The answer is:  Possibly.

 

     Two clients recently reported that the New York State Department of Taxation and Finance reviewed their vehicle storage lot agreements with local property owners during a recent audit to determine if the dealers owe the State money for unpaid sales tax.  In each instance the dealer was required to pay unpaid sales tax for the storage of their vehicles at neighboring lots owned by third parties.  This was due to the fact that the dealers did not have the proper written agreements for the storage of the vehicles.

    

     Under New York State Tax law the service of providing parking, garaging, or storing motor vehicles is generally subject to sales tax.  However, if a dealer enters into a lease, rental or similar agreement of real property, the charges are not subject to tax.  An agreement qualifies as exempt if it meets the following criteria:

1. The Agreement is written;
2. The Lessee has the exclusive right to occupy either the entire premises or a fixed and specific area or areas of the premises;
3. The lessor relinquishes the right to enter the fixed and specific area or areas of the lessor's premises subject to the agreement, except for a limited reservation of rights to enter to perform activities normally associated with being a lessor of real property (i.e. collect rent, perform repairs, etc.);
4. The lessee, its employees, or agents have an unlimited right to enter the property during normal business hours; and
5. The lessee has an insurable interest in the premises (while it is not required that the lessee actually has insurance on the premises to meet the requirements the presence of an insurance policy on the leased premises would be acceptable proof that this condition is met).

     It is imperative that you review your vehicle storage agreements to determine if you are working under an agreement which renders the storage nontaxable.  If you are unsure as to whether your agreement subjects your dealership to additional sales tax liability or if you have additional questions on this topic contact Stevan LaBonte at the LaBonte Law Group at 516-280-8580 or Paul Charles at Richards Witt and Charles, CPAs at 516-741-0515.      

  

 

  

     The following is a follow up summary of your obligations in the event of a manufacturer recall which appeared in a recent article from the LaBonte Law Group.

 1. SALE OF NEW VEHICLES

 

It is a violation of federal law to sell a new motor vehicle while the vehicle is still subject to an unrepaired recall. The National Highway Transportation Safety Administration (NHTSA) has made it clear that dealers must not deliver a vehicle to a customer and promise to repair it later.  If you have a new vehicle on your lot that is subject to a recall remove it from your available inventory as quickly as possible.  Once the recall repairs are complete you can once again offer that new vehicle for sale.  

 

2. PARTS

 

Replacement motor vehicle parts in a dealer's inventory which are the subject of a manufacturer's recall are under the same rule as the sale of new vehicles.  A dealer must not sell recalled parts until the repairs are completed.

 3. USED VEHICLES

 

Used vehicles subject to recall are a tricky issue for dealers.  Federal law does not specifically prohibit or penalize the sale of a used vehicle subject to a recall.  However, a dealer who sells new units of a particular brand, who also sells a used vehicle of that same brand having an unrepaired recall defect, runs the risk of significant liability.  If there is an accident related to the unrepaired defect, the dealership may be subject to a lawsuit claiming negligence for selling a vehicle with a defect it knew, or should have known, was subject to recall. 

Sound business practices

      In the event of a recall, dealers must establish procedures for the proper handling of all vehicles and parts which are subject to the recall.  The procedures should include:

1. Forwarding of all recall notification material to their sales department, parts department, and service department managers for immediate review and processing.
2. Immediate review of all vehicle inventories to determine whether the dealership has any vehicles in their inventory which are subject to the recall and to take immediate action to have those vehicles repaired.  (Remember; if the repairs cannot be made prior to delivering the vehicle to the customer it cannot be sold).
3. In the parts department, management should determine whether parts subject to the recall are in inventory.  If so, those parts cannot be sold until they can be repaired or until replacements arrive.  Dealers should order any parts needed for recall repairs at expected demand levels.
4. The service department must implement procedures to carefully and appropriately handle customer requests for recall repairs and to handle recall repairs for units in inventory.  It is likely that call volume and service appointment requests from customers will be heavy so allocate appropriate levels of additional personnel to handle the additional calls and service appointments.

      If you have any questions on how to handle, or respond to, the NYDCA subpoena or any questions on handling manufacturer recalls please contact Stevan LaBonte at 516-280-8580.