With Sound Transit under siege for the formula it uses to determine a car’s value, Washington state’s Department of Licensing has discovered some mistakes with the original car prices it plugs into that formula to determine what taxes are owed.
As Sound Transit and the state Department of Licensing continue to be deluged with complaints about new, higher car-tab taxes, the DOL has discovered that some vehicle prices in the department’s records are incorrect.
The mistakes in the manufacturer’s suggested retail prices (MSRP) in the DOL’s records affect a small portion of taxpayers, DOL spokesman Brad Benfield said.
What’s more, unlike the hotly disputed depreciation formula that the DOL applies to arrive at a car’s value for taxing purposes, the MSRP errors go both ways — some overvalue a vehicle, while some undervalue a vehicle, resulting in a lower tax payment.
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“In most cases it’s correct,” Benfield said of vehicle prices. “But we have actually identified a couple that appear to be wrong. We don’t know exactly how many.”
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He said the agency recently set up a specialized team, with as many as six people, to deal with complaints about car values. The agency could, Benfield said, potentially issue refunds if past charges have been incorrect.
The primary way the DOL gets its price data is from local car dealers. When a dealer sells a car, they submit title information, including the MSRP, on behalf of the customer to the DOL. If a car comes from out of state, that information is gathered when it is registered in Washington at a licensing office.
Benfield said DOL has been getting hundreds of calls a day from people upset about their Sound Transit car-tab taxes. For car tabs that expire after March 1, the passage of Sound Transit 3 raised the tax rate from 0.3 percent of a car’s value to 1.1 percent.
That money, along with an increase in sales and property taxes, will be used for a massive expansion of light rail and bus service over the coming decades.
But Sound Transit uses — and has used for about 20 years — an inflated formula it inherited from the Legislature to set a car’s value, resulting in higher valuations and higher taxes. The DOL is under contract to collect the taxes for Sound Transit.
“Most people just want to talk to us about how it’s computed and ask about why we don’t use the actual value of the car,” Benfield said. “We explain to them that it’s required by law.”
The Legislature changed the inflated formula 10 years ago, but because Sound Transit had sold bonds based on the previous formula, it continued to use the inflated one.
Nothing has changed recently about either Sound Transit’s inflated valuation formula or DOL’s list of MSRP’s (including the mistakes). But, because of the tax increase, those pre-existing issues were exacerbated and people started to notice.
The errors in DOL’s prices were first reported by KING 5.
Among the first to bring the mistaken prices to DOL’s attention was Keith Brick, a software developer who thought there was a problem with the valuation of his 2011 Mazda. By looking at his tax bill, he was able to infer the price DOL was applying to his car. He compared that with an MSRP he found from an outside source and discovered they didn’t match.
After more research into other makes and models, Brick discovered that DOL’s data was dotted with mistakes. Some cars, among those Brick checked, seemed to be overvalued by thousands of dollars, while some were undervalued by similar amounts, resulting in over or under charges that could have lasted for years.
“This is not an isolated error,” Brick said. “I’m astonished by what I found and believe this should be investigated further.”
Sound Transit has been under assault in the Legislature, with Republicans looking to do everything from overhauling the agency’s leadership to allowing cities to opt out of paying Sound Transit taxes. Two Republican senators have written to the state attorney general, arguing that the agency’s valuation formula is unconstitutional.