In this issue: – Michael W. Dunagan: Law Protects Lien Holders In Liability Insurance Claims – TxDMV’s Current and Upcoming Industry Initiatives – Special Inventory Tax – It Doesn’t Have to be Difficult!
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TIADA Board of Directors
Vo l u m e X X I / I s s u e 12 / D e c e m b e r 2 0 21
PRESIDENT Mark Jones/MCMC Corporate 264 Exchange Burleson, TX 76028
TexasDealer
PRESIDENT ELECT Ryan Winkelmann/BJ’s Autohaus 5005 Telephone Road Houston, TX 77087 CHAIRMAN OF THE BOARD Robert Beck/Stop N’ Drive Motors 711 N. General McMullen San Antonio, TX 78228
contents 5 Officers’ Message by Ryan Winkelmann, TIADA President Elect
SECRETARY Eddie Hale/Neighborhood Autos PO Box 1719 Decatur TX 76234
6 TIADA Member Application 7 The Records You Keep Determine Your Compliance by Eric Fancher: Senior Financial Examiner, Office of Consumer Credit Commissioner
TREASURER Vicki Davis/A-OK Auto Sales 23980 FM 1314 Porter, TX 77365 VICE PRESIDENT, WEST TEXAS (REGION 1) Cesar Stark/S&S Motors 7699 Alameda Ave. El Paso, TX 77915
10 On The Cover: 2021 Annual Compliance Quiz by TIADA Staff
13 Legal Corner: Law Protects Lien Holders in Liability Insurance Claims by Michael W. Dunagan
17 TxDMV’s Current and Upcoming Industry Initiatives VICE PRESIDENT, FORT WORTH (REGION 2) Chad Lancaster/Chacon Autos 11800 E. Northwest Hwy Dallas TX 75218 VICE PRESIDENT, DALLAS (REGION 3) Greg Reine/Auto Liquidators 39670 LBJ Freeway Dallas TX 75237 VICE PRESIDENT, HOUSTON (REGION 4) Russell Moore/Top Notch Used Cars 900 East Davis Conroe, TX 77301
by Whitney Brewster: Executive Director, Texas Department of Motor Vehicles
25 Special Inventory Tax – It Doesn’t Have to be Difficult! by Tax Assessor-Collectors, Hon. John Ames and Hon. Michelle French
28 TIADA Scholarship Application 29 Texas Motor Vehicle Dealer Tax Compliance by Texas Comptroller of Public Accounts
34 TIADA Auction Directory 36 TIADA’s Most Read Compliance Articles by TIADA Staff
39 Maximum Finance Charge Rates for 2022 VICE PRESIDENT, CENTRAL TEXAS (REGION 5) Robert Blankenship/Texas Auto Center 6809 Suite B S IH35 Austin, TX 78744 VICE PRESIDENT, SOUTH TEXAS (REGION 6) Armando Villarreal/McAllen Auto Sales, LLC 4215 S. 23rd St McAllen, TX 78503 VICE PRESIDENT AT LARGE Brad Kalivoda/Fiesta Motors 2599 74th Street Lubbock, TX 79423 VICE PRESIDENT AT LARGE Greg Phea/Austin Rising Fast 8024 IH 35 North Austin TX 78753
TIADA EXECUTIVE DIRECTOR Jeff Martin 9951 Anderson Mill Rd., Suite 101 Austin, TX 78750 Office Hours M-F 8:30am – 4:30pm 512.244.6060 • Fax 512.244.6218 jeff.martin@txiada.org
by Michael W. Dunagan
41 41 43 45 45 46
New Members Local Chapters TIADA Membership Renewal Notice Board of Directors Meeting Minutes Upcoming Events Behind the Wheel by Jeff Martin
Did You Know? Your Auction App coupons expire at the end of each year. If you haven’t taken advantage of over $10,000 in savings on auction fees for 2021, download the TIADA Auction App and start saving. Learn more at: txiada.org/auction_app or turn to page 33. Notice to all members concerning services and products: TIADA was established in 1944 to develop professional standards of service and conduct for the independent auto industry. Opinions expressed herein are not necessarily those of the TIADA management, the Board of Directors or the membership. Likewise, the appearance of advertisers or their indemnifications of TIADA does not constitute endorsement of the products or services featured.
Editor: Stephen Pallas
Magazine Ad Sales: Patty Huber, 512-310-9795
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officers’ message by
The Case for Thorough Recordkeeping
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ast month I received a 3-page letter from TxDMV, which on the cover seemed to be a general disclosure on how they are now recovering canceled, damaged, or unneeded metal plates that were purchased by dealers. Before almost discarding the mailer, I turned to page two and noticed an official request for records from the Enforcement Division, requesting I produce a total of 18 sale file documents related to a sale to a disgruntled customer that took place at my dealership a few months earlier. I had 15 days from receipt of the request to provide the documentation, including any video or audio related to my acquisition and sale. Needless to say, I’m glad I didn’t judge the document by its cover. Every dealer that has experienced an audit, or records request, from one of the many regulatory agencies who license and regulates us has that same question: “Is this going to be the ONE file out of all the rest that’s either incomplete or has a mistake?” Well, I personally patted myself on the back, and congratulated everyone in my office who handles the files for being able to hand over every single document requested that applied to the transaction under review! Producing a complete file was not pure luck. Having spent 30 years now in this business, I, as well as any
Ryan Winkelmann
BJ’s Autohaus (Houston) TIADA PRESIDENT ELECT
other dealer, understand how challenging it can be to self-audit compliance procedures amidst the whirlwind of daily crises that seem to occur in our industry, but I also understand how important it is to find the time. I know that each one of you can quickly identify when one of your cars is missing a window flag, buyers guide, set of keys, has a flat tire, won’t start for a test drive, or is parked out of order. You notice these things so easily because you’re looking. And you know that it takes just minutes to correct. The same can be said for potential compliance risks within our businesses. I’d encourage every dealer to take a few minutes out of your day to give the same awareness to your files and business procedures regarding compliance in all departments. It really doesn’t take long, and it’s simply not worth the risks when left undone. Thankfully, TIADA has a close and positive long-standing relationship with all the agencies that regulate our businesses and offers the best compliance training available for Texas dealers. Also, don’t rely on what the guy down the street is doing; he could be doing it wrong. Be proactive in identifying and addressing compliance areas that may put your dealership at risk. This will ultimately save you a lot of money, headache, and frustration.
Be proactive in identifying and addressing compliance areas that may put your dealership at risk. This will ultimately save you a lot of money, headache, and frustration. December 2021
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feature The Records You Keep Determine Your Compliance
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pon notification of a compliance examination, a common first question asked is: “What records must I have?” Most likely, an OCCC examiner will first ask for a list of all financed sales, a list of open accounts, and a list of repossessions. A list of paid accounts is also helpful. These are the lists from which our examiners may choose their sample of transaction files for review. All dealers should become familiar with how to access and print these reports in their dealer management software system (“DMS”). If unsure, contact your DMS help-desk for assistance. Your DMS provider should be able to help you. Regarding a buyer’s transaction file, generally, the records required are the records necessary to prove your compliance. A good rule of thumb is: if the record is prepared in connection with the sale and/or servicing of the retail installment sale, including repossession and subsequent sale, then it is very likely a required record. Origination records include verifiable proof or justification of every amount included in the retail installment sales contract (“RIC”). Starting from Line 1 of the RIC: the buyer’s Order/Purchase Agreement (if prepared) and Title Application (130-U) should prove the
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by Eric Fancher Office of Consumer Credit Commissioner
selling price; the Texas Disclosure of Equity in Trade-in Vehicle and proof of trade-in payoff should prove the amounts of gross and net trade-in; the receipt you issue for any down payment taken proves the cash down payment; the VIT factor notice received from the county at the beginning of each year supports the VIT charge; the title application receipt (VTR-500-RTS aka “white slip”) proves the fees paid to public officials on behalf of the buyer for sales tax, title, registration, and inspection fee to the state; the inspection station receipt proves the charge for the inspection cost paid to the station; ancillary product charges (service contracts, maintenance agreements, GAP/Debt cancellation agreements, etc.) are supported by the product certificates of coverage; and, the maximum charge for a documentary fee is set by rule or by an accepted filing to the OCCC. If you collect on installment sales, a specific account record must be created and maintained. This may be through the use of a DMS or by hand if no DMS is used. The account record must contain pertinent account information and maintain a continuous running history of the account by recording each and every fee, charge, payment, corrective entry, and balance after each entry until the account is closed. If sales tax is deferred, a record of the sales tax paid from the payment 7
must be indicated. Proof of remittances to the Texas Comptroller of Public Accounts may be requested during an examination. If the finance charge is calculated according to the true daily earnings method, each payment should be broken down to indicate the amount applied to principle, finance charge, other fees, and sales tax, if applicable. Additional required records include proof of your out-of-pocket expenses and other charges that may be added to an account in the event of repossession. Examples may include receipts for out-of-pocket expenses for repossession and sale. If you or your repossession agent prepare a vehicle condition report after the repossession, it must be retained. If you install a GPS, tracking, or starter interrupt device, you should maintain proof of the buyer’s agreement to the installation of that device. If you have collateral protection insurance in place, all records pertaining to the policies and premiums must also be maintained. Often overlooked is the requirement to document all collection contacts made between you and the buyer or others in connection with the collection of amounts due under the RIC. The written record must include the date, method of contact, contacted party, person initiating the contact, and a summary of the contact. And, finally, copies of individual collection
8
notices or letters or references to standard collection letters sent to the buyer must also be maintained. All of the above records, and any others required to prove your compliance, must be made available for examination and within a reasonable time upon request. For specific recordkeeping requirements, please refer to the following rules: For sellers who assign RIC’s to holders (aka indirect lenders; auto finance acceptance companies and the like), refer to 7 Texas Administrative Code, Section 84.707. For sellers who collect on their RIC’s (aka buy-here-pay-here sellers), refer to 7 Texas Administrative Code, Section 84.708. For holders of RIC’s (aka indirect lenders; auto finance acceptance companies and the like), refer to 7 Texas Administrative Code, Section 84.709. These sections of the Administrative Code may be found through links on the OCCC website: www.occc. texas.gov/industry/motor-vehicle-sales-finance. Eric Fancher is a Senior Financial Examiner specializing in auto finance exam operations and industry outreach. He may be reached via email at eric.fancher@occc.texas.gov or you may contact the OCCC directly by calling (512) 936-7600.
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on the cover t ff
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[Editor’s note: The first ten questions have been taken from information that appeared in the Texas Dealer magazine in 2021, mainly in the Legal Corner section. The five bonus questions at the end come from information that has appeared in our industry emails and/or blogs posted on the TIADA website this year.]
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Compliance QUESTIONS
1. The legal term used to describe a part or component that is permanently added to a vehicle such that it becomes a part of the vehicle and is thus subject to a lien on the vehicle is: (a) Attachment. (b) Add On. (c) Accession. (d) Extra.
7. The debt cancellation provisions of a Debt Cancellation Agreement kick in upon which two (2) of the following: (a) The collateral is totaled. (b) The collateral is stolen. (c) The collateral is used in the commission of a crime. (d) The engine locks up.
2. A 2011 model vehicle will be exempt from federal odometer disclosure in ____________ (2021 or 2031).
8. With regard to personal property contained in a repossessed vehicle, which of the following is correct: (a) Personal property found in a repossessed vehicle can be disposed of after 15 days if it is not claimed. (b) Any personal property left in a vehicle is covered by the car creditor’s lien. (c) A car creditor must return personal property even if the debtor has not returned keys to the vehicle. (d) A car creditor can withhold returning personal property until the debtor pays the repossession fee.
3. True or False: Even though the legal age for contracting in Texas is 18, a sale can be legally made to a 17-yearold if the sale is all cash. 4. The legal term for a court order that directs an officer to take possession of property is a writ of: (a) Possession. (b) Replevin. (c) Sequestration. (d) Habeas Corpus. 5. True or False: The completed sale of a vehicle cuts off the seller’s liability for negligent entrustment in a case where the buyer causes an accident and has no liability insurance. 6. The dealer in a sellerfinanced transaction has, under Texas dealer rules, _______ calendar days after the sale to file transfer papers with the county tax office. (a) 15 (b) 30 (c) 45 (d) 60 December 2021
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9. The Texas Legislature meets in regular session for ____(six or eight) months every ______ (odd or even) year. 10. True or False: A dealer can refuse to accept property-damage insurance issued by a company that has a reputation for slow claims processing.
Bonus QUESTIONS 11. True or False: A dealer may charge a credit card convenience fee for payments made by credit card. 12. The Truth In Lending Act requires disclosure of certain terms when which of the following are used in an advertisement: (a) pay weekly (b) monthly payments to suit your needs (c) repayment in as many as 72 months (d) monthly payment terms arranged (e) all of the above
13.At the time of renewal of my license, I must submit a surety bond in the amount of: (a) $25,000 (b) $50,000 (c) $100,000 (d) $250,000
14. True or False: Federal law requires me to disclose if an airbag is functioning. 15. Which of the following records should you keep for 6 years? (a) Personal files after termination (b) Denied Credit Applications (c) Form 8300 (d) Repair Orders
Answers can be found on page 44. 11
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legal corner Law Protects Lien Holders In Liability Insurance Claims Dealer Question: I just
found out that my customer has received and cashed a settlement check from a third party’s liability carrier that covers damages to the vehicle for which I hold a lien. My customer has spent the money and refuses to pay the balance on the vehicle, which has been totaled. Do I have any recourse against the insurance company? Answer: Yes.
A
s the average wholesale cost of used cars spirals upward, and the amount of risk dealers put on the street increases, the importance of vehicle insurance coverage to lien holders grows. Thus, most secured creditors are requiring property damage insurance as part of their retail installment contracts and are actively monitoring lapses and cancellations and, in some cases, responding to lack of insurance coverage by repossession or forced placement of single-interest coverage. Many Buy-Here-PayHere dealers are moving to collateral protection programs that offer additional control over the terms of and continuity of coverage. BHPH dealers that a few years ago never seriously enforced the property damage insurance provisions of their contracts are realizing that a few total losses at today’s prices can severely impact the bottom line. To ensure that the lien holder’s position is protected on a policy of property damage insurance owned by the debtor, it is necessary for the lien holder to be listed as loss payee.
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Such a listing gives the lien holder certain contract rights in the policy proceeds and prevents the insurer from paying the insured for vehicle damage without including the lien holder. Because of the nature of liability insurance, which covers third parties who are damaged or injured by the insured, there is no corresponding loss-payee provision. One particularly frustrating situation for vehicle lien holders is when a liability claim for property damage to a vehicle is paid directly to the debtor. A common example of this situation: A third party, who has liability coverage, causes an accident that damages lien holder’s collateral. The liability carrier, ignoring the lien holder’s status, negotiates a settlement directly with the debtor, and issues a check payable to the debtor without mentioning the lien holder. The lien holder subsequently finds the vehicle, a total wreck, in a pound or body shop. The debtor has by now often purchased another vehicle, probably using the insurance proceeds, and refuses to make further payments to lien holder.
Michael W. Dunagan TIADA COUNSEL
If a lien holder becomes aware of an accident in which the liability insurance of a third party will likely be involved, the dealer should contact the liability carrier, give lien information, and request (in writing) that the lien holder be included in the settlement negotiations as they relate to the property damage to the vehicle. Several years ago, TIADA was able to convince the Texas Legislature that this situation was extremely unfair and needed to be corrected. A bill was passed that placed a lien on liability insurance proceeds in favor of the holder 13
of a perfected motor vehicle lien. That law, which appears at Section 61.001 of the Texas Property Code, has probably saved vehicle lien holders millions of dollars since its passage. The change in the law was motivated by the experience of some lien holders that insurance adjusters were purposely trying to keep the lien holder out of settlement discussions. In some cases, the insurance adjustor would tell the lien holder that he or she had no obligation to talk with the lien holder and no obligation to see that the insurance proceeds were payable to the lien holder. The typical response a lien holder received from the liability carrier, after finding out that the debtor had been paid and had absconded with the money, was something to the effect that the liability insurance carrier has no obligation to check for recorded liens and no obligation to include the lien holder as a payee. Interestingly, many insurance adjustors are still today telling lien holders that the insurance company has so obligation to them, despite the clear language of Section 61.001. As further indication that lien holders were being intentionally excluded from the settlement process, many insurance companies were contracting with the debtor to allow the debtor to keep the salvage, deducting the salvage value from the settlement. This way, the insurance company didn’t need to obtain a released title certificate from the lien holder. Of course, the debtor never claimed the salvage and it was often sold to satisfy a storage lien. Now, if a liability carrier goes around the recorded lien holder, it can be sued and forced to pay again. We still encounter cases where debtors are paid directly. When confronted, some insurance adjusters often claim no obligation to the lien holder. Some claim that they aren’t obligated to include lien holders as payees on settlement checks 14
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when the amount at stake is under a certain level (we’ve found that some liability insurance carriers impose their own internal minimum amount, under which a lien holder contact is not contacted or included). But the law contains no such limit. Whether they are ignorant of the change in the law or just bluffing, we don’t know. In every such case, however, we’ve been able to force the company to pay the lien holder. Under the law, the recorded lien holder’s claim extends to the lesser of (a) the fair market value of the vehicle before the damage; (2) the reasonable cost of repair to the vehicle; or (3) the balance owed to the lien holder by the debtor. The liability carrier can satisfy its obligation by making the settlement check jointly payable to the debtor and the lien holder. If the debtor forges the lien holder’s name on the check and cashes it (a fairly common occurrence), most insurance companies claim no further liability, and deflect responsibility to whomever cashed or deposited the check with the forged endorsement. At least one Texas Court of Appeals has ruled, however, that the insurance company remains liable to the lien holder. It is very important to note that to be protected under this law, the lien holder must have filed an application for transfer of title to the buyer reflecting its lien. All third parties are legally on notice of the lien when it is filed, even if the state hasn’t yet processed the new title certificate. On the other hand, the law offers no protection to the lien holder who has not transferred the title, as an unrecorded lien holder would not fit the definition of “mortgagee.” If a lien holder becomes aware of an accident in which the liability insurance of a third party will likely be involved, the dealer should contact the liability carrier, give lien December 2021
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information, and request (in writing) that the lien holder be included in the settlement negotiations as they relate to the property damage to the vehicle. The identity of the liability carrier can often be obtained from the accident report filed by the police. In the event that the debtor is paid directly, the lien holder is entitled under the law to bring action against the insurance company for payment. A copy of Section 61.001 can
be obtained from TIADA (https:// www.txiada.org/Files/Third-Party Liability Statute.pdf). Michael W. Dunagan is an attorney in Dallas, Texas who has represented the Texas Independent Automobile Dealers Association for over 40 years. He has written a number of books and hundreds of articles for trade journals and law reviews. His clientele includes dealers, banks, finance companies, auto auctions and credit unions.
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TxDMV’s Current and Upcoming Industry Initiatives
he strength and resiliency of independent auto dealers during the pandemic is a clear indication that the future is bright for the automobile industry in Texas. The Texas Department of Motor Vehicles continues to enhance our tools and services that help promote this vital part of the Texas economy. For TxDMV and Texas Independent Automobile Dealers Association members, what we do and how we do it will continue to evolve in this COVID-19 world. All of us have had to shift the way we collaborate, communicate and strategize in an ever-changing and unfamiliar environment. I commend TIADA and its dealers for their agility and flexibility. I am grateful for the opportunity to update the TIADA community on some of our current and upcoming initiatives impacting independent dealers.
eTAG Enhancements
Unfortunately, there are bad actors out there who abuse the temporary tag database. These actors’ administrative and potentially criminal violations hurt the reputation of the thousands of hard-working independent dealers across the state and put the safety of Texas citizens at risk. The Texas Department of Motor Vehicles recognizes the impacts of fraudulent issuance of temporary tags and is continually analyzing opportunities to work with our partners to put stronger safeguards in place to prevent misuse. House Bill 3927, which passed during the 87th Legislative Session, made several changes to how temporary tags are administered. The bill includes a recommendation from the TxDMV Board to allow rule-making authority to set the maximum number of temporary tags licensed dealers can issue. The maximum number will be based on quantifiable metrics including time in operation, sales data, expected growth, and expected market changes. The bill also expands the authority of TxDMV to include denying access to the temporary tag database for users who fraudulently obtain tags from the system. Rest assured; we are not implementing this bill in a vacuum. Stakeholder input is an important part of the process. Our new Motor Vehicle Industry Regulation Advisory Committee met twice in September 2021 and provided input to TxDMV on this important issue. The Texas Department of Motor Vehicles considered the thoughtful discussion and input from the committee December 2021
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by Whitney Brewster Executive Director, Texas Department of Motor Vehicles
in developing rule language implementing HB 3927. On October 29, 2021, the TxDMV Board approved the posting of proposed rules for public comment. You can view the rules concerning maximum tags limits (§215.152 and §215.158) and denial of access (§§215.150 – 215.505) here: www.TxDMV.gov/general-counsel/ proposed-and-adopted-rules. Staff will thoroughly review and consider all feedback received about the proposed rules before returning to the board for final adoption. We will continue to work with motor vehicle dealer representatives, members of law enforcement, and other stakeholders to stop the improper use of temporary tags.
Customer Service Advisory Committee
The TxDMV Customer Service Advisory Committee (CSAC) also met in September 2021. This committee is charged with making recommendations on topics related to the improvement and enhancement of customer service. The committee met to take up another bill impacting dealers that passed during the last legislative session. Senate Bill 876 relates to the county in which a person may apply for the registration of and title for a motor vehicle. This bill allows a dealer to apply for title and for registration to any county tax assessor-collector willing to accept the transaction, in addition to the purchaser’s, seller’s, or lienholder’s county. The CSAC met with TxDMV staff to discuss and consider ongoing efforts to implement SB 876, which include updating IT applications such as the Registration and Title System, webDEALER, and webSUB, rule development, revisions to forms and documents, development of training modules, and communications to stakeholders. 17
Deal Jacket Checklist
One change of note for dealers regarding SB 876 is that, as of March 1, you will no longer need to maintain Form VTR-136 (County of Title Issuance) in the deal jacket. However, the following documents must still be maintained: 1. Documentation on how the vehicle was brought into the dealer’s inventory (Auction Receipt, Purchase Record, Buyer’s Order, Bill of Sale, etc.). 2. Copies of the Retail Installment Agreement(s). 3. Odometer Statement (if applicable). 4. Front and back of a title or MCO for the motor vehicle prior to transfer. 5. Buyer’s Guide. 6. We-Owe (if applicable). 7. Buyer’s Orders, Bills of Sale, Lease Agreements, and any Conditional Sales Agreement/Bailment Agreements (associated with the sale of the vehicle). 8. A copy of the payment instrument or a receipt for cash received.
9. Financing documents, waivers, any other agreements between the seller and purchaser to include the Credit Application. 10. Copy of Form VTR-130-U (Application for Texas Title and/ or Registration). 11. Copy of Form VTR-500 (Title Application Receipt/White Slip). 12. Copy of Form VTR-271 (Limited Power of Attorney) if taking a vehicle in for a trade. 13. Copy of Form VTR-264 (Repossessed Motor Vehicle Affidavit) if the vehicle was repossessed by the dealer. 14. Copy of proper Photo Identification (only required if title transferred in Texas). 15. Copy of required Written Disclosure for Rebuilt Salvage (if applicable). 16. A photocopy of the completed sales tax exemption form for out of state sales approved by the Texas Comptroller of Public Accounts (if applicable).
17. Copy of Consignment Agreement (if applicable). 18. Copy of Buyer’s Tag Receipt — Dealer Copy. 19. All other documents in your possession related to the listed vehicle(s).
Dealer Training
One of the guiding philosophies of our Enforcement Division is that compliance is best achieved through education. That is why TxDMV provides online dealer training seminars regarding the many laws affecting the motor vehicle industry. These free sessions help dealers understand the rules that govern their businesses. Each day-long seminar includes information that enables dealers to stay in compliance and avoid violations. I highly encourage everyone who is already working or interested in working in the motor vehicle industry to attend. See our website for upcoming dates:
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TxDMV.gov/dealers/dealer-services/ dealer-training-seminars. In addition, a bill passed during the 86th Legislative Session that requires education for independent dealers who have been licensed less than 10 years, and new applicants, to ensure all dealers have an understanding of the business to protect themselves and the citizens of Texas. These dealers and applicants must complete the web-based training prior to submitting a license application. This training is now available in both English and Spanish.
It is a top priority of mine to keep an open line of communication between TxDMV and TIADA. Communication is the foundation of trust and creates a positive atmosphere for productivity, teamwork
and understanding. With your valuable input, TxDMV can implement sound policies and procedures so you can best serve your customers and the great state of Texas.
Closing Thoughts
As our stakeholders, TIADA members are our partners in developing practical solutions to the issues we face. We look to you to identify issues in your industry where TxDMV can be a catalyst for positive change. If you are interested in serving on one of our advisory committees, visit TxDMV.gov/ general-counsel/advisory-committees.
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Please fill out the form on the next page to help our efforts out at the Capitol!
Join the list of those who have already contributed for 2021.
Contributions Year-to-Date as of December 2021 Greig, Steven J. Hale, Eddie Gregory, Tommy * Jones, Mark * Blankenship, Robert Ingram, Blake Reine, Greg Murphy, Bill Zak, Gregory * Hagler, Keith * Allen, Scott Donnelly, Chris * Rogers, Lowell Sabillon, Juan Scott, Paul Torres, Cesar H. Edenfield, Robert * Winkelmann, Ryan *
$5,000 $5,000 $3,600 $3,000 $2,500 $2,500 $2,500 $1,750 $1,500 $1,425 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $700 $700
Cowan, Donny Moore, Russell Atchison, Jeff Beck, Robert Brown, Mark Chapman, Kyle Cockerell, Clint Davis, Vicki Hanson, April * Kalivoda, Brad Kirwan, Christopher Martin, Jeff Martinez, Mario Rhodes, Brent Smith, Jerry and DeDe Zak, Michael Lloyd, Raymond Milligan, Robert
$600 $550 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $425 $425
Cooke, Earl Jeffers, Robert Lazo, Deyla Macheca, Chris Moore, Gerald (G.R.) Petersen, Shaun Trevino, Miguel Frappier, John Caldwell, Steven Burke, Steve Hobson, James Levine, Stephen Phea, Greg Vara, Jose Wilson, Erik Nwankwo, Chinweuba
$250 $250 $250 $250 $250 $250 $250 $200 $150 $100 $100 $100 $100 $100 $100 $50
*Monthly Donor
Total Contributions to Date 20
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Yes, I would like to help with TIADA’s grassroots effort! ______________________________________________________________________________________
Please list me as a sustaining donor. I would like to support my industry by making a monthly credit card donation of
$______________
Add me to the KEY-PERSON list! I know (Name of Legislator) _______________________________________________ as a ____ Acquaintance
____ Personal Friend
____ Professional Contact
I would like to attend political fundraisers in my area I would like to support my industry by pledging a one-time donation of ___$1,000
___$500
___$250
___$100
Other $________
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____ Personal Check Payable to INDEPAC
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Name_______________________________________________________________________________ Company ___________________________________________________________________________ Home Address_______________________________________________________________________ Email ______________________________________________________________________________
** Personal Check or Personal Credit Card only. Corporate contributions are prohibited by state law. Contributions are not tax deductible as charitable contributions for federal income tax purposes. ** Charge my Credit Card V MC D AM __________________________________________________ Exp: _____/_____ CVV: _____ Name on Card: ____________________________________________________________________________ Card Billing Address (if different):
______________________________________________________
______________________________________________________________________________________
Or donate online at www.txiada.org >> Resources >> Advocacy >> Political Action Committee ______________________________________________________________________________________ Referred by:
c/o TIADA 9951 Anderson Mill Rd Suite 101 Austin Texas 78750 PHONE
December 2021
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512.244.6060 FAX 512.244.6218 EMAIL accounting@txiada.org
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feature Special Inventory Tax – It Doesn’t Have to be Difficult! on o n
mes C
s Count
ssessor Co ector
CC
nd
on
ic e e renc
enton Count
CC
ssessor Co ector
Dallas County is the 2nd largest county in Texas and Denton County is the 7th largest county in Texas. Together, the Tax Offices in Dallas and Denton serve over 4,000 dealerships in the North Texas Region. John R. Ames has served as the Dallas County Tax Assessor since 2009 and Michelle French has served as the Denton County Tax Assessor since 2013. Combined, they have over 65 years of Tax Collection experience.
S
pecial Inventory Tax (also referred to as SIT or Vehicle Inventory Tax) is one of the more unique taxes collected by the county Tax Assessor. Dealerships that are licensed to sell motor vehicles, heavy equipment, vessels and outboard motors, and manufactured housing are required to make monthly escrow payments with the county tax office to pay their annual SIT tax bill. Understanding the SIT process, including when and how to file, is important to avoid costly penalties. Texas Tax Code Section 23 provides the statutory authorization and requirements to implement the reporting, collection and disbursals of SIT.
Annual Declaration
Dealers are required to file an Annual Declaration form with their county’s appraisal district, no later than February December 2021
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1st of each year. They are also required to file a copy of the form with their county Tax Assessor. Dealerships that were not in business on January 1st are required to submit the Annual Declaration within 30 days of opening. The Dealer’s Motor Vehicle Inventory Declaration, form 50-244, is available from the Comptroller’s website (www. comptroller.texas.gov). Some appraisal districts may also use their own Annual Declaration. Dealers are required to provide information regarding their sales from the previous calendar year, which will be used to determine their taxable value for the current tax year. For example, an Annual Declaration submitted on February 1, 2022, will include the dealer’s total sales information from January 1, 2021 – December 31, 2021. The appraisal district will use this information to determine the taxable value for the upcoming tax year. 25
Monthly Statements and Escrow Payments
Dealers are required to submit a Monthly Statement no later than the 10th of each month, to the county Tax Assessor. Heavy Equipment Dealers must submit the Monthly Statement no later than the 20th of each month. This statement includes information regarding each sale that took place for the prior month, such as a description of each unit sold, the sales price of each unit, and the unit property tax due for each unit, if any. The Unit Property Tax (UPT) is calculated by adding the total of all taxing unit tax rates, in which the dealership motor vehicle inventory is located, divided by 12. For instance if the county tax rate is .60/100, the city is .75/100 and the school rate is 1.30/100 the following calculation would determine the UPT: .60 + .75 + 1.30 = 2.65/100/12 = .0022083 UPT. This represents one-twelfth of the preceding year’s aggregate tax rate. Monthly Statements must be submitted each month, even if no units were sold. A duplicate of the Monthly Statement must also be submitted to the appraisal district where the dealership resides. When submitting the copy of the Monthly Statement to the county tax office, the dealer will also make an escrow payment for the total unit property tax due for all sales reflected on the Monthly Statement. Some counties may offer an online portal payment system for SIT, which
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allows users to submit statements and possibly pay electronically. If you are unsure of whether or not this is an option for you, contact your county tax office. New dealers that were not in business on January 1st of the current year must file a completed Monthly Statement each month. However, new dealers are not required to make monthly escrow payments during their first year of business. The Dealer’s Motor Vehicle Inventory Tax Statement, form 50-246, is available from the Comptroller’s website (www.comptroller.texas.gov). Some appraisal districts may also have their own Monthly SIT Statement.
Penalties/Fines
As with other types of taxes, failure to submit forms and applicable escrow payments by the established due dates can result in penalties that can quickly add up to big bucks. A penalty of $1,000.00 for each month or partial month can be added for Annual Declarations submitted past the due date of February 1st. For example, if a dealer submits the Annual Declaration on March 2nd, a penalty of $2,000.00 can be added ($1,000.00 for the full month of February and $1,000.00 for the partial month of March). Monthly Statements are due by the 10th of the month. For each month or partial month that a Monthly Statement is not filed timely, a penalty of $500.00 can be added. A dealer who submits the January Monthly
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Statement on March 2nd can be charged a penalty of $1,000.00 ($500.00 for February and $500.00 for March). In addition to the $500.00 per month penalty for not submitting the Monthly Statement on time, an additional penalty of up to 10% of the escrow amount due can be charged for failure to make the full escrow payment (if applicable) by the 10th. Pursuant to Tax Code Section 23, a dealer that does not file the monthly statements commits a misdemeanor that may be punishable
by a fine up to $100 per day until filed. Fines may also be assessed by the Appraisal District for failure to submit the declaration form up to $500 per day until filed. Any questions regarding the penalties or fines assessed on a dealer’s SIT account or payment options available for accrued penalties should be directed to the local county tax office.
Distribution of Escrow Funds The money paid into the escrow account is money that is due based
on the dealer’s monthly sales. The tax office is required to disburse those funds to the applicable taxing entities each year. If the escrowed amount is not sufficient to cover the levy due, the tax office will notify the dealer of the remaining balance so a shortage payment can be submitted. If the escrow amount is greater than the levy due, the excess funds are distributed as overage payments to each taxing entity listed for the account. Excess funds are not carried over to hold in escrow for the next year, and, per the Tax Code Sec 23.122, no withdrawals are allowed from the escrow account.
Dealer Closures
.
SIT taxes are due annually for any dealership that was in business on January 1st. Closing a dealership mid-year does not remove the tax liability. The dealer should expect to receive a tax statement at the mailing address that is on file with the appraisal district. These taxes are due upon receipt and must be paid no later than January 31st, to avoid property tax penalties and interest. Any money that was escrowed prior to closing the dealership will be applied to the levy due, and any shortage will be the responsibility of the dealer. If your dealership closed mid-year, you may consider calling your county tax office to determine what needs to happen to cover any shortages so you are prepared to settle the account before the balance goes delinquent and penalties and interest are added. SIT is different from most other taxes, but it doesn’t have to be difficult. If you have questions, reach out! We are here to help! Article Contributors: Christina Benedict, Dallas County Property Tax Director; Amber White, Dallas County Asst. Property Tax Director; and Patricia Avitia, Dallas County Property Tax Collections Manager.
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ATTENTION STUDENTS!!!
$1,000 Marvin Norwood Scholarship DEADLINE
May 13, 2022 {Applications and/or any required documents received after May 13, 2022 will NOT be accepted.} Criteria and Guidelines 1. Each applicant must be entering or currently enrolled in an accredited college or a trade school. Proof of enrollment must be included with this application.
Date: Name:
DOB:
Address: City:
State:
Zip:
Email: (You will receive an email confirmation of receipt.)
Telephone Number: High School Last Attended:
2. Each applicant must provide a letter from their TIADA member sponsor that includes the sponsor’s address and phone number.
Address:
3. Each applicant must complete the application form.
Date of Graduation:
4. A copy of high school transcripts is required for applicants who are college freshmen. If applicant is currently enrolled, provide college transcripts with official university imprint.
Other High Schools Attended (Names and Addresses):
5. Provide a detailed description of participation in any academic, honorary, civic or extracurricular activities in college. In addition, a detailed description of high school activities is required from college freshmen along with a college acceptance letter. 6. Compose an essay of no more than two typed, double-spaced 8 ½” x 11” pages. The essay should discuss the applicant’s relationship with their TIADA scholarship sponsor, current education goals and future aspirations as it relates to the applicant’s subject/training area. 7. Provide at least two (but no more than three) letters of recommendation, no older than one year, from college/high school faculty, employers or other appropriate sources (not related).
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SCHOLARSHIP APPLICATION
City:
State:
Zip:
Dates of Attendance:
College(s) you are attending or plan to attend for admission:
Parents Name(s): TIADA Member Name (Sponsor): TIADA Member Company Name: TIADA Member Address: City:
State:
Zip:
Sponsor Signature Should you have any questions, please contact TIADA at 512.244.6060. Please return the completed application with all required documents to: TIADA Attention: Scholarship Applications 9951 Anderson Mill Rd. Suite 101, Austin, TX 78750
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feature Texas Motor Vehicle Dealer Tax Compliance e s Com tro er of u ic ccounts o ic
i ision t ff
T
exas motor vehicle dealers continue to significantly contribute to our state’s economy through voluntary tax compliance. An important part of this compliance is continuing to keep and maintain proper records. In this article, we provide important guidelines to help motor vehicle seller-financed sales dealers remain compliant with their requirements. In addition, we include information on how a Texas dealer can purchase certain parts and accessories tax free for motor vehicles held for resale.
Keeping and Maintaining Records – All Motor Vehicle Dealers
When it comes to a motor vehicle dealer’s recordkeeping responsibilities, the Texas Tax Code has specific requirements. A motor vehicle dealer must keep and maintain the following: sales invoices records of total receipts from all income sources copies of payment methods, such as checks or receipts for cash payments copies of Forms 130-U, Application for Texas Title and/or Registration copies of receipts for tax, title and registration issued by the county tax assessor-collector (CTAC) completed Forms 14-313, Texas Motor Vehicle Sales Tax Resale Certificate, when selling a motor vehicle to another Texas dealer for resale completed Forms 14-312, Texas Motor Vehicle Sales Tax Exemption Certificate – for Motor Vehicles Taken Out of State, when applicable These records must be made available to the Comptroller’s office for four years from the date the motor vehicle was sold. If a dealer also handles consignment sales of motor vehicles, the same recordkeeping responsibilities apply.
Keeping and Maintaining Records – Seller-Financed Sales Dealers
In addition to the records listed above, sellerfinanced sales dealers must keep and maintain the following: December 2021
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copies of lienholder’s receipts for tax, title and registration issued by the county tax assessor-collector ledgers or similar records with • names and addresses of purchasers • sales prices (i.e., total consideration) • down payment(s) • dates and amounts of subsequent payments • dates of sales • dates of any repossessions These records must be made available to the Comptroller’s office for four years from the date the motor vehicle was sold.
Points to Remember – Seller-Financed Sales Dealers
Dealers making seller-financed sales must have a Motor Vehicle Seller-Financed Sales Tax Permit issued by the Comptroller’s office. Seller-financed sales dealers should keep the following information in mind to avoid an acceleration of tax: When calculating tax, it is presumed that interest accrues and is paid on a straight-line basis. In other words, once you collect tax on any down payment that has not been itemized, the remaining tax due is collected equally on each subsequent payment. A seller-financed vehicle is considered paid in full when that vehicle is used as a trade-in on another transaction, and the seller-financed dealer must remit the remaining tax due on the vehicle being used as a trade in. Motor vehicle tax paid to the CTAC at the time of titling and registration satisfies the tax liability for that transaction. A seller-financed sales dealer cannot take a bad debt deduction for motor vehicle tax paid to the CTAC. If a seller-financed sales dealer does not apply for title and registration within 60 days from the date of sale, the tax accelerates, and the dealer is liable for all unpaid tax at that time. The dealer must remit the tax on the next seller-financed sales tax return (the time constraint only affects the tax acceleration, not the usual due dates.) Generally, if a seller-financed sales dealer sells, factors, assigns or otherwise transfers the right to 29
receive payments to someone, all unpaid tax is due on the total consideration not reported at the time the agreement is sold, factored, assigned or otherwise transferred. That is, unless the seller-financed sales dealer sells, factors, assigns or otherwise transfers rights to receive payments to • a related finance company (RFC) registered under, Section 152.0475, as an RFC; or • grants a security interest in a purchaser’s account; yet retains custody and control of the account and the right to receive payments in the absence of a default under the security agreement. Motor vehicle tax may not be reduced when notes are sold at a discount.
Related Finance Company (RFC)
A qualifying RFC is one in which at least 80 percent of the ownership is identical to the ownership of the sellerfinanced sales dealer. A seller-financed sales dealer does not incur the acceleration of tax when a note is transferred or reassigned to a qualifying RFC with an active registration with the Comptroller’s office. The sellerfinanced sales dealer will continue to collect and remit the remaining tax due as each payment is received.
When a seller-financed sales dealer sells a note to an unrelated lender, a non-qualifying RFC or an RFC that is not registered with the Comptroller’s office at the time of the sale, tax due will continue to accelerate.
Tax-Free Purchases of Repair Parts and Accessories for Vehicles Held Exclusively for Resale
A dealer that has a Texas sales tax permit can issue a resale certificate to purchase repair parts and accessories used on vehicles held exclusively for resale. The sales tax permit is different from a motor vehicle sellerfinanced permit. If a seller-financed sales dealer does not have a sales tax permit, they can apply online at https://comptroller.texas.gov/taxes/sales.
Additional Resources
Links to Texas Tax Code Sections 111.0041, 152.063 and 152.0635; Rule 3.74, Seller Responsibility; Tax Publication 98-820, Related Finance Companies and Seller-Financed Sales; and Motor Vehicle Sales Tax Rules are available online at Comptroller.Texas.Gov. Motor vehicle dealers can also contact the Comptroller’s office by calling 800-252-1382 or going to https://comptroller.texas.gov/web-forms/tax-help.
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$AVE : $200
C.M. COMPANY AUCTIONS, INC. www.cmauctions.com
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Amarillo IAA AMARILLO*
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Austin ADESA AUSTIN
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ALLIANCE AUTO AUCTION AUSTIN
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METRO AUTO AUCTION AUSTIN www.metroautoauction.com 8605 Cullen Ln., Austin, TX 78748 512.282.7900, Fax 512.282.8165 GM: Brent Rhodes 3rd Saturday, monthly
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Corpus Christi CORPUS CHRISTI AUTO AUCTION
www.corpuschristiautoauction.com 2149 IH-69 Access Road, Corpus Christi, TX 78380 361.767.4100, Fax 361.767.9840 GM: Hunter Dunn Friday, 10:00 a.m.
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IAA CORPUS CHRISTI*
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Dallas-Ft. Worth Metroplex ADESA DALLAS
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ALLIANCE AUTO AUCTION DALLAS
www.allianceautoauction.com 1550 CR 107, Hutto, TX 78634 737.300.6300 GM: Brad Wilson Wednesday, 9:45 a.m.
www.allianceautoauction.com 9426 Lakefield Blvd., Dallas, TX 75220 214.646.3136, Fax 469.828.8225 GM: Robert Kersh Wednesday, 1:30 p.m.
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www.americasautoauction.com 219 N. Loop 12, Irving, TX 75061 972.445.1044, Fax 972.591.2742 GM: Ruben Figueroa Tuesday, 1:00 p.m. / Thursday, 1:00 p.m.
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MANHEIM DALLAS**
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MANHEIM DALLAS FORT WORTH**
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METRO AUTO AUCTION DALLAS
www.metroaa.com 1836 Midway Road, Lewisville, TX 75056 972.492.0900, Fax 972.492.0944 GM: Scott Stalder Tuesday, 9:00 a.m.
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El Paso EL PASO INDEPENDENT AUTO AUCTION www.epiaa.com 7930 Artcraft Rd, El Paso, TX 79932 915.587.6700, Fax 915.587.6700 GM: Luke Pidgeon Wednesday, 10:00 a.m.
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December 2021
MANHEIM EL PASO
www.manheim.com 485 Coates Drive, El Paso, TX 79932 915.833.9333, Fax 915.581.9645 GM: JD Guerrero Thursday, 10:00 a.m.
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IAA HOUSTON NORTH* www.iaai.com 16602 East Hardy Rd., Houston-North, TX 77032 281.443.1300, Fax 281.443.4433 GM: Aracelia Molina Thursday, 9:00 a.m.
$AVE : up to $200 Sell Fee
Harlingen/McAllen
MANHEIM HOUSTON
IAA MCALLEN*
www.iaai.com 900 N. Hutto Road, Donna, TX 78537 956.464.8393, Fax 956.464.8510 GM: Ydalia Sandoval Tuesday, 9:00 a.m.
$AVE : up to $200 Sell Fee
BIG VALLEY AUTO AUCTION**
www.bigvalleyaa.com 4315 N. Hutto Road, Donna, TX 78537 956.461.9000, Fax 956.461.9005 GM: Lisa Franz Thursday, 9:30 a.m.
www.manheim.com 14450 West Road, Houston, TX 77041 281.924.5833, Fax 281.890.7953 GM: Brian Walker Tuesday, 9:00 a.m. / Thursday 6:30 p.m.
$AVE : $100
MANHEIM TEXAS HOBBY www.manheim.com 8215 Kopman Road, Houston, TX 77061 713.649.8233, Fax 713.640.6330 GM: Darren Slack Thursday, 9:00 a.m.
$AVE : $200
$AVE : $100
Houston
Longview ALLIANCE AUTO AUCTION LONGVIEW
ADESA HOUSTON
www.adesa.com 4526 N. Sam Houston, Houston, TX 77086 281.580.1800, Fax 281.580.8030 GM: Angela Williams Wednesday, 9:00 a.m.
$AVE : $200
www.allianceautoauction.com 6000 East Loop 281, Longview, TX 75602 903.212.2955, Fax 903.212.2556 GM: Chris Barille Friday, 10:00 a.m.
$AVE : $200
AMERICA’S AA HOUSTON
www.americasautoauction.com 1826 Almeda Genoa Rd, Houston, TX 77047 281.819.3600, Fax 281.819.3601 GM: Ben Nash Thursday, 2:00 p.m.
$AVE : $200
AMERICA’S AA NORTH HOUSTON www.americasautoauction.com 1440 FM 3083, Conroe, TX 77301 936.441.2882, Fax 936.788.2842 GM: Buddy Cheney Tuesday, 1:00 p.m.
$AVE : $200
AUTONATION AUTO AUCTION - HOUSTON www.autonationautoauction.com 608 W. Mitchell Road, Houston, TX 77037 822.905.2622, Fax 281.506.3866 GM: Juan Gallo Friday, 9:30 a.m.
$AVE : $200
HOUSTON AUTO AUCTION
www.houstonautoauction.com 2000 Cavalcade, Houston, TX 77009 713.644.5566, Fax 713.644.0889 President/GM: Tim Bowers Wednesday, 11:00 a.m.
$AVE : $200
IAA LONGVIEW* www.iaai.com 5577 Highway 80 East, Longview, TX 75605 903.553.9248, Fax 903.553.0210 GM: David Cooper Thursday, 9:00 a.m.
$AVE : up to $200 Sell Fee
Lubbock IAA LUBBOCK* www.iaai.com 5311 N. CR 2000, Lubbock, TX 79415 806.747.5458, Fax 806.747.5472 GM: Lori Davee Tuesday, 9:00 a.m.
$AVE : up to $200 Sell Fee
TEXAS LONE STAR AUTO AUCTION** www.lsaalubbock.com 2706 E. Slaton Road., Lubbock, TX 79404 806.745.6606 GM: Dale Martin Wednesday, 9:30 a.m
$AVE : $75/Quarterly
Lufkin
Midland Odessa IAA PERMIAN BASIN*
www.iaai.com 701 W. 81st Street, Odessa, TX 79764 432.550.7277, Fax 432.366.8725 GM: Christopher Rogers Thursday, 11:00 a.m.
$AVE : up to $200 Sell Fee
ONLINE ACV AUCTIONS**
www.acvauctions.com 800.553.4070
$AVE : $250
E-DEALERDIRECT**
www.e-dealerdirect.com chris@edealerdirect.com
$AVE : Up to $500/month
San Antonio ADESA SAN ANTONIO
www.adesa.com 200 S. Callaghan Rd., San Antonio, TX 78227 210.434.4999, Fax 210.431.0645 GM: Clifton Sprenger Thursday, 10:00 a.m.
$AVE : $200
IAA SAN ANTONIO*
www.iaai.com 11275 S. Zarzamora, San Antonio, TX 78224 210.628.6770, Fax 210.628.6778 GM: Brian Sell Monday, 9:00 a.m.
$AVE : up to $200 Sell Fee
MANHEIM SAN ANTONIO**
www.manheim.com 2042 Ackerman Road San Antonio, TX 78219 210.661.4200, Fax 210.662.3113 GM: Mike Browning Wednesday, 9:00 a.m.
$AVE : $100
SAN ANTONIO AUTO AUCTION**
www.sanantonioautoauction.com 13510 Toepperwein Rd. San Antonio, TX 78233 210.298.5477 GM: Brandon Walston Tuesday, 10:00 a.m. / Thursday, 1:30 p.m.
$AVE : $200
Tyler GREATER TYLER AUTO AUCTION www.greatertyleraa.com 11654 Hwy 64W, Tyler, TX 75704 903.597.2800, Fax 903.597.3848 GM: Wayne Cook Tuesday, 5:00 p.m.
$AVE : $200
Waco
IAA HOUSTON*
LUFKIN DEALERS AUTO AUCTION
ALLIANCE AUTO AUCTION WACO
$AVE : up to $200 Sell Fee
$AVE : $200
$AVE : $200
www.iaai.com 2535 West. Mt. Houston, Houston, TX 77038 281.847.4700, Fax 281.847.4799 GM: Alvin Banks Wednesday, 9:00 a.m.
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www.lufkindealers.com 2109 N. John Reddit Dr., Lufkin, TX 75904 936.632.4299, Fax 936.632.4218 GM: Wayne Cook Thursday, 6:00 p.m.
www.allianceautoauction.com 15735 I-35 Frontage Road Elm Mott, TX 76640 254.829.0123, Fax 254.829.1298 GM: Christina Thomas Friday, 10:00 a.m.
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feature TIADA’s Most Read Compliance Articles in 2021 t ff
Y
ou probably know that TIADA offers its compliance consultation service throughout the year, and that one of the association’s most valuable resources for dealers is its blog. These articles frequently appear in our industry newsletter, which we send to our members twice per month. If you have a compliance question concerning your dealership, it is likely that the answer can be found in these TIADA articles. Throughout the year, certain issues and articles stand out as particularly relevant for our members. We’ve compiled a few of our most viewed articles that dealers are reading in 2021. Chances are that you’ve had a similar question or concern about these issues, so you don’t have to feel alone.
About That Mistake on the Title: Can I Make an Alteration?
All vehicle transactions are not seamless and sometimes mistakes happen when titling or registering a vehicle. Did you know you can often correct an error after the fact without having to unwind a deal? Texas Administrative Code, §217.5 outlines the process regarding alterations: 4) A Statement of Fact may be requested to explain errors, corrections, or conditions from which doubt does or could arise concerning the legality of any instrument. A Statement of Fact will be required: (a) in all cases in which the date of sale on an assignment has been erased or altered in any manner; or (b) in case of alteration or erasure on a Dealer’s Reassignment of Title. (c) in the case of Rights of survivorship. A signed “rights of survivorship” agreement may be executed by a natural person acting in an individual capacity in accordance with Transportation Code, §501.031.
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Statements of Fact are requested to explain errors, corrections, or conditions from which doubt does or could arise concerning the legality of any document. A person relevant to the issue in question is usually required to complete a statement of fact. Certain conditions arise, however, which necessitate that a particular person complete the statement of fact. The statement of fact must properly identify the 36
vehicle. The vehicle description should include, at the minimum, the vehicle identification number. To reduce the requirement for Statements of Fact, only line through incorrect information on the assignment or any other document and show the correct information. The department does not allow the use of white-out or liquid paper on any title transfer documents. If an obvious error is lined through and the correct information is shown, the department accepts the transaction provided there is no conflict elsewhere in the transaction.
What About Those Fees? Legal v. Improper Fees
Tax, title, and licensing fees: they’re all items you will see on your sales contract all the time, but when was the last time you looked beyond the sales tax of 6.25%? As you know there are a lot of different fees out there. We all know about the importance of collecting and reporting the 6.25% sales tax to the State of Texas via the Comptroller’s Office, but what about documentation fees and other dealer fees? What about including some additional items such as “dealer prep” or “dealer service fee” on a buyer’s guide? Well, be careful as such “add-on” fees might cost the dealer later during an exam, audit, or lawsuit. Fees on Retail Installment Contracts are strictly regulated by the Texas Office of Consumer Credit Commissioner (OCCC). The OCCC has been very clear about documentation fees and other fees on retail contacts. In Texas, dealers are allowed to charge up to $150 per transaction or less and a seller is not required to provide a notification or cost analysis to the OCCC before charging a documentary fee of $150 or less. However, before charging a documentary fee greater than $150, a seller must provide both a notification and a cost analysis to the OCCC for approval. See Texas Administrative Code, Title 7, Section 84.205. Adding extra fees such as “dealer prep” to a Retail Installment Contract will be problematic with future OCCC examinations as that is outside of the scope of approved items on retail contracts. In a retail installment transaction, the seller is subject to Chapter 348, Texas Finance Code, which allows for the certain itemized charges to be added to the cash price
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under Sec. 348.005. Texas Finance Code § 348.006 states that for a documentary fee to be included in the principal balance of a retail installment contract: 1. The seller must charge the fee to cash and credit buyers; 2. The fee may not exceed a reasonable amount agreed to by the parties for the documentary services; and 3. The buyer’s order and the retail installment contract must include: (a) A statement of the amount of the fee; (b) The following statement in reasonable proximity to the charge in type that is bold faced, capitalized, underlined, or otherwise conspicuously set out from surrounding written material: “A DOCUMENTARY FEE IS NOT AN OFFICIAL FEE. A DOCUMENTARY FEE IS NOT REQUIRED BY LAW, BUT MAY BE CHARGED TO BUYERS FOR HANDLING DOCUMENTS RELATING TO THE SALE. A DOCUMENTARY FEE MAY NOT EXCEED A REASONABLE AMOUNT AGREED TO BY THE PARTIES. THIS NOTICE IS REQUIRED BY LAW.” Everybody knows or has heard of other dealers including discretionary fees such as dealer preparation, detail, service, and other vague ad-on charges included at the time of sale. However, be careful how you represent those additional fees. Be especially careful about advertising “internet specials” or even listing prices online, only to
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December 2021
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later include dealer prep fees or other hidden fees at the time of sale on the buyer’s guide. This could potentially expose you to regulatory scrutiny for advertising violations. Texas 43 TAC 215.246 states that “advertisements shall be accurate, clear, and conspicuous. Advertisements shall not be false, deceptive, or misleading. For an internet advertisement, a disclosure may be considered accurate, clear, and conspicuous.” At the end of the day be careful about charging additional fees to get the car ready to sell that you cannot clearly document, explain, or account for or allow to be removed at the request of the customer. When was the last time you reviewed your dealer management software and/or a white slip from a recent deal? Make sure your fees are up to date for the county you operate in. If you are unsure of the itemized charges in your jurisdiction, confirm with your dealer management software provider and local tax assessor collector that all fees are up to date.
Trading In a Car Without a Title
635 Fritz Dr. Ste 210 Coppell, TX 75019 469-637-0150
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Dealers cannot sell a vehicle without a title and should also not take a trade-in without a blue title in the customer’s name. If the customer does not have the title, but the vehicle is subject to the lien, the lienholder, such a bank or credit union, may have the title in their possession. Dealers should contact the lender to discuss payoff for title release, if applicable. So, what do you do if your customer claims to have a “clean” title, but can’t remember where it is or is lost or destroyed? Be Careful! You could ask that the customer go to the local DMV regional service center with a VTR 34. Also, some local tax assessors or title
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deputies may process a replacement for title but wait times may vary. However, losing a potential sale is not always practical. If you can confirm the identity of the person and vehicle ownership, then there may be another option to accept a trade in without a title. Texas Motor Vehicle Power of Attorney (Form VTR-271) is the form a vehicle owner can use to grant authority to a dealer to perform certain administrative tasks with his or her vehicle. For instance, the dealer may transfer titles to a motor vehicle in Texas using the principal vehicle owner’s name. This is a type of limited power of attorney that pertains to transferring title of motor vehicles only. In compliance with federal law, the secure Power of Attorney for Transfer of Ownership to a Motor Vehicle (Form VTR-271-A) must be used when use of a power of attorney is permitted by the applicable regulations for a vehicle subject to federal odometer disclosure. “If a power of attorney is used to apply for title, initial registration, or a certified copy of title, the grantor (person signing this form) and the grantee (person signing the application) must include a photocopy of their photo identification as required by state law.”
Conclusion
Remember that TIADA members have access to our professional, expert staff for consultation on any and all industry-related compliance questions you might have. If you need legal assistance, we can refer you to an attorney from our legal consultation program. Many questions can also be answered 24/7 through our Knowledge Base. Please do not hesitate to contact the association with any regulatory or compliance question and we will get you to the right answer as soon as we can. And stay tuned to our blog for articles on the common issues we hear about from our members. T e x a s
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feature Maximum Finance Charge Rates for 2022 ic e
un
n
Counse
Dealer Question: What is the
maximum finance charge rate I can use on a motor vehicle retail installment contract?
Answer: Dealers who hold vehicle finance licenses issued by the Office of Consumer Credit Commissioner (OCCC) are authorized to finance the sale of vehicles, and are allowed to add finance charge or time-price-differential to the amount financed (while the term “interest” is commonly used interchangeably with finance charge and time-price-differential, “interest” actually is the amount charged on a loan of money, and should not technically be used in the context of financing the sale of a motor vehicle). December 2021
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he legislature has established a sliding scale of maximum rates, with higher rates allowed on older cars. The maximum rate that sellers of older vehicles can add to the amount financed is $15 per $100 per annum or, stated another way, 15 per cent add on (see accompanying chart). Depending on such variables as the length of the repayment period, the amount of each payment, and the frequency of payment (weekly, bi-weekly, semi-monthly or monthly), the annual percentage rate on 15 per cent add on can exceed 26 per cent. Chapter 348 of the Texas Finance Code allows sellers of vehicles to finance any unpaid balance at rates that generally exceed the rates of interest that can be legally charged by banks and traditional lenders. For purposes of setting maximum rates of finance charge, Chapter 348 establishes four classes of vehicles based of the vehicle’s model year. The attached chart shows allowable rates for calendar year 2022. These rates are valid on sales that take place between January 1, 2022, and December 31, 2022. The maximum rates “roll over” on January 1 of each year. The maximum rates of finance charges are stated in the Finance Code as “add-on” rates. For example, for vehicles that fall into the class-four category, sellers can charge fifteen dollars per one hundred dollars 39
Maximum Finance Charge Rates for Calendar Year 2022 Class One Two
Three Four
Year Models
Max. Rate
Alternate Rate
2023 and 2022 new Any new not appearing in Class One above; 2022, 2021 and 2020 used 2019 and 2018 2017 and older
7.5 per cent add-on 10 per cent add-on
18 per cent APR 18 per cent APR
12.5 per cent add-on 15 per cent add-on
18 per cent APR 18 per cent APR
financed per annum. These are maximum rates, and any rate lower than the maximum can be charged. “Add-on” rates should not be confused with “annual percentage rates” which are the rates required to be disclosed on loans and retail installment sales by federal law. The Annual Percentage Rate (or APR), which appears in the so-call “Fed Box”, will usually be substantially higher than the add-on rate. All financing sellers, with a few exceptions, are required by federal law to disclose the rate of finance charge as an annual percentage rate, or APR, on their contracts. Since Texas law sets maximum rates as addon rates, it is necessary to first calculate the amount of finance charge the creditor chooses to assess within the legal limit, then determine the APR for disclosure purposes. Federal Truth-In-Lending requires that any finance charge rate be advertised or expressed to a consumer as an APR. It is thus improper to advertise or discuss add-on rates with customers. The process of calculating the APR on contracts that provide for payments other than equal monthly payments is extremely difficult. Most dealers rely on specialized software (often referred to as dealer management software, or DMS) to perform this function. (For a list of reviewed programs, see the OCCC website at https://www.occc.texas.gov). Without appropriate software, it is virtually impossible for a creditor who collects weekly, bi-weekly, or semi-monthly payments to accurately calculate an APR and other required disclosures. Dealers should not guess at or estimate an APR as incorrect disclosures are the basis for claims for statutory damages and attorney’s fees. Note that the chart also includes a column for what is referred to as an “Alternate Rate.” This rate is 18 per cent APR for all four classes. Many dealers have questioned what the alternate rate is, and how it affects the rates they can charge. The alternate rate is an optional rate. A dealer has the option to use either the standard or alternate rate. As an example, a dealer financing the sale of a 2015 40
model- year vehicle can charge up to 15 per cent addon (since this year model falls into Class Four) or the alternative rate of 18 per cent A.P.R. Since the 15 per cent add-on rate translates to over 26 per cent A.P.R. on a typical weekly payment contract, a higher legal return can be achieved using the standard rate than the alternative rate. On the other hand, the sale of a class-two vehicle would be subject to a 10 per cent add-on maximum. Since the actual yield on 10 per cent add-on would be lower than 18 per cent, the alternative rate would allow the seller a higher legal return. OCCC rules also require the disclosure of a “contract rate” which is different from the add on rate and A.P.R. DMS providers that comply with Texas requirements properly calculate and disclose the contract rate. The OCCC website has additional information about maximum rates and contract rates. Remember that the so-called “add-on rate,” which is the rate used to calculate the finance charge added to a contract, can’t be used on the contract documents or in any communication with consumers, such as advertising. In order that credit consumers can shop rates on an “apples to apples” basis, federal law requires all discussions about rates to refer to the chosen universal rate, or the A.P.R. It would thus be improper to have an add-on rate appear anywhere on a contract.
Time to renew your dealer’s license? visit TexasDealerEducation.com T e x a s
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Please Welcome Our Newest TIADA Members
Local Chapters CORPUS CHRISTI G.R. Moore
DEALER MEMBERS D&D Auto Sales Inc
The Car Shack
Heather Malphrus . . . . . . . . 83 Horseshoe Lake Rd, State Highway 19, Huntsville, TX 77320
(dates announced at
Done Deal Auto Sales
www.txiada.org)
Oscar Francis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5701 Southwest Fwy, Houston, TX 77057
East Texas Auto Group, LLC Arthur Baker. . . . . . . . . . . . . . . . 3012 W Marshall Ave, 3520 Gilmer Rd, Longview, TX 75604
EL PASO
Hogg’s Automotive Training Academy, Inc.
Cesar Stark
Dalphine Hogg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PO BOX 150145, Dallas, TX 75217
S & S Motors
Hollywood Motors Joi Hunt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5624 Southwest Freeway, Houston, TX 77057
Meeting – 3rd Friday
Kimberly Trevino Kimberly Trevino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1811 Azalea St, Mission, TX 78573
(Monthly)
R Y J Auto Sales, LLC Mariano Contreras. . . . . . . . . . . . . . . . . . . 3447 Autumn View Drive, Grand Prairie, TX 75050
FORT WORTH Jerry Smith
ASSOCIATE MEMBERS Allstate Insurance
H J Smith Automobiles
John Alexander . . . . . . . . . . . . . . . . . . . . . . . . . 2814 Brookline Drive, Missouri City, TX 77459
(dates announced at www.txiada.org)
resource guide
HOUSTON April Hanson
The TIADA Website: www.txiada.org Members can log in with their username/password and access our Dealer Member Directory, Legislative Action Center, Compliance Consultation Service and much more. Register for all upcoming TIADA events online through the Calendar of Events, access our online membership application, find contact information for all our Local Chapters, and access many additional resources through our Knowledge Base.
License Renewal Certificate TexasDealerEducation.com
Office of Consumer Credit Commissioner 800.538.1579
Coast to Coast Motors
occc.texas.gov
Meeting – 2nd Tuesday (Monthly)
Texas Comptroller 800.252.1382 comptroller.texas.gov/
SAN ANTONIO NIADA 800.682.3837 www.niada.com
Irving Motors Corp REPOSSESSIONS
(dates announced at
American Recovery Association
www.txiada.org)
972.755.4755 www.repo.org or contact TIADA state office
Texas Department of Motor Vehicles
FORMS
888.368.4689 www.txdmv.gov
800.252.9154 www.burrellprinting.com
December 2021
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Jose Engler
Burrell Printing
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W hy Choose Us?
Visit Us Online for Customized Solutions & Helpful Insights
M U L L ENINSU RANC E.C O M
F e a t u r e d I n s u r a n c e S o lu t io n s 8 00- 7 8 3 - 6 29 7 - T O L L F R E E ( 9 7 2) 6 8 1- 6 29 7 - L O C A L INF O @ M U L L ENINSU RANC E.C O M
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Answers to the 2021 Dealer Proficiency Quiz (Questions found on pg. 10–11
Compliance ANSWERS
1. (c). Accession. The Uniform Commercial Code defines accessions as goods installed in or affixed to the other property that is the subject of the lien. One test commonly used by courts in determining if something is an accession is whether it can be removed easily without damaging the underlying collateral. (January 2021; “Stereos, Tires, Wheels: Personal Property or Accessions”; Texas Dealer) 2. 2031. The federal odometer disclosure on titles can be made as “exempt” if the vehicle falls under the exemption for older vehicles depending on its model year. Prior to January 1, 2021, the exemption applied to vehicles 10 years old or older. A new rule from the National Highway Traffic Safety Administration (NHTSA) now changes the exempt age to 20 years, reflecting the increasing average age of vehicles still in operation. The new rule requires an odometer disclosure for every title transfer of ownership for vehicles up to 20 model years old, beginning with model year 2011 vehicles (thus 2011-year models will be subject to federal disclosure through 2031). Model-year-2010 and older vehicles remain subject to the previous 10-year rule. (February 2021; ‘Odometer Problems Don’t Go Away With ‘Exempt’ Status”; Texas Dealer) 3. FALSE. Most dealers know by now that the legal age for contracting is 18. (The minimum age for purchase or consumption of alcohol is 21 and appears in another area of the law.) Some dealers erroneously think that the minimum age applies only to financing and not to cash sales. It in fact applies to all contracts, and a cash sale is a contract. (“I agree to give you this car if you agree to give me money.”) (March 2021; “Avoid Selling To Minors”; Texas Dealer) 4. (c). Sequestration is the legal remedy available in Texas to a creditor who is unable to peaceably repossess a vehicle because it is hidden or locked up. In some states, the same remedy if referred to as replevin. (April 2021; “What To Do When Peaceable Repossession Is Not Possible?”; Texas Dealer)
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7. (a) and (b). The Texas Finance Code specifically provides that either total damage to a vehicle or theft of the vehicle triggers debt cancellation under a DCA. (July 2021; “Alternatives to Traditional Property-Damage Insurance Offer Options to Dealers”; Texas Dealer) 8. (c). Since there is no lien on a debtor’s personal effects, they must be returned upon demand, and can’t be held to enforce the debtor’s obligations. (September 2021; BHPH Compliance: Don’t Overlook Proper Handling of Personal Property in Repossessed Vehicles”; Texas Dealer) 9. The Texas Legislature meets in regular session for SIX months each ODD year (there may be special sessions called by the governor). (October 2021; “Obstacles Made Early Association Work Daunting and Rewarding”; Texas Dealer) 10. FALSE. A car creditor can’t arbitrarily reject propertydamage insurance from an insurance company that is licensed to issue policies in Texas just because the creditor doesn’t like the company. (July 2021; “Alternatives to Traditional PropertyDamage Insurance Offer Options to Dealers”; Texas Dealer)
Bonus ANSWERS
11. FALSE. Convenience fees are not authorized to be charged or collected by a retail seller in connection with receiving payments on a motor vehicle retail installment transaction. However, under certain circumstances, a dealer may allow a retail buyer to pay through a third-party payment processor, and the processor may charge a fee for its service. (November 1, 2021; “Convenience Fees on Motor Vehicle Retail Installment Transactions”; txiada.org) 12. (c). Payment period is considered triggered by statements such as “48-month payment,” “4-year loan,” and “repayment in as many as 72 months. None of the other terms are trigger terms and are specific examples of what is not a trigger term that are offered by the CFPB. (August 17, 2021 “Don’t Shoot Yourself in the Foot by Ignoring Trigger Terms”; txiada.org) 13. (b). All applicants and dealers applying for a new GDN, or renewing a current GDN, on or after September 1, 2021 are required to submit a Motor Vehcile Dealer Surety Bond in the amount of $50,000. (August 19, 2021 “Official Notification on Dealer Surety Bond Increase”; txiada.org)
5. TRUE. The Texas Supreme Court has ruled that a seller can’t be held liable under negligent entrustment. (May 2021; “What Is Negligent Entrustment and When Is a Dealer Liable for Accidents Caused By His Buyer”; Texas Dealer)
14. FALSE. There is no federal law that requires used car dealers to inform customers about open recalls or deployed airbags. Dealers should however keep in mind any misrepresentation may be actionable under the Texas Deceptive Trade Practices Act (DTPA). (November 1, 2021 “Are You Obligated to Replace Defective or Deployed Airbags”; txiada.org)
6. (c). The seller in a seller-financed transaction has 45 calendar days to transfer under the Texas Title Act provisions governing dealer requirement. However, there are issues (such as protection of a secured position in a bankruptcy) that would motivate faster transfer. (May 2021; “Timely Transfer of Titles Requires Diligence”; Texas Dealer)
15. (a). Personal files should be retained for six years after termination. The others are incorrect as denied credit applications should be retained for two years, Form 8300 should be retained for five years, and repair orders should be retained for 2 years. (January 7th, 2021; “How Long Am I Required to Keep These Records”; txiada.org) T e x a s
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board of directors meeting minutes October 25, 2021 Courtyard by Marriott | Pflugerville, TX compiled by Texas Dealer staff
Board Members in Attendance:
Brad Kalivoda, Eddie Hale, Greg Reine, Chad Lancaster, Cesar Stark, Vicki Davis, Ryan Winkelmann, Mark Jones, Russell Moore, Armando Villarreal, Robert Blankenship. TIADA Staff in Attendance: Jeff Martin, Earl Cooke, Teresa Orkun, Stephen Pallas, Patty Huber. At its meeting on Monday, October 25, 2021, TIADA took the following actions: President Mark Jones called the meeting to order at 9:59 AM.
Minutes of Last Meeting Secretary Eddie Hale presented the minutes of the last Board of Directors Meeting.
A motion was made to accept the minutes. Moved by Russell Moore, seconded by Vicki Davis — PASSED
Executive Director’s Report Executive Director Jeff Martin gave an update on 2021 Conference, on membership, and on website reviews. Special Projects Manager Teresa Orkun presented a report on Dealer Professional Development. Director of Compliance and Business Development Earl Cooke provided an update on governmental relations and INDEPAC. Director of Associate Member Relations Patty Huber presented a report on the Business Partner Program. Earl Cooke provided an update on the CPO program. Vicki Davis reported the Budget numbers for FY’21 and FY’22. Jeff Martin conducted an exercise with attendees to develop the 5-Year Strategic Plan for 2022-26.
Old/New Business Treasurer’s Report
Treasurer Vicki Davis presented the Treasurer’s report. A motion was made to accept the report. Moved by Greg Reine, seconded by Armando Villarreal — PASSED
President’s Report
Mark Jones talked about attending NIADA conference, DFW meeting, El Paso meeting and Golf Tournament as well as a legislative visit with Rep. Glenn Rogers. He also shared the committee appointments with the board. Attendees reported on their member outreach calls. December 2021
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A motion was made to approve Advanced Auto and Preferred Dealer Solutions as Business Partners. Moved by Eddie Hale, seconded by Armando Villarreal. — PASSED A motion was made to adjourn the meeting. Moved by Greg Reine, seconded by Ryan Winkelmann — PASSED Mark Jones adjourned the meeting at 4:28 PM. Respectfully submitted, Eddie Hale, Secretary
Upcoming Events 2022 TIADA DEALER ACADEMY Online registration available. www.txiada.org
February 7 Keeping Your BHPH Dealership Legal and Compliant Houston, TX
OTHER TIADA EVENTS
January 24 Board of Directors Meeting Austin, TX
April 25 Board of Directors Meeting Austin, TX
July 24 Board of Directors Meeting Round Rock, TX
A complete copy of any reports referenced in this document and more detailed notes from the meeting are on file at the TIADA office and available upon request.
24–26 TIADA Conference and Expo Round Rock, TX
45
behind the wheel by
Jeff Martin TIADA EXECUTIVE DIRECTOR
Here’s to You and the New Year
T
his job is very rewarding in many ways, but hearing from our members is one of the greatest rewards we receive. Since 2016, I have been highlighting some of the positive comments we receive throughout the year as a way to toast our team, celebrate our members, and end the year on a positive note.
“Good morning, I just wanted to thank you. We actually already received the registration back and we got it just in time before our deadline with the bank. We appreciate TIADA and all your help.” —Dinora, Munoz Auto Sales – Houston “We have sold our dealership property and have semi-retired. I say semi because we will keep a license but on a much smaller scale with no employees. We certainly appreciate all the help over the years that TIADA has provided.” — Diana, Brink Fleet – Lubbock “Thank you for all that you have done for all of us. It has been incredibly impressive what you have been able to accomplish over the past year. If there is anything that I can do to assist, please do not hesitate to reach out. I would love to continue to serve on the committee moving forward as well as in any other capacity that will benefit TIADA.” — Streeter, Drive Casa, LLC – Dallas “Heading back to SFO! Thanks again for putting on a world-class IADA show this year. I thoroughly enjoyed every moment of it!” —Zach, Selly Automotive, San Francisco, CA 46
“First, we want to thank you for a fabulous evening. I think our table had the most fun that night. We appreciate all that you do for us. Thank you! Second, I thought of you and Mario the other day with his story about you and him traveling together, it was hilarious! Now when I eat a health bar for lunch, I think of you. Only Mario could tell that story. It was great! Have a great weekend.” — Charlotte & Jim, Sports & Classic Motorcars – College Station “Thanks for including us in yesterday’s meeting. You all are doing a great job with all this uncertainty! Thanks!” —Diane, AutoAction – Houston “I hope your team is enjoying some much-deserved time off after the conference. You guys should be extremely proud of what was accomplished. We continue to set the bar for this industry nationwide.” —Chad, Chacon Autos – Dallas And to that, we say thank you right back. Thanks for your comments, thanks for your support, and thanks for your membership. Goodbye to 2021 and here is to 2022. We hope to see you all very soon. T e x a s
D e a l e r
December 2021
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