nationwide Northwest LLC
14 Paul Webb Training
10 Rekdal Hopkins Howard
13 Shepard & Shepard Insurance
We are considering offering an F & I class in late Q3 or early Q4, and welcome suggestions for other new and improved courseware. We are already researching different delivery formats to minimize travel time to with Auburn or Spokane while better serving our
remote/rural dealer base. Some of the things we are considering include webinar formats
for existing and new classes. We also have plans to replace Bootcamp with several more
up to date modules.
As I said in my last column, this association becomes stronger with more member participation. We have just completed a series of successful chapter meetings in Spokane,
Yakima, TriCities and a South Sound meeting at Griot’s Garage in Tacoma. By the time
you are reading this magazine, we will have held our first combined chapter meeting at
Manheim, Seattle. Look for a positive report and pictures in the next edition. n
2 | THE FRONT ROW | WSIADA.COM Jun/Jul 2016
TO ADVERTISE WITH WSIADA
and receive a copy of the media kit
for THE FRONT ROW magazine,
call (253) 735-0276.
COMPLIMENTARY DEALER CROSS-PROMOTIONAL OPPORTUNITIES
• Display vehicles on Anderson Plaza at ACM
— Great visibility from I-5, I-705 & Tacoma Dome
• Offer Ride & Drives around Dome District & Haub Family Field
• Purchase ACM Group Admission Tickets for event promotion
• ACM develops event promotional email for dealership
Contact the Private Event & Sales Coordinator at [email protected]
2702 East D Street Tacoma, WA 98421 | 253.779.8490 | americascarmuseum.org
THE FRONT ROW | WSIADA.COM Jun/Jul 2016 | 3
u EXECUTIVE DIRECTOR’S MESSAGE
BY TODD C. ELLIOTT, WSIADA EXECUTIVE DIRECTOR
Thank you for the positive feedback on the relaunch of the
Front Row magazine. This is your magazine, so I welcome
feedback on content, features and columns. In my last column
I spent some time outlining our Chapter structure. To highlight the regional similarities and differences, we are looking
ways to personalize and differentiate the Chapter experience.
In this Month’s Edition
The general theme of this edition revolves around finance and
insurance. Given the role the association tries to play keeping
dealers compliant, we could dedicate significant editorial space
every issue to finance and insurance; however, that would
quickly get boring! In this issue, with exception of a reprint from Rebecca Chernek, all
of the articles in the magazine were written by associate members or one of our partners
in Olympia. A very positive meeting with Vikki Smith and some of her leadership team
led to a very helpful guide authored by John Ryser. We also include our regular features:
Service Provider Directory, calendar of events, auction schedules and Read and Respond.
By the time you read this, we will have concluded a unique North/South Sound Chapter
meeting event hosted at Manheim, Seattle on June 8. The presentation from Marc
Worthy, Assistant Attorney General will be a good one. I will provide some feedback in
our next issue. This will be the last Chapter meeting until fall.
Pictures, Columns, Content
We are still looking for pictures and interesting content from our members. We plan to
have a professional photographer catalog the festivities at our Education Fair in August,
so smile, you’re on Candid Camera.
Our annual education fairs are just around the corner. Remember to save the dates!
On July 19 we are cohosting the event with Credit Acceptance and DAA Northwest. Paul
Webb keynotes with another stimulating session. If you plan to participate in the DAA
Rock N Roll sale, arrive a day early and get your five hours of continuing ed. As a reminder, Chicago is the guest band this year!
August 18: LeMay, America’s Car Museum, Tacoma. Thursday instead of Saturday this year.
Paul Webb keynotes this one, too. Check your email for more details and a formal agenda.
Continuing Education - Read and Respond
Remember, take the grueling exam at the back of this issue and the last issue and get
credit for 2.5 hours of continuing ed. If you already completed two issues of Read and
Respond, join us at either Education Fair to round out your 2016 certification. Ashlie, or
anyone else on staff, will be happy to step you through the CE process.
4 | THE FRONT ROW | WSIADA.COM Jun/Jul 2016
New Forms And Process
For Indian Country Tax
Beginning June 9, 2016, a new law updates the requirements to make tax exempt sales to tribes and enrolled tribal
members. A new form is used to document these sales. The Department of
Revenue has published a form sellers
can use. We also plan to have the form
available for sale at the WSIADA store.
Dealers need to use this form or a
form that meets the requirements under the new law:
The Department of Revenue has also
published a Special Notice regarding
If you have any questions, please feel
free to contact the WSIADA staff at
Changes to Federal Overtime
Requirements Take Effect Soon
BY THE AUTOMOTIVE DEALER PRACTICE GROUP OF DAVIES PEARSON, P.C.
The United States Department of Labor adopted new overtime regulations under the
federal Fair Labor Standards Act (“FLSA”),
which will take effect on December 16,
2016. The changes are significant and relate to salary requirements for the “white
collar” exemptions (i.e., administrative,
professional, executive, and computer).
As a result, dealers should determine now
whether the new regulations require any
change to their compensation structure
and plan accordingly. According to www.
whitehouse.gov, the rule change is expected
to affect more than 75,000 workers in the
state of Washington.
The primary change is an increase in the
minimum salary that must be paid to an
employee for them to qualify for administrative, professional, executive, and computer exemptions. Specifically, the salary requirement for most employees will
be increased from at least $455 per week
($23,660 annually) to at least $913 per week
($47,476 annually). In addition, at least 90%
of the salary must be paid on a salary basis,
meaning that only 10% of an eligible employee’s compensation can be satisfied with
nondiscretionary bonuses or incentive payments. The new regulations also establish a
mechanism for automatically updating the
salary and compensation levels every three
years, with the first update coming in 2020.
As a result, this is an issue that needs to be
looked at periodically.
An employee’s salary alone does not determine whether he or she is exempt from
federal overtime requirements. An employee’s eligibility for overtime exemptions will
depend upon his or her salary and primary duties. Each category of “white collar”
exemption has a unique set of duties that
must be the primary duties actually performed by the employee. For example,
an administrative professional’s primary
duty must be the performance of office or
non-manual work directly related to the
management or general operations of the
employer or the employer’s customers and
must include the exercise of discretion and
independent judgment with respect to matters of significance.
The new regulation also changes the minimum salary threshold for highly compensated employees. Under the new rule, the
minimum salary requirement for highly
compensated employees is $134,004 annually, which is an increase from $100,000.
Highly compensated employees are exempt
from overtime if, in addition to meeting the
salary requirement, their primary duties
include performing office or non-manual
work and they customarily and regularly
perform at least one of the exempt duties
of an exempt executive, administrative, or
There are a number of adjustments that
dealers can make to ensure that they
comply with the new requirements. For
example, dealers can increase the salaries for otherwise eligible employees to
the new threshold. Alternatively, they
can no longer treat those employees as
exempt, in which case the employees
would be entitled to overtime compensation. In this scenario, dealerships can
hire more employees to reduce or elim-
inate the overtime worked by the non-exempt employees
The new rule does not affect the retail sales
exemption from overtime, under which
many commissioned dealership employees may be exempt. In addition, the new
rule does not change any of the overtime
requirements under Washington State law.
Dealers in Washington must comply with
both the federal law and Washington’s
Minimum Wage Age, which each contain
distinct requirements for overtime payment and exemptions. In addition, dealers
in specific cities in Washington, such as
Seattle and Tacoma, must ensure that they
comply with local pay requirements.
Dealers should contact their legal counsel
to ensure that they comply with wage laws,
including the new federal overtime requirements as the penalties for violating these
laws can be severe. n
This update summarizes current issues
of interest to motor vehicle dealers and is
not intended as legal, accounting, or other
professional services or advice. The publisher assumes no liability for the reader’s
reliance on its contents. Consult your attorney or other professional for advice on
issues important to you and your dealership. Published by the Automotive Dealer
Practice Group of Davies Pearson, P.C. in
Tacoma, Washington: Ronald L. Coleman,
Peter T. Petrich, Lamont C. Loo, Brian M.
King, Michael T. Oates, Trevor D. Osborne
Davies Pearson is an associate member that
sponsors the dealer support program for
THE FRONT ROW | WSIADA.COM Jun/Jul 2016 | 5
Save the Dates
In conjunction with DAA Northwest’s
21st Annual Rock & Roll Sale
Con its Each
2016 WSIADA EDUCATION FAIRS
Call 253.735.0267 or Email staﬀ@wsiada.com
The most effective way to reach
automobile dealers in Washington
is by targeting your ad dollars
with THE FRONT ROW magazine.
Contact us for more information
about advertising with us!
6 | THE FRONT ROW | WSIADA.COM Jun/Jul 2016
THE FRONT ROW | WSIADA.COM Jun/Jul 2016 | 7
Bad Deal on Bad Debt
JUSTON MASUDA, CPA, REKDAL HOPKINS HOWARD
The term Caveat Emptor or “buyer beware”
is a long standing principle in contract law
and is not a term unknown to the automotive industry. However, when it comes to
the bad debt deduction for purposes of sales
tax in Washington State, dealers should be
aware of the term “seller beware”. This is
because when a dealer finances a vehicle to
a customer and then later repossesses the
vehicle, the dealer must reduce the bad debt
deduction by the fair market value of the
vehicle taken in.
Let’s look at an example of how this is applied. Let’s say a dealer sells a vehicle for
$10,000 and the sales tax on the vehicle is
$1,000 (10% tax for purposes of simplicity
and also ignoring license fees and interest
income). So when the customer drives off
the lot, the customer owes the dealership
$11,000. Fast forward six months and assume the customer has not made a single
payment and the dealer cannot locate the
vehicle to repossess it and takes a bad debt
deduction for the amount outstanding. The
dealer would write off $10,000 as bad debt
from the original sale and get a refund of
$1,000 of sales tax paid. The total loss to the
dealership would be $10,000 ($11,000 note
less $1,000 of sales tax refunded). So for purposes of sales tax, the dealer would be whole.
at your dealership. Often times dealers mistakenly report the bad debt deduction in
whole (such as in the first example) when
the vehicle is repossessed. This can come
as a big surprise upon audit, when the
Department of Revenue (DOR) assesses
sales tax on the value of the dealer’s repossessions for an entire audit period which
can be up to a period of four years.
Unfortunately, the bad news on bad debt
does not stop there. For dealers who are
correctly reducing the deduction of bad
debt for the value of the repossessions, there
are two additional rules that are not in the
dealer’s favor. These rules are found within the Washington State Administrative
Code under WAC §458-20-196 (Rule 196).
Under Rule 196, if the dealer sells the vehicle for more than they took the vehicle into
inventory for, the dealer must reduce the
bad deduction previously taken by the difference in the selling price and price used to
take the original bad debt deduction. This
is because the DOR does not differentiate
between the fair market value for wholesale
and retail transactions for this purpose.
Let’s now look at the same set of facts, but
the dealer is now able to locate and repossess the vehicle. In this case, the law
requires that the bad debt deduction is
reduced by the fair market value of the vehicle repossessed. So six months later with
additional mileage, age, and wear and tear
the dealer stocks in the vehicle for $6,000.
The bad debt deduction is now equal to
$4,000 ($10,000 outstanding debt less the
$6,000 ACV of the vehicle repossessed). In
this instance, the dealer would receive only
$400 of sales tax back so the total loss to the
dealer is $4,600 ($4,000 of bad debt plus
$600 of sales tax paid).
Let’s look at this by building on the second
example provided where the dealer sold
the vehicle for $10,000 and repossessed
the vehicle and stocked it in for $6,000. A
month later, the dealer sells the vehicle for
$8,000 and collects and remits the sales tax
of $800 (assume 10% again). For sales tax
purposes, a dealer might think that he is
done with sales tax as he has paid $1,400
of sales tax for the same vehicle ($600 paid
by the dealer in pre-repossession sale and
$800 paid by the customer in the post-repossession sale). However, under Rule
196, the dealer owes an additional $200 for
the difference in the amount of the value
the repossession was taken in for and the
value of the subsequent sale (Retail Sale of
$8,000 and the ACV of the repossession of
$6,000 times 10%).
These two examples provide an illustration
of a hidden risk involved in financing sales
The second rule also comes from Rule 196
and has to do with reconditioning. Let’s
8 | THE FRONT ROW | WSIADA.COM Jun/Jul 2016
say that in the previous example the dealer
had to replace the engine to sell the vehicle and the engine cost the dealer $3,000
and dealer sold the vehicle for $9,000 instead of $8,000 due to the new engine. So
the dealer broke even on the sale (selling
price of $9,000 less repossession cost of
$6,000 plus $3,000 for the new engine).
In this case it would seem that the subsequent sale of $9,000 was due to reconditioning and that the original bad debt of
$6,000 would not be affected by the sales
price as the increase in value was due to
the new engine. However, this is not how
the DOR is currently assessing tax on this
transaction. Instead, the DOR’s position
is that because Rule 196 states that when
the amount of a subsequent sale of repossessed property is different from the previously used to reduce the bad debt deduction that the difference must be claimed
as an additional recovery of bad debt. This
seems to be an over reach of Rule 196 as the
Rule is silent on reconditioning.
As a result of the DOR’s current position on
bad debt, dealers involved in financing their
sales need to consider the sales tax ramifications when extending credit. Dealers may
also want to avoid sales tax adjustments to
bad debt taken on repossessions by taking
in the repossessions for the amount of the
bad debt (essentially reducing the deduction to zero) or to wholesale repossessed
vehicles for the repossessed amounts to
third parties. Under the current treatment
of bad debt in regards to repossessions, the
exposure to sales tax to a dealer truly creates a “seller beware” environment.
For more information regarding sales tax
or other State or Federal taxes, please contact Juston Masuda, CPA at Rekdal Hopkin
Howard, PS at 425-658-1400. n
Juston Masuda is a CPA with Rekdal
Hopkins Howard. Reskdal Hopkins
Howard is a Luxury Edition Associate
Member of the Association and frequent
contributor to Association events.
THE FRONT ROW | WSIADA.COM Jun/Jul 2016 | 9
7 Steps to Collecting Past-Due Payments ASAP
BY MICHAEL STOWELL, DIRECTOR OF INDEPENDENT SALES, DEALERSOCKET
It’s the circle of life for buy-here-pay-here
deals … Customer buys car, gets financed,
then pays off their loan in good standing
or falls behind, ultimately requiring your
collections team to step in. It’s no one’s
favorite part of the business, but laser-focusing your collections efforts makes all
the difference in a successful finance operation.
Uncollected payments reduce cash flow,
increase costs and erode profits. The longer past-due accounts remain outstanding, the less likely you are to collect. In
fact, your ability to collect deteriorates an
average of 10 percent each month, according to the Commercial Collection Agency
Association (CCAA). So it’s essential that
businesses find the right method to consistently persuade customers to pay their
Get ahead with these seven steps to bringing in past-due payments right away:
Start with the right software. If you
aren’t working with a quality DMS
that provides the comprehensive reporting and analytics you need to measure your results, stop reading this article
now and get yourself a new system.
Create a Right Party Contact (RPC)
measurement. RPC is the result of
speaking to the “right person” who
has direct financial responsibility for the
payments on the account. If that happens
to be the co-signer, so be it. If it’s the driver, contact them first.
Measure conversion rates of RPCs
and other contacts. Conversion rates
are the statistics used to quantify
what percentage of collection calls result
in a formal payment arrangement (i.e.,
promise-to-pay). RPC conversion rates
are typically higher in first-party collections where you directly interact with the
debtor who owes you money. In the inde10 | THE FRONT ROW | WSIADA.COM Jun/Jul 2016
pendent auto industry, I’ve seen RPC conversion rates as high as 75 percent.
as 68 percent!) On the other hand, not
matching the two makes this payment arrangement a 50/50 proposition.
Code your collection records with
activity codes that highlight an
RPC. Use that information in your
future reporting to help set a strategy for
improving conversion rates across the
board. Shoring up this metric should be a
top priority of any business owner or collections manager.
Match RPCs and promises-to-pay
with future electronic payments.
This means the collector must close
the customer on two variables. First, the
collector must get the debtor to agree to
a payment arrangement. The most effective payment arrangements are reasonable enough that they are likely to be kept,
but aggressive enough that you don’t give
away the farm.
Second, the collector must close the
debtor to set up an electronic payment
that mirrors the current arrangement.
Matching the two will create a positive
impact on cash flow and delinquency. (I
have seen the success rate jump as high
At the end of each call, recap the
conversation. Remind customers of
the electronic payment arrangement
they just made, and inform them that they
will be notified when the payment is deducted from their account.
Tell the customer you are documenting the account with this information. It may not seem like much, but
this small step will create future accountability. n
Michael Stowell is Sales Director at
DealerSocket. He has sold the company’s
technology platform to some of the largest dealer groups in the country and holds
its highest annual sold MRR. He has been
with DealerSocket for eight years. Michael
can be reached at [email protected]
com. To learn more about DealerSocket
visit dealersocket.com/ind. DealerSocket
is a Limited Edition WSIADA Member
and Advisory Board Member.
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BY REBECCA CHERNEK, CHERNEK CONSULTING
If you’ve been
in this business
for any length
of time, you’re
no doubt familiar with the
That’s when a
dealer signs a
a customer, allowing them to take possession of their new
car before they’ve even received bank approval. It’s a practice about as old as the industry
itself — and one that’s also fraught with risk.
particulars with the lender. This effectively
keeps the buyer from going elsewhere while
waiting for approval and limits the risk that
they’ll be scooped up by the competition.
Back in my retail days, I worked with numerous general managers who didn’t think
twice about spot deliveries. They’d espouse
the notion that if you weren’t bringing
enough cars back, you just weren’t spotting
aggressively enough! Their motto seemed
to be: “If the customer can fog a mirror,
we’ll spot them.”
Although many states have no laws in place
preventing the practice of spot delivery,
there are several conditions that apply. For
example, it’s considered a deceptive practice to have a customer sign a contract on
terms you know they may not be approved
for. This is commonly known as a “yo-yo”
deal, and can lead your dealership into a
world of trouble — not the least of which
could result in a class action lawsuit.
The fact that spot deliveries still occur today
seems a bit of a mystery. With the advent of
technology and the development of channels like Dealertrack, RouteOne and CUDL,
you’d think the practice would have gone the
way of the DeLorean. This is hardly the case.
Many dealers will stop at nothing to put a
deal together, including pushing spot deliveries. This is a frequently used tactic to
remove a buyer from the market until the
dealer has had enough time to hash out the
12 | THE FRONT ROW | WSIADA.COM Jun/Jul 2016
Often times, dealers bank on catching
lenders asleep at the wheel. But it’s when
third-party financing can’t be obtained at the
quoted rates that things start to get messy.
That’s when the customer is called back into
the dealership and presented the cold hard
facts by the F&I manager: The deal was not
approved on the original terms offered. In
order to keep the car, they’ll have to resign
on higher payments or different terms.
original contract is rescinded and a new
contract is written up, this time for terms
more likely to result in a third-party approval. Some states, like California, require
the use of specific forms when recontracting customers. These forms also typically
require dealers to provide full disclosure for
the reasons why.
Recontracting is a sticky practice. Many
dealers aren’t aware that back-dating contracts isn’t legal. All recontracted deals
must show the new date of the contract. If
not, this may lead to the inaccurate disclosure of a stated APR — a major no-no that
can cause your dealership to be hit with a
Truth in Lending Act violation.
Stips and liabilities
When spot deliveries go bad
Another common mistake dealers make is
letting customers slip on stip collections, attempting to collect stips only after the customer has taken possession of the vehicle.
This practice can open you up to significant
risk — like the customer being unable to offer proof of income, or the provided proof
of income not matching what was entered
into the application.
Recontracting is the most common result
of failed spot deliveries. That’s when the
In this case, you as the dealer will have no
choice but to send the deal to another bank.
This provides customers with anywhere
from two weeks to 45 days to shop the loan
without adversely impacting their credit. If
credit is pulled outside of that allowance, it
may damage the customer’s credit file. This
can leave your dealership liable. The solu-
Spot deliveries gone bad often result in
one of two scenarios: recontracting and
unwinding. Unwinding is a more straightforward action, resulting in the complete
cancellation of terms and the return of the
vehicle to the dealership.
RISK MANAGEMENT t
tion? Never let the customer leave without
validating their income and without all
stips in hand.
Insurance and liability
Yet another danger inherent in the spot
delivery is the question of insurance in the
event of an accident. If a customer drives a
new car off the lot and gets into an accident
— wrapping the vehicle around a telephone
pole and injuring others in the process —
your dealership will be responsible for paying for the damages. In this scenario, an insurance provider is not obligated to pay the
claim. It’s not until the transaction is fully
funded by the bank that insurance kicks in.
State requirements vary
Some states require dealers to obtain bank
approval within a specific time frame.
Recently, New Jersey revised spot delivery
time frames to four days. If bank approval can’t be obtained within that time, the
customer has to return the vehicle. Once
outside that four-day allowance, customers can demand the originally contracted
terms – leaving the dealership responsible
for providing in-house financing. In-house
financing, also known as full recourse, can
open up a can of worms with respect to various regulations.
Other states have different rules about spot
delivery. In Wisconsin, dealers there are
required to provide financing if they spot
Shopping for Dealership Insurance?
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Insuring Your Dealership
Send Your Name,
Dealership Name, and Address
To: [email protected]
Shepard & Shepard
“We wrote the book on dealer
deliver a vehicle and can’t get the customer approved through a third-party lender.
Because state laws differ, ensure you are up
to speed on where your state stands with respect to spot delivery.
Deferred down payments and
Often, dealers offer to hold checks or promissory notes to defer the customer’s down
payment when doing a spot delivery. While
this may not be considered illegal by FTC
standards (as long as no interest is charged
to the customer and you’ve been fully transparent), it could raise serious issues with
your bank provider.
If the customer fails to make payment to
the lender and the lender discovers your
dealership accepted a deferred down payment or promissory note in lieu of actual
money down, your dealership could be
on the hook for the full value of the car.
Naturally, much of this has to do with your
established relationship with the lender in
question – but it’s a risk better not taken. As
a point of caution, always read your dealer
agreement and closely review your retail installment sales contracts.
No such thing as a free ride
Spot deliveries offer numerous conveniences for both customers and dealerships.
Customers can drive their new vehicle off
the lot much sooner, and dealerships enjoy
selling more cars. But spot deliveries also
come wrapped in risks that must be considered. Spot decisions can wreak havoc in
the wrong hands. As a dealer, it’s imperative
that you examine the potential pitfalls of
spot delivery and determine if the risks to
you outweigh the benefits. n
Rebecca Chernek of Chernek Consulting
provides customized in-dealership training for franchised, independent and highline luxury brand automotive dealers.
Interactive virtual training programs in
conjunction with role play, including a recently added course on compliance, are
available at www.chernekconsultingvirtualpro.com.
THE FRONT ROW | WSIADA.COM Jun/Jul 2016 | 13
14 | THE FRONT ROW | WSIADA.COM Jun/Jul 2016
DEALER INSIGHT t
Did you know the Department of Revenue
will do a tax consultation?
What is a tax consultation?
Upon request, a representative from the
Department of Revenue will visit your office and explain how state taxes apply to
your specific business activities.
How does it work?
The representative will:
• Spend a couple of hours reviewing your
type of business and its operations.
• Explain how to properly report your
taxes and answer any questions you
• As a result of the Consultation Visit,
you will not be issued an assessment.
If any misreporting is discovered, you
will have an opportunity to amend
your past returns.
• Give you a written summary of the
topics discussed. You may also request
written instructions to help you fill out
future tax returns.
Who can benefit from a consultation visit?
Small business owners struggling to understand how to report their taxes properly will benefit from a short consultation
visit. Large businesses with difficult issues
can request advice by calling their local
Department of Revenue office.
How do I sign up?
Complete a Pre-Consultation Visit
Questionnaire available from WSIADA and
return it to the Department of Revenue. n
Point-of-Sale Lending Specialists
• No credit scoring
• No mileage or year requirements
• No payment recourse
• Quick electronic funding
• Work directly with buyer
• Newly-licensed dealers accepted
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THE FRONT ROW | WSIADA.COM Jun/Jul 2016 | 15
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THE FRONT ROW | WSIADA.COM Jun/Jul 2016 | 17
What Can I Expect from a
Department of Revenue Audit?
If you are an independent auto dealer in the
state of Washington, you are going to participate in an audit with the Department of
Revenue. This guide is designed to give you
an idea of what you can expect. Please contact the WSIADA or your local DOR office
if you have questions.
Todd Elliott, Executive Director, WSIADA
Why am I being audited?
The Department of Revenue (DOR) routinely audits businesses to determine whether state excise taxes were reported and paid
correctly. Audits are a learn¬ing opportunity
for correct excise tax reporting.
When and where will the audit be
An auditor will contact you to schedule an
appointment. A date and time will then be
The audit may take place at the following
• your place of business.
• one of the Department’s local offices.
• your accountant’s, attorney’s, or other
18 | THE FRONT ROW | WSIADA.COM Jun/Jul 2016
We are committed to working with you in a
professional and cooperative manner.
What will the auditor review?
The audit relates to excise taxes you may
pay on your excise tax returns, such as:
• business and occupation tax
• retail sales tax
• use tax
• public utility tax
An audit of your business activities may
cover several major areas, including:
1. Income - verification of proper
amounts, classifications, and documentation.
2. Deductions and exemptions - verification of proper amounts, classifications, and documentation.
3. Purchases - verification of retail sales
or use tax paid on capital assets, supplies, or articles manufactured for your
How can I prepare for an audit?
The auditor will explain the records re-
quired for the review. Gather these before
The audit period is usually for the past
four calendar years, plus the current year
through the end of the last completed calendar quarter.
The records requested usually include the
• Washington State excise tax returns
and work papers.
• Federal income tax returns for the
• Summary accounting records and
source journals such as check registers,
general ledger, sales journal, general
journal, cash receipts journals, and any
other records used to record income
• Sales invoices.
• Purchase invoices, such as accounts
payable and receipts.
• Depreciation schedule and purchase
invoices for assets acquired during the
• Reseller permits/resale certificates for
any wholesale sales.
DEPARTMENT OF REVENUE t
u AUCTION LISTING
Adesa | adesa.com/seattle
Tuesday: Consignment 9:30AM
Alternate Tuesday: Specialty 8:30AM
Thursday Night: InOp Sale 4:45PM
Brashers - Portland
Thursday: Consult website
Although most audits can be completed
with the above records, additional documents may be requested.
Copart | copart.com
Times vary: Consult website
DAA - Seattle | daanw.com
Friday: Dealer and Fleet/Lease 9:00AM
Alternate Friday: Heavy Metal* 9:00AM
Monthly GSA Public Auctions: 1:00pm as
DAA - Northwest | daanw.com
Weekly auctions: Thursdays at 9:00am;
Monthly promotional event auctions:
Wednesday at 2pm & Thursday at
9:00am / EXCEPTION: July 20-21
DAA Northwest Rock & Roll Sale –
Wednesday at 9:00am & Thursday at
Monthly MotorSports auctions:
Thursdays at 11:00am (Lane 8) /
EXCEPTION: July 20 DAA Northwest
Rock & Roll Sale – Wednesday at
Monthly RV auctions: 11:00am (Lane 8);
Heavy Metal auctions: 8:30am as scheduled (Lane 8);
NOTE: MotorSports, RV and Heavy Metal
auction dates can be found at daanwmotorsports.com
Ehli Auto Auctions | ehliauctions.com
Last weekend of every month.
Kaman | kamanauctions.com
Manheim - Seattle
Monday: OVE Event Sales
Tuesday: Alternate weeks Ford Factory
(Closed sale) - 10:00am; Crossborder
Mobile Sale - 1:00pm
Wednesday: General Sale Weekly –
All sale dates and times are subject to
change. Please verify with the
Auction or manheim.com.
Manheim - Portland
Tuesday: Open Sale: 9:00AM
Supporting documentation for all deductions and exemptions.
The auditor will use your electronic records,
when available. This improves the accuracy
of the audit and reduces the time it takes
to complete, minimizing the inconvenience
Sampling is frequently used to realize efficiencies for both the Department and taxpayer. This helps minimize costs associated
with the audit, such as retrieving and examining documents.
The auditor will discuss the options to select the most appropriate method.
All information you provide will be maintained in strict confidence and is not available to the public. However, the Department
has information-sharing agreements with
the Internal Revenue Service and other
What happens during an audit?
The auditor will take a tour and/or observe
your operations to get a better understanding of your business activities and accounting records.
The auditor will review those records and
provide you with valuable information and
instructions for future use.
What happens after the audit?
You will be notified of the audit findings.
The auditor will explain any adjustment to
you or your representative before finalizing
the audit. If you have information we have
not considered or you believe a mistake
has been made, please contact the auditor
If you agree with the adjustments:
You have the option to prepay your assess-
ment once the audit has been completed.
Full payment will include the tax, any applicable penalties, and estimated interest.
Since a full payment stops the accrual of
interest, you would save money by making
the payment early. Any questions you have
about making a prepayment should be discussed with the auditor.
If you disagree with the adjustments:
You may request a meeting with the auditor’s manager and review disputed issues.
If agreement cannot be reached:
• You have 30 days from the date the
audit report is mailed to appeal to the
Department’s Administrative Review
and Hearings Division.
• If you file an appeal prior to the assessment’s due date, you should pay
the unprotested amounts. Payment is
not required for the protested amounts
and will remain due pending the appeal. However, interest continues to
accrue until taxes are paid in full.
• If you file an appeal more than 30 days
after the audit report is mailed, you
must pay the total amount due and petition for refund.
• Contacted by the auditor to schedule
• Information gathered
• Audit performed
• Audit findings discussed
• Audit agreed to OR manager’s conference held
• Audit finalized
• Any adjustment paid OR appeal filed
NOTE: This is general information. If you
need more information about the audit
process, please contact your local office.
For auto dealers there may be specific documentation requests including complete
“Deal Jackets” for the individual transactions, etc. n
John Ryser, Assistant Director
Audit |Washington State Department of
THE FRONT ROW | WSIADA.COM Jun/Jul 2016 | 19
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The Benefit of BENEFITS
Remaining competitive in the hunt for the
right job candidates who will propel your
business to success is a struggle. Once you
find the people you need, you have to convince them that your company is a better
place to work than your competitors. A
strategic, quality benefits package can help
you attract and retain those top employees.
Employees value a well-rounded selection
of benefits, and health insurance, a 401(k)
plan, life insurance and dental coverage are
a few of the plans that you can consider
Benefits packages offer value to your employees and help you boost productivity
and retention in a cost-effective manner.
Here are a few of the advantages of offering
employee benefits as part of your compensation package.
Talent Attraction and Retention
Employees highly value a good benefits
package. Developing a strategic benefits
package that targets specific types of employees can help attract the right job candidates to keep your organization running at
Once you have these top-performing employees at your company, providing a tailored employee benefits package will serve
as a barrier to them leaving—a great benefits package can be a huge advantage when
looking at retention strategies because it
holds more than just monetary value for
the employee. A bigger salary at another
company likely won’t be as strong a pull for
an employee tempted to leave if the other
company’s benefits package isn’t as attractive as yours.
Healthy, Productive Employees
When your benefits package includes a
combination of health insurance and dental
and vision coverage, you will have employees who are able to take a proactive role in
managing their health. They will have easy,
affordable access to health care, reducing
absenteeism due to illness.
When they are on the job, healthy employees are more productive than sick ones. It’s
beneficial for your company’s productivity
and your employees when they have access
to medical coverage and time off when they
A good benefits package leads to satisfied
employees with higher morale. Employees
who find value in their benefits are typically
more willing to commit to their company
because it helps make them feel valued—
which leads to increased productivity and
Efficient Use of Resources
Offering valuable benefits can help lower top employees’ expectations for salary.
Many employees are willing to accept good
benefits in lieu of a slightly higher salary.
This is an advantage to your budget because the value you present to employees
with benefits, especially health insurance
plans, can be monetarily equal to a raise
in salary for them, while costing you less
due to group rates and lower payroll taxes. Employers can avoid the hidden cost of
paying extra payroll taxes on higher salary
by instead offering benefits to provide similar value to employees.
Even if you think you can save a little money
in the short term by skimping on employee
benefits, you will eventually face the consequences through a lowered ability to attract
high-achieving employees, increased difficulty retaining your top performers, and
lowered morale and productivity.
Offering a quality array of employee benefits will pay off through a stronger, more
productive workforce with employees committed to your company.
Working with Benefit Consultants
Northwest will help you develop a strategic benefits package that works for your
budget and offers attractive options to your
employees. We can also give you access to
educational materials for your employees as
you launch your new or improved benefits
package. Contact us at (800) 945-4193 or
visit bcnw.com. n
Benefits Consultants is a new associate
member of the association.
THE FRONT ROW | WSIADA.COM Jun/Jul 2016 | 21
READ AND RESPOND | June/July 2016 Front Row
The purpose of this Read and Respond quiz is to verify one has read the content of this issue of Front Row. All of the answers for the
questions provided are included in the content of the issue. WSIADA’s Read and Respond quizzes may be counted toward state required
continuing education. A passing grade will be granted for scores of 80% or higher. $50 payment is required for non-members prior to
the Washington State Department of Licensing being notified of completed continuing education.
Please be advised that the information contained in WSIADA’s Front Row is, to the best of our knowledge, current and correct. However,
we caution readers not to use the information provided to them as final authority. Its purpose is to be a guide. Any legal advice should
be regarded as general information. It is strongly recommended that one contact an attorney for counsel regarding specific circumstances. Some articles may express opinions and/or suggestions for best practices. Likewise, the appearance of advertisers or their
identification as members of WSIADA, does not constitute an endorsement of the products or services featured.
Dealership Name: _______________________________________ Dealer #: _______________ Date: _________________
Check: q I read and understand the disclaimer above.
Check those that apply: q $50 payment is enclosed. q I already paid. q It’s included in my membership.
Quiz Taker’s Name: ______________________________________ Signature: _ ___________________________________
Email: ________________________________________________ Position: ____________________________________
Feedback and Comments:
CIRCLE THE CORRECT ANSWER.
1. According to Michael Stowell, as a
result of collectors closing debtors
to set up an electronic payment that
mirrors the current arrangement, he
has seen collection success rates jump
by how much?
2. For most employees, the new Federal
overtime rules will include a salary
requirement increase from:
a. $455 per week to $913 per week;
b. $544 per week to $913 per week;
c. $23,660 annually to $47,476 annual;
d. Both A & C
3. According to Davies Pearson, P.C.,
what percentage of a salary must be
paid on a salary basis as a part of the
new Federal overtime requirements?
d. There is no such requirement.
22 | THE FRONT ROW | WSIADA.COM Jun/Jul 2016
4. Rebecca Chernek cautions dealers
to do what prior to taking deferred
a. Read your dealer agreement and closely;
b. Run the buyer’s credit;
c. Closely review your retail install-
ment sales contracts;
d. All of the above;
e. Both A & C.
5.According to the Commercial
(CCAA), your ability to collect a debt
deteriorates how much each month?
6.According to whitehouse.gov, the
rule change to the Federal overtime
requirements is expected to affect:
a. More than 7,500 workers in the state of Washington;
b. More than 75,000 workers in the state of Washington;
c. More than 5,500 workers in the state of Washington;
d. More than 55,000 workers in the state of Washington.
7. After a vehicle is repossessed (by a
Buy Here Pay Here dealer), the dealer
is required to reduce the bad debt deduction by what?
a. The total interest payments received during the course of the loan;
b. The new ACV amount;
c. The new retail list price;
d. Fair market value of the vehicle.
8. According to Juston Masuda, when
extending credit, dealers need to consider what?
a. Their current cash flow;
b. The sales tax ramifications;
c. That they may be more susceptible to frequent audits by the DOR;
d. Both B and C.
9.Which of the following items
will likely be reviewed during a
Department of Revenue audit (select
all that apply)?
a. Business and occupation tax
b. Retail sales tax
c. Use tax
d. Public utility tax
10:00AM, Prelicensing Class
10:00AM - 3:30PM, Title Workshop
10:00AM - 3:30PM, Title Workshop
ALL DAY, Eastern Ed Fair
10:00AM - 3:30PM, Title Workshop
10:00AM, Prelicensing Class
ALL DAY, Western Ed Fair
10:00AM - 3:30PM, Title Workshop
10:00AM, Prelicensing Class
8:00AM - 10:00AM, Chapter Meeting
u READ AND RESPOND | JUNE/JULY 2016
10.According to Benefit Consultants
Northwest, employees who find value
in their benefits are typically more
willing to commit to their company
because it helps make them feel what?
a. Stable in their employment;
c. Healthy and productive;
11.Many dealers aren’t aware that
back-dating contracts isn’t legal.
Rebecca Chernek warns that this is a
compliance risk for dealers because:
a. It is undoubtedly a deceptive practice;
b. It is an easy way to make mis
takes and have conflicting records
for the transaction;
c. It may lead to the inaccurate dis
closure of a state APR that can cause your dealership to be hit with a Truth in Lending Act violation.
12.Rebecca Chernek suggests that dealers never let their customers leave
a. Collecting 100% of the down payment;
b. Without validating their income;
c. Without all stips in hand;
d. Both B & C.
13.The Federal overtime requirements
will be changed effective:
a. August 26th, 2016
b. September 26th, 2016
c. December 26th, 2016
d. January 26th, 2016
14. What are RPCs?
a. Radical Payment & Collections;
b. Reasonable Payment & Collections;
c. The statistics used to quantify what percentage of collection calls result in a formal payment arrangement;
d. The Rate in which Payments are a result of Collection efforts.
15.What objectives are kept in mind
for the business office at Motors
Northwest (select all that apply):
a. Good lender relationships;
b. Quick and timely transactions;
c. Run as a profit center;
d. Protect the store and maintain compliance;
e. Minimum employee turnover;
f. Close attention to internal
16.If you disagree with the adjustments
made after a Department of Revenue
audit, what recourse does a business
a. None. Audit findings are final.
b. File for an appeal on the
c. Write a letter to Taxpayer Services to request a new audit.
d. You may request a meeting with the auditor’s manager and review disputed issues.
17. Who is the keynote speaker at b o t h
2016 Education Fairs?
a. Paul Webb
b. J.T. Curry
c. Todd Elliott
d. Marc Worthy
18.To find additional rules pertaining to reporting bad debts, what
Washington State Administrative
Code (WAC) is a good resource?
11:00AM, Title Workshop
THE FRONT ROW | WSIADA.COM Jun/Jul 2016 | 23
It is important to be to be recognized as a professional! Enclosed are my annual dues to ensure that my business has all
the advantages WSIADA/NIADA provides to put me at the forefront of my profession.
By completing this form, I am consenting to and giving WSIADA/NIADA, its aﬃliates and subsidiaries, my permission to (until I give
written notice to discontinue) contact me and provide information to me at the mailing and e-mailing addresses, telephone and fax
numbers I have provided. I certify that (I am/we are) eligible for membership in WSIADA.
Other Employees I would like to include within my membership
$450 – Dealer Member: is limited to any sole proprietorship, partnership or corporation which is engaged in buying and selling motor vehicles as a
principal part of its business; holds a vehicle dealer’s license issued by the Washington State Department of Licensing.
Charge Card for Membership Dues
Check made payable to WSIADA enclosed. Returned checks will be subject to a $25 service fee.
Please charge my (circle one): VISA
Credit Card Information: 16 Digit Card #:
Type of Credit Card:
(Card Holder’s Signature if different)
707 Auburn Way South, Auburn, WA 98002 Email: staﬀ@wsiada.com Call or Text: (253)735-0267 Fax:(253)804-0844
We want to be
Your Full Service
Manheim Seattle offers a large selection of
pre-sale day, sale day and post sale day
options to assist and enhance you auction
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Services we offer to our dealers:
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Dealer Financing offered by NextGear
Purchase Protection offered by Deal Shield
And many more options on Manheim.com
For more information call: 206-762-1600
We want to be ‘Your Manheim’!
WASHINGTON STATE INDEPENDENT
AUTO DEALERS ASSOCIATION
707 Auburn Way South
Auburn, WA 98002
ALL THE TOOLS TO BUILD YOUR SERVICE DRIVE
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© 2016 AutoZone Inc. All rights reserved. AutoZone, AutoZone & Design, Duralast, Duralast Gold, Duralast Max, Loan-A-Tool and Duralast ProPower are registered marks of AutoZone Parts,
Inc. and Going The Extra Mile is a mark of AutoZone IP, LLC or one of its affiliates. ALLDATA is a registered trademark of ALLDATA LLC. All other marks are the property of their respective
owners.©2016 AutoZone, Inc. All rights reserved. AutoZone, AutoZone & Design, Duralast, and Duralast Gold are registered marks and Going The Extra Mile and Duralast Max are marks of
AutoZone Parts, Inc. All other marks are the property of their respective owners. All photographic, clerical, typographical and printing errors are subject to correction.
NIADA used car dealer ad.indd 1
2/10/16 8:30 AM