Miscellaneous Regulations

On April 6, 1998 the Board of Governors of the Federal Reserve System enacted a final rule amending the interpretation of regulation Z. The law hasn't changed, just the interpretation of it within the scope of the Regulation Z Commentary. To most of us, this is no big deal. It only affects loans where the trade-in value is less than the amount owed to the prior creditor. Effectively, this means that the new interpretation only kicks-in when the customer is "upside down" on the amount he owes on his trade-in vehicle. This may be thought of as a "lien shortfall". He owes more to his prior finance company than the vehicle is worth so his lien payoff is more than the value of his trade-in resulting in a negative value for his trade-in. Effective October 1, 1998 the downpayment (cash + trade) may only be used to reduce the cash price of the vehicle. A negative trade-in value could cause the appearance of an increase in cash price thus causing this new interpretation to kick in. To keep things simple, when you have an upside down trade you should show a value of zero for the Trade-in value and then show the upside down amount simply as an "Amount Paid To Others On Your Behalf". The FIADA contract already has a position under "Itemization of Amount Financed" [line 4(G)] to contain this information. Make sure that you indicate who you are making the payoff "to" and indicate that you are making the payment "for" a lien shortfall and then enter the shortfall amount. This is all that it takes to satisfy the new interpretation. Remember, this is NOT a new law... This is simply a re-interpretation of an existing law. Some finance companies are changing their forms to show more information such as trade-in, lien and the resultant lien shortfall. This is acceptable, but not necessary. The Bill of Sale already shows all trade and payoff information and consequently putting the details on a Retail Installment Contract is repetitious and not required.

The Division of Banking and Finance has also changed their interpretation of some items that affect the interest rate and the recognition of interest on Retail Installment Contracts. A change in Rules interpretation now forces you to treat any payment that is not monthly as an "irregular payment". The yield must be that of a monthly contract. Thus, even though payments on a weekly contract are made on a regular weekly basis, they become irregular payments because they are not monthly. This sounds a little irregular in itself. But, that is the way it must now work. So, if you are doing weekly payments, the loan will be calculated to arrive at an APR rate that is monthly, then the loan will be calculated again using that APR to arrive at the proper interest that will be earned when the loan is paid off on a weekly basis. Good computer systems have already been programmed to deal with this matter so you really don't have to spend time trying to figure out why a years worth of months is more regular than a years worth of weeks. Ours is not to reason why... ours is but to weep and cry.

If you sell a vehicle to a person who will take possession in Florida but will register it in his home state you must charge sales tax according to the rate charged in his home state. The tax must be included in the amount you pay to Florida on the 20th of the month following the sale. Do not try to send it to his home state. There are only 3 states that will not allow him credit for the tax he paid in Florida. They are Arkansas, Indiana and Mississippi. Those states will double dip him by taxing him again when he gets home. There is nothing that you can do to stop this from happening. Just make sure you have him sign an affidavit that he will register in his home state within 10 days. The signature must be notarized. Then you can issue him a Temporary 30 day tag and send him on his way.

I hate to introduce confusion into the subject, but believe it or not, the Department of Revenue wants you to adjust your reported sales amount for out of state taxable sales by dividing the actual tax collected by six percent to arrive at a ficticious taxable amount. This is then added to your taxable sales on line 3 of the DR15 monthly reporting form even even though it may be a much lower figure than the actual taxable sale. Then, you must subtract that amount from the real selling price to arrive at a ficticious Exempt Sales figure to be entered on line 2 of the DR15 form. This allows your total taxable sales to be easily verified using simple arithmetic but it leaves the door open for error and dishonesty. Once more, a good computer system does this for you and monthly reporting becomes a snap.

Three counties in Florida have changed their Surtax rates fairly recently. Bay and Santa Rosa counties are now .005 and Hillsboro is .0075.

If you prepaid sales tax on the accrual method when you sold a vehicle on a retail installment contract and later have cause to repossess the vehicle or declare it a skip and write it off on your federal taxes you may be allowed to reclaim part of the sales tax that was prepaid. You must apply for the refund within 12 months of the repo or writeoff date and you must have been the one to prepay it in order to claim a refund. If you sold the paper to a finance company without recourse, I don't know of any legal method for anyone to get a refund. Form DR95B is the form that is used when a refund is claimed.

The DMV has anounced several form revisions recently. The 82053 power of attorney has been changed to no longer need a notary. The 82040 Application for Title has undergone several revisions lately. The most recent is dated 8/97 and should be the one that you use.

Be careful... you can change Garage Liability insurance companies any time that you wish. But, there is a catch. If you allow a break in coverage (if the new policy does not begin coverage until after the old policy has been cancelled for a period of time) there is a $1,000 fine by DMV. Be sure that if you change companies you don't allow a break in coverage to occur.

If you need any blank forms for doing sales tax work, there is a "Fax on Demand" phone line that you can call and have forms faxed to you. The number is (850) 922-3676.

If you are venturing into the world of rebuilts, there are special rules. You can acquire the proper forms and instructions from DMV and setup an inspection appointment. Just a word of caution. They are going to require photographs of the vehicle prior to being rebuilt and they are going to require that all receipts for parts be in the name of the entity who gets the title in their name. If you rebuild the vehicle yourself, you must get it titled and registered in your name if you are not a dealer. If you are a dealer, you must actually transfer the title into your dealership name and then you can transfer and register it into the name of a customer.

There may be a time when a motor vehicle that is over ten years old and has very low mileage is sold. The seller and/or the buyer may want that mileage carried forward on the title. Complete the odometer declaration section on the application for title and the mileage will be carried forward on the DMV data base as long as the vehicle has not been previously recorded as exempt on the DMV data base.

If you sell less than five cars a month on Retail Installment Sales you should use DOR form DR-228 to report your Documentary Stamp usage. If five sales or more you should register with the Sales Tax office and report your Documentary Stamp usage on DR-225.

DMV takes a dim view of many attempts at consignment sales. A dealer who consigns his cars to another dealer for sale because that dealer has a better location may be inviting a checkup. Likewise a wholesale dealer who spots his cars on a retail dealer's lot because he can't legitimately sell at retail is asking for trouble. The real intention of consignment sales is as a service to the public. Using it for other purposes may kill the golden goose for everyone. If you do get into a consignment relationship, make sure that you have a signed consignment agreement, a copy of the title showing ownership in the name of the party that you are dealing with, and a HSMV 82053 Power of Attorney so that if he changes his mind while the agreement is alive, you can apply for a duplicate title and complete the deal.

You should have a signed "Blanket Certificate of Resale" on file for every person or company that you sell to at wholesale. If you know that good old Joe certainly has a dealer license so you don't need to charge him tax, that is not good enough. When you get audited by DOR they are going to insist that you have a resale certificate on file. If you don't DOR could make you pay sales tax anyway on cars that you sold to any dealers without a certificate. To mess up on this one is just plain careless and sloppy.

If you take a deposit from a customer who wants you to hold a certain vehicle until he comes back it is no big deal. Just assure that you give him a deposit receipt properly made out and signed by both of you. You must show why you took the money and under what circumstances it may be refunded. FIADA has such receipts available if you need to purchase a supply.

Some dealers still refuse to pay the $1.50 due on any new, used or rebuilt battery sold. Basically, unless you call yourself "Mattel Motors, Batteries Not Included" you must pay the money to the state DOR each month. FIADA is trying to get this law changed some day, but you could be victimized if the state catches up to you before the law is changed, if ever.

Never disclose an "Add-on" rate to a customer. Even if you only do it on a bill of sale but show the actual APR on the retail installment contract, you can still get in trouble. A good attorney could use that as a method of showing that you attempted fraud and deception by quoting a lowball rate that the customer could not understand and then substituted the higher APR rate to fool him but stay within state and federal limits. Only quote APR rates. The "Add-on" rate is just used as a tool to determine the maximum interest charge and subsequently should not ever be shown to anyone.

If you or your employees have trouble understanding legal interest rates, reporting rules, legal affairs, deceptive trade practices or implied warranties, it may be a good reason to send yourself and your employees to a day of dealer training school. A call to DMV will get you the telephone numbers for all of the schools in the state.

You must have a title in your possession to offer a vehicle for sale or to sell it. However, there are four occasions when DMV will let you off. If you have applied for a duplicate title for your customer or mailed a check to a lienholder, and you have a bill of sale showing that he sold or traded the vehicle to you, and you have a completed "Secure Power of Attorney" signed by the customer assigning rights to you, then you may offer the vehicle for sale and sell it even though you don't have the title currently in your possession. DMV will normally allow you to sell a consignment vehicle even though you don't have the title in your possession. But, you must have a signed consignment agreement, a copy of the front and back of the title, and a live 82053 Power of Attorney with you shown as the Attorney In Fact. Finally, if you are using a floorplanner and he has possession of the title, DMV usually will accept a photocopy of the title showing that the vehicle has been reassigned to you. The actual vehicle title may be off premises at the floorplanner but it will usually not be a problem so long as a copy of it could be faxed to DMV from the floorplanner if requested.

This is just a reminder that you should have a "Buyer's Guide" window sticker displayed conspicuously on every vehicle that you offer for sale at retail. You may remove it during a test drive but must re-display it conspicuously when done. Not on the seat or in the glove box.

Once more, I find myself at that crucial point where I disavow any inference that I am an attorney or an accountant. Don't use me as your excuse if anything written here gets you in trouble. Please call your attorney or accountant before putting anything that I have mentioned into practice.

To return to list of articles: