Connecticut Seal

General Assembly

File No. 253

    February Session, 2016

Senate Bill No. 3

Senate, March 29, 2016

The Committee on Transportation reported through SEN. MAYNARD of the 18th Dist., Chairperson of the Committee on the part of the Senate, that the bill ought to pass.

AN ACT CONCERNING THE LICENSING OF NEW AND USED CAR DEALERS.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 14-52b of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2016):

(a) In the event a manufacturer licensed in accordance with the provisions of section 14-67a, as amended by this act, cancels, terminates or fails to renew any franchise, as defined in section 42-133r, as amended by this act, with a new car dealer, as defined in section 14-51, as amended by this act, the Commissioner of Motor Vehicles, upon receipt of written notice of such action by the manufacturer, shall, unless the dealer holds one or more additional franchises, demand that such new car dealer surrender such license to the commissioner. If such action is contested by such dealer in accordance with the provisions of sections 42-133r to 42-133ee, inclusive, as amended by this act, the commissioner shall not demand surrender of such license, and no replacement motor vehicle dealer shall be named for the dealer's point or location, except in accordance with subdivision (10) of section 42-133cc, until the proceedings to contest such action by the manufacturer are finally determined after all means of administrative, judicial and appellate review have been exhausted and the decision is adverse to the dealer.

(b) Except as provided in subsections (c) [and (d)] to (e), inclusive, of this section, no person, firm or corporation licensed as a manufacturer in accordance with the provisions of section 14-67a, as amended by this act, may be the holder of a new or used car dealer's license issued in accordance with the provisions of section 14-52, except a manufacturer may operate as a dealer on a temporary basis in accordance with the provisions of subdivision (8) of section 42-133cc. The provisions of this subsection shall apply to any firm or corporation that is owned or controlled by a manufacturer, as determined by the commissioner. Any applicant for a new or used car dealer license that is denied a license under the provisions of this subsection shall be entitled to a hearing in accordance with the provisions of chapter 54.

(c) Notwithstanding the provisions of subsection (b) of this section, the commissioner may issue a used car dealer's license to a person, firm or corporation, owned or controlled by a manufacturer, engaged primarily in the business of rental of motor vehicles and industrial and construction equipment, provided: (1) Motor vehicles offered for sale by any such person, firm or corporation are limited to motor vehicles that have been previously used exclusively and regularly in the conduct of the business or motor vehicles traded in by purchasers of such previously used motor vehicles, (2) any warranty repairs performed by such person, firm or corporation are limited to motor vehicles that such person, firm or corporation owns, has previously owned, or has taken in trade, and (3) any retail financing provided or arranged by such person, firm or corporation is limited to vehicles sold by such person, firm or corporation.

(d) The commissioner may extend the period of a license issued to a manufacturer to operate a dealership on a temporary basis, in accordance with the provisions of subsection (b) of this section and subdivision (8) of section 42-133cc, for not more than one additional year, up to a maximum period of two years, if the commissioner is satisfied that such manufacturer has made and is continuing to make bona fide efforts to sell and transfer the dealership to a person, firm or corporation that is qualified to hold a new or used dealer's license.

(e) (1) For purposes of this subsection, "manufacturer" means a person, firm or corporation licensed as a manufacturer in accordance with the provisions of section 14-67a, as amended by this act, and any subsidiary, affiliate or entity owned or controlled by such manufacturer.

(2) Notwithstanding the provisions of subsection (b) of this section, the commissioner may issue a new or used car dealer's license to a manufacturer, provided such manufacturer (A) does not have any franchise agreement with any new car dealer in the state, (B) manufactures only electric vehicles, (C) sells at retail only motor vehicles manufactured by such manufacturer, (D) does not hold a controlling interest in another manufacturer, or a subsidiary, affiliate or entity owned or controlled by such other manufacturer, that is licensed as a dealer under this subsection, and (E) is not owned or controlled by another manufacturer, or a subsidiary, affiliate or entity owned or controlled by such other manufacturer, that is licensed as a dealer under this subsection.

Sec. 2. Subdivisions (1) and (2) of subsection (a) of section 14-51 of the general statutes are repealed and the following is substituted in lieu thereof (Effective October 1, 2016):

(1) "New car dealer" includes (A) any person, firm or corporation engaged in the business of merchandising new motor vehicles under a manufacturer's or importer's contract for each such make of vehicle, [who may, incidental to such business, sell used motor vehicles and repair motor vehicles. Such person] and (B) any person, firm or corporation licensed as a manufacturer, as defined in subsection (e) of section 14-52b, as amended by this act, that is engaged in the business of merchandising new motor vehicles and licensed as a new car dealer as provided in subsection (e) of section 14-52b, as amended by this act. Such person, firm or corporation may, incidental to such business, sell used motor vehicles and repair motor vehicles, and shall be qualified to conduct such business in accordance with the requirements of section 14-52a.

(2) "Used car dealer" includes (A) any person, firm or corporation engaged in the business of merchandising motor vehicles other than new, [who] and (B) any person, firm or corporation licensed as a manufacturer, as defined in subsection (e) of section 14-52b, as amended by this act, that is engaged in the business of merchandising motor vehicles other than new and licensed as a used car dealer as provided in subsection (e) of section 14-52b, as amended by this act. Such person, firm or corporation may, incidental to such business, repair motor vehicles. A used car dealer does not include any person, firm or corporation engaged in the business of leasing or renting motor vehicles that offers for sale or sells used motor vehicles incidental to its primary business, if [(A)] such person, firm or corporation is licensed in accordance with the provisions of section 14-15, and [(B)] the motor vehicles that it offers for sale were formerly the subject of one or more lease agreements to which it was a party and the actual or prospective purchaser is the original lessee pursuant to a purchase option specified in a lease agreement. Such person shall be qualified to conduct such business in accordance with the requirements of section 14-52a.

Sec. 3. Section 14-67a of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2016):

(a) No person, firm or corporation shall engage in the business of manufacturing motor vehicles for sale in this state without having been issued a manufacturer's license, which license shall expire biennially on the last day of June. Application for such license or renewal thereof may be made to the Commissioner of Motor Vehicles in such form as the commissioner shall require. The commissioner may require with such application all of the following, which [he] the commissioner may consider in determining the fitness of such applicant to engage in business as a manufacturer of motor vehicles for sale in this state:

(1) Information relating to the applicant's solvency and his financial standing;

(2) A certified copy of any warranty made by the manufacturer or any other party in whom title to such motor vehicle may have been vested prior to possession of such motor vehicle being transferred to a person licensed under the provisions of this section;

(3) [A] (A) Except as provided in subparagraph (B) of this subdivision, a copy of the applicant's standard franchise agreement and all supplements thereto, together with a list of the applicant's authorized dealers or distributors in this state and their [address] addresses. Such applicant shall notify the commissioner immediately of the appointment of any additional dealers or distributors or any revisions of or additions to the basic franchise agreement on file with [him] the commissioner, or of any individual dealer or distributor supplements to such agreement, and (B) the provisions of this subdivision shall not apply to any manufacturer licensed as a new or used car dealer pursuant to subsection (e) of section 14-52b, as amended by this act;

(4) A certified copy of the delivery and preparation obligations of the applicant's new car dealers, which obligations shall constitute such new car dealers' only responsibility for product liability between the dealer and the manufacturer;

(5) An affidavit stating the rates such applicant pays or agrees to pay any authorized new car dealer for parts and labor used and expended by such authorized new car dealer for the manufacturer under delivery and preparation obligations under the new car warranty;

(6) A biennial license fee of two thousand three hundred dollars, which fee shall not be subject to refund or proration; and

(7) Any other pertinent matter commensurate with the safeguarding of the public interest.

(b) An application for renewal of such license filed with the commissioner after the expiration date of such license shall be accompanied by a late fee of two hundred fifty dollars. The commissioner shall not renew any license under this section which has expired for more than forty-five days.

Sec. 4. Section 42-133r of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2016):

(a) As used in this section and sections [42-133r] 42-133s to 42-133ee, inclusive, unless the context indicates a different meaning:

(1) "Manufacturer" means any person who manufactures or assembles new motor vehicles, or imports motor vehicles for distribution to dealers or through distributors, or factory branches.

(2) "Distributor" means any person who offers for sale, sells or distributes any new motor vehicle to dealers or who maintains factory representatives or who controls any person, firm, association, joint venture corporation or trust, who offers for sale, sells or distributes any new motor vehicle to dealers.

(3) "Factory branch" means a branch office maintained by a manufacturer for the purpose of selling, or offering for sale, motor vehicles to a distributor or dealer, or for directing or supervising factory or distributor representatives.

(4) "Owner" means any person holding an ownership interest in a business entity operating as a dealer or under a franchise as defined in this section either as a corporation, partnership or sole proprietorship. To the extent that the rights of any owner under [sections 42-133r] this section and sections 42-133s to 42-133ee, inclusive, conflict with the rights of any other owner, such rights shall accrue in priority order based on the percentage of ownership interest held by each owner with the owner having the greatest ownership interest having first priority and succeeding priority accruing to other owners in the descending order of their percentage of ownership interest.

(5) "Dealership facilities" means real estate, buildings, fixtures and improvements which are used in the course of business under a franchise by a new motor vehicle dealer.

(6) "Dealer" means any person engaged in the business of selling, offering to sell, soliciting or advertising the sale of new motor vehicles and who holds a valid sales and service agreement, franchise or contract, granted by a manufacturer or distributor for the retail sale of the manufacturer's or distributor's new motor vehicles.

(7) "Motor vehicle" means a self-propelled vehicle intended primarily for use and operation on the public highways, other than a farm tractor or other machinery or tools used in the production, harvesting and care of farm products.

(8) "New motor vehicle" means a motor vehicle which has been sold to a new motor vehicle dealer and which has not been used for other than demonstration purposes and on which the original title has not been issued from the new motor vehicle dealer.

(9) "Established place of business" means a permanent, commercial building easily accessible and open to the public at reasonable times and at which the business of a new motor vehicle dealer, including the display and repair of vehicles, may be lawfully carried on.

(10) "Franchise" means a written agreement or contract between a manufacturer or distributor and a dealer which purports to fix the legal rights and liabilities of the parties to such agreement or contract, and pursuant to which the dealer purchases and resells the franchise product or leases or rents the dealership premises.

(11) "Good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.

(12) "Designated family member" means the spouse, child, grandchild, parent, brother or sister of an owner who, in the case of the owner's death, is entitled to inherit the ownership interest in the dealer under the terms of the owner's will, or who has been nominated in any other written instrument, or who, in the case of an incapacitated owner of a dealer, has been appointed by a court as the legal representative of the dealer's property.

(13) "Person" means a natural person, partnership, corporation, limited liability company, association, trust, estate or any other legal entity.

(14) "Relevant market area" means the area within a radius of fourteen miles around an existing dealer or the area of responsibility defined in a franchise, whichever is greater.

(15) "Commissioner" means the Commissioner of Motor Vehicles.

(b) The provisions of this section and sections 42-133s to 42-133ee, inclusive, shall not apply to any manufacturer licensed as a new or used car dealer pursuant to subsection (e) of section 14-52b, as amended by this act.

This act shall take effect as follows and shall amend the following sections:

Section 1

October 1, 2016

14-52b

Sec. 2

October 1, 2016

14-51(a)(1) and (2)

Sec. 3

October 1, 2016

14-67a

Sec. 4

October 1, 2016

42-133r

TRA

Joint Favorable

 

The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 17 $

FY 18 $

Resources of the General Fund

GF - Revenue Gain

Potential

Potential

Department of Motor Vehicles

TF - Revenue Gain

up to $10,000

up to $10,000

Note: GF=General Fund; TF=Transportation Fund

Municipal Impact: None

Explanation

The bill results in a potential revenue gain of up to $10,000 to the Special Transportation Fund by expanding car dealer license eligibility to additional manufacturers, which is dependent on the number of licenses issued by the Department of Motor Vehicles.

The bill also increases the potential sales tax revenue to the General Fund. The actual revenue gain in sales tax would be dependent upon any potential shift in consumer purchases from out-of-state to in-state purchases.

Connecticut requires sales tax to be paid on vehicles registered for less than thirty days in another state, upon registration of the vehicle in this state; however, Connecticut does provide credit for sales tax paid out-of-state if the registrant provides supporting documentation.

Of the adjacent states, Massachusetts is the only state that charges sales tax on the purchase of motor vehicles on nonresidents.1 Vehicle purchases from Massachusetts are therefore likely to qualify for the sales tax credit for out-of-state purchases. Any potential shift in sales from Massachusetts to Connecticut under this bill, would result in the full sales tax payment in Connecticut, rather than an out-of-state sales tax credit, and therefore may result in a potential revenue gain.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to the number of new or used dealers established in Connecticut.

OLR Bill Analysis

SB 3

AN ACT CONCERNING THE LICENSING OF NEW AND USED CAR DEALERS.

SUMMARY:

This bill allows a licensed motor vehicle manufacturer to sell the vehicles it makes directly to Connecticut consumers under certain conditions. It does so by authorizing the motor vehicles commissioner to issue a new or used car dealer's license to a licensed motor vehicle manufacturer that meets certain requirements.

Current motor vehicle law bars manufacturers from holding a new or used car dealer's license (see BACKGROUND) except that:

The bill also makes technical and conforming changes.

EFFECTIVE DATE: October 1, 2016

CRITERIA A MOTOR VEHICLE MANUFACTURER MUST MEET TO SELL DIRECTLY TO CONNECTICUT RESIDENTS

To qualify for a new or used car dealer's license under the bill, a licensed manufacturer:

The bill exempts a manufacturer who meets these qualifications from motor vehicle franchise laws (see BACKGROUND). One law from which it exempts a manufacturer licensed as a dealer under the bill assigns priority order of dealer ownership rights in cases where such ownership rights conflict.

Under the bill, a manufacturer is any person, firm, or corporation licensed as a motor vehicle manufacturer under state law and any subsidiary, affiliate, or entity it owns or controls. The bill expands the statutory definitions of new and used car dealers to include such a manufacturer and generally subjects the manufacturer to the rules governing these dealers. Under the bill, if a manufacturer is licensed as a new car dealer, it may also repair vehicles and sell used vehicles; if licensed as a used car dealer, it may also repair vehicles.

BACKGROUND

Motor Vehicle Franchises and Dealerships

Under the laws governing motor vehicle franchises, a motor vehicle manufacturer makes or assembles new motor vehicles or imports them for distribution to dealers or through distributors or factory branches. A dealer sells motor vehicles and holds a valid sales and service agreement, franchise, or contract with a manufacturer or distributor for retail sale of the manufacturer's or distributor's new motor vehicles (CGS 42-133r).

The motor vehicle franchise laws set out, among other things, the respective obligations of manufacturers and dealerships (CGS 42-133r to 42-133mm). They generally prohibit a manufacturer from unfairly competing with a dealer who (1) sells the manufacturer's “line make” of vehicles (e.g., Toyota or Ford) and (2) is operating under an agreement or franchise with the manufacturer (CGS 42-133cc (8)).

Motor Vehicle Dealer Laws and Regulations

Motor vehicle dealers are subject to laws governing vehicle licensing, registration, and recordkeeping, among other things.

The Department of Motor Vehicles (DMV) requires new and used car dealers to pay a biennial license fee of $700 and $560 respectively. New and used car dealers also must post a $50,000 cash or surety bond and comply with applicable state and federal laws. The commissioner may refuse to grant or renew a license if the dealer, an officer, or major stockholder has been convicted of violating any criminal laws pertaining to the business or certain other crimes such as fraud (CGS 14-52 & 52a).

Dealers must follow motor vehicle law regulations in such areas as use of dealer plates, record-keeping, motor vehicle guarantees, odometer readings, issuing vehicle registrations, and customer complaints (Conn. Agencies Reg. 14-63-1 et seq.).

Manufacturer

Under the motor vehicle statutes, a manufacturer generally is (1) a person, whether or not a Connecticut resident, engaged in the business of constructing or assembling new motor vehicles of a type required to be registered by the commissioner, for operation upon any highway, except a utility trailer, which are offered for sale in Connecticut, or (2) a person who distributes new motor vehicles to new car dealers licensed in Connecticut (CGS 14-1 (48)).

The law prohibits any person, firm, or corporation from engaging in the business of manufacturing motor vehicles without receiving a manufacturer's license, which expires biennially on June 30. Applicants for a manufacturer license must apply to DMV and pay a biennial license fee of $2,300 (CGS 14-67a).

COMMITTEE ACTION

Transportation Committee

Joint Favorable

Yea

29

Nay

4

(03/15/2016)

TOP

1 New York State does not currently tax purchases of motor vehicles by nonresidents. Rhode Island does not charge Connecticut residents on the purchase of motor vehicles.