Last week Americans had to mail their tax returns to Uncle Sam. For used-car dealer Richard Estes in Ceres, Calif., tax week was particularly grim.
An Internal Revenue Service officer visited his dealership, Budget Auto Sales and Leasing, the afternoon of Monday, April 13. The agency wants to collect $772,000 in back taxes, penalties and interest it claims he owes.
Estes says the taxes are owed primarily on income from reserves on subprime vehicle loans - income he never received. When used-car dealers sell vehicles to customers with bad credit, finance companies do not pay all the loan proceeds to the dealer immediately. Instead, they hold some in reserve to cover the risk that the customer will not be able to meet the obligation. Estes is suing one such finance company he claims owes him more than $200,000.
Estes claims the tax bill will bankrupt him.
He has become a poster child for a battle the National Independent Automobile Dealers Association is waging to get the government to change how it collects taxes from used-car dealers who sell cars to people with poor credit.
Robert Zwiers, IRS motor vehicle industry specialist at the agency's office in Grand Rapids, Mich., says the IRS does not comment on specific cases. But Zwiers said taxpayers like Estes have avenues of appeal if they disagree with their tax bill.
But Estes, 61, says he has spent more than $100,000 in legal and accounting fees the past six years. Now, he says, he does not have money to appeal.
So April 8 at the National Independent Automobile Dealers Association convention in Las Vegas, Estes wrote a letter to U.S. Rep. Henry Hyde, R-Ill., to get the congressman to intervene on his behalf.
The independent dealer association is lobbying to get the IRS to change its procedures. Independent used-car dealers who sell vehicles to customers with poor credit believe they are providing the only means of transportation these customers can afford. A compromise is in the works, but Estes fears it may come too late.
Two of three cars Estes sold the Saturday before he left for Las Vegas were to customers whose credit applications had been rejected by new-car dealers. He wrote in his letter to Hyde: 'What are these people supposed to do, go back on welfare?'
Bradford Wernle welcomes comments. Call him at (313) 446-0373 or send e-mail to [email protected]