WKYT Investigates: Customers of Ky. car dealer hit with unexpected bill

NICHOLASVILLE, Ky. (WKYT) - Former customers of Auto Plaza USA in Nicholasville received an unexpected letter from the Kentucky Department of Revenue. The letter stated the customers owed the state money for unpaid taxes on their car purchases.

"Makes me feel like a criminal," explained Aaron Rajchel. He bought a used F-350 truck from the dealers two years ago. Now, a notice from the state said he owes close to $1,000 to cover taxes that weren't paid on the truck when he bought it. "So as far as the Department of Revenue is concerned, I'm responsible for paying the taxes, regardless of if I gave them to Auto Plaza to give to them. If they failed to do that the department of revenue doesn't care," Rajchel told WKYT's Miranda Combs.

Combs talked to numerous customers with the same exact story. "It said it had been improperly registered and the appropriate registration tax was not paid," Matthew Cunningham explained. He too purchased a car from Auto Plaza last year and had since traded the vehicle. "It's just something that you think when you go to a dealership that they're going to take care of and they don 't end up taking care of it, and it's just annoying," he said.

Combs went to the dealership and talked to Manager Tim Nease. "We try to help anyone. But at the end of the day, we can't help everyone," he said. Nease said he doesn't owe the customers any money. He said he already paid the correct tax amount to the county clerk and the state. Nease said the proof is that the cars were all transferred to the customers; he believes the vehicles would not have been transferred if the mistake was on his end. "I have nothing but empathy and sympathy for each one of these clients and every one of them I've tried to do something." But Nease stopped short of saying he's paid the rest of the taxes for the customers. He said, "One way or another we have tried to do something to compensate them or help them in any way we can." Nease said, "At the end of the day, Auto Plaza USA did not collect money and just not pay it."

The Kentucky Department of Revenue won't comment on this problem. They did send this statement:

“While we cannot comment, confirm or deny any investigation due to taxpayer confidentiality, please see the following statement from DOR on how the "Title Tax" is handled.”


Traditionally, car dealers assist their customers by handling the title/registration paperwork and related taxes and fees by submitting the documents to the local county clerk's office. However, all vehicle titling and registration is in the name of the vehicle owner. KRS 138.460 imposes the tax on the vehicle owner even though the vehicle dealership may be acting as the vehicle owner's agent. Periodically, the Department of Revenue (DOR) makes audit adjustments based upon the statutorily defined retail price of the vehicle registration. There are no arbitrary formulas involved. DOR calculates the MVUT based on statutory definitions to determine whether an assessment of additional tax is due to the Commonwealth. With audits, adjustments are based upon actual dealer sales records.

Motor Vehicle Usage Tax is a tax levied on motor vehicles at the time of titling or registration. The tax rate is six percent (6%) of the retail price. Retail price is defined in KRS 138.450(16) for used vehicles as either the total consideration given less any amount allowed as a trade-in allowance and attested to in a notarized affidavit. In the absence of a notarized affidavit, the law requires establishment of the retail price based upon use of the NADA reference manual. (KRS 138.450 provides definitions of total consideration, notarized affidavit, trade-in allowance, and retail price.)

For new vehicles (not under consideration here), tax is levied on the retail price as defined in KRS 138.4603. Retail price is the total consideration minus any trade-in as indicated on the notarized statement of consideration. If there is no valid statement of consideration, then retail price is 90% of the manufacturer's suggested retail price (MSRP).

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