Statewide Budget Issue in Bremerton — Updated

Now that I’m back I’m working on a story that could have implications throughout the state.

Three auto manufacturers filed suit against the city of Bremerton in an effort to get out of paying business and occupation taxes in town. Honda, Ford and Chrysler are arguing that the federal and state constitutions prohibit taxation on imports, so the city shouldn’t be able to collect on wholesale sales of imported vehicles in Bremerton.

Ford and Chrysler would presumably have to pay the tax, but they’re waiting until the courts decide on the Honda imports. Ken Bagwell, assistant city attorney for Bremerton clarified that Ford and Chrysler are in the suit because they manufacture vehicles in Canada and Mexico.

The case could have implications throughout the state for any city that charges B&O taxes, and perhaps for the state. I’ve checked with other cities — Bellevue, Issaquah, Seattle and Bellingham — and Bellevue and Seattle charge the tax. I believe the others do, too. I haven’t yet checked with the state to know whether it charges the tax on wholesale sales of imports.

To be clear, this question does not involve retail sales. So when you buy a car n Bremerton, the B&O tax is part of what you pay. It would be higher, however, if Bremerton were able to collect when the manufacturer sells to the retailer. Eventually all those costs get passed on to the buyer.

This began because more than a year ago two years ago Bremerton hired a company to collect on back taxes owed to the city by businesses not paying B&O taxes. At the time the city specifically cited wholesale auto sales as a key tax that wasn’t being collected. Bremerton’s financial services director, Laura Lyon, said the back taxes between all auto wholesalers could amount to several million dollars. How much of that was from imports she wasn’t sure. When the city council agreed to hire Tax Recovery Services of Tacoma to go after the funds, Lyon estimated the city could recover between $900,000 and $2 million.

The Perkins Coie attorney for the auto makers has yet to return my call said he would not comment on the case, but was looking to see if someone from one of the three companies would. One question that comes to my mind is if the companies have been paying these taxes in other cities for years, why are they fighting the tax in Bremerton?

This is not an issue in Port Orchard or Poulsbo because those cities don’t have a B&O tax. Bremerton is working to join that club. The tax on imports isn’t an issue in Bainbridge Island because it doesn’t have car dealers.

5 thoughts on “Statewide Budget Issue in Bremerton — Updated

  1. Welcome back, Steven! You missed all the fun.

    Interesting story.
    Why wouldn’t the local car dealerships be responsible for the tax? Why hasn’t Bremerton collected when the manufacturer sells to the retailer?
    What do the dealers say?
    Will they – after paying the tax – move to a B&O less area …such as BI?

    Shame on Honda, Ford and Chrysler for trying to dodge the tax…why should imports get a free ride?

    In my opinion… Sharon O’Hara

  2. Sounds like a gray area that needs to be better defined. I find it interesting that on one hand when it comes to taxes they want to be defined as an import but when it comes to sales they actively promote themselves as “Made in America”, even Honda.

    When purchasing a vehicle we are more interested in the base price. That is were we make our decision whether or not to buy from that particular dealer. Our last purchase was from Dave Smith in Kellogg Idaho. We still paid Washington State Sales Tax and licensing on the purchase but local dealers could not match the price. We tried to by locally but saved $8000 on the base price over what Bremerton Dodge wanted to charge us for the same exact vehicle. It was worth the drive from Idaho.

  3. Steve-could you define their definition of “import” ?

    My understanding is that all three of the auto manufacturers listed produce a majority of their cars in U.S. factories. There is a small percentage that is produced overseas, Mexico or Japan.

  4. My understanding is these vehicles are legitimate imports, manufactured elsewhere. They are at least brought in from other countries.

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