Automobile dealerships are among the most regulated businesses in the U.S.

Just listen to the fast-talking legal qualifiers that takes place at the end of your radio ads or look at the brochures you are required to display in your showroom or put on your reading glasses to read the small print in your newspaper ads.

But these are just the tip of the dealership regulatory iceberg. NADA identified 56 federal regulatory issues last year that impact retail automobile dealerships. That is up from 47 three years earlier. These federal regulations impact virtually every department of a dealership.

Many large companies have entire departments whose sole purpose is to ensure the company's compliance with all applicable federal, state and local laws and regulations.

This is obviously not practical in the dealership environment. In a dealership, responsibility for total regulatory compliance is shared by the various departments, with specific duties assigned to each department manager.

Because of the problem of immediacy in the dealership environment, regulatory compliazcan result in severe penalties or fines. Ignorance of these regulations is not always a defense. Here are some questions you should consider:

How much of your money is at risk?

How do you check for compliance at your dealership?

Do you depend on your managers?

Or do you depend on an internal auditor or even your CPA firm?

Are those on whom you depend familiar with the regulatory issues in effect today?

Do they have (or take) the time?

When managers do desire to achieve compliance in their departments, they may find a lack of current, reliable information or perhaps a towering stack of regulations written in “legalese.” Gaining and maintaining compliance can be an overwhelming and daunting task for managers. Listed below are some of the regulations that impact dealerships today:

New vehicle sales

  • Federal Luxury Car Tax
  • American Automobile Labeling Act of 1992
  • Price Labeling Law/Monroney Sticker
  • FTC Guidelines for CAF…Advertising
  • NHTSA Reauthorization Act of 1992
  • Tax Treatment of Demonstrator Vehicles
  • IRS Cash Reporting
  • FTC Written Warranty Rule
  • Credit Card Acceptance Policies/Federal Truth in Lending Act

Used vehicle sales

  • FTC Used Car Rule
  • Price Labeling Law/Monroney Sticker
  • Truth in Mileage Act of 1986

F&I

  • FTC Credit Practices Rule
  • Fair Credit Reporting Act

Service, body shops

  • Clean Air Act
  • Comprehensive Environmental
  • Response, Compensation and
  • Liability Act of 1980 (Superfund)
  • Miscellaneous OSHA Workplace
  • Health & Safety Standards
  • Safe Drinking Water Act of 1986
  • Resource Conservation and
  • Recovery Act of 1976
  • Federal Underground Storage Tank Regulations
  • OSHA Hazard Communication
  • Standard (Right to Know)
  • CFC Recycling
  • Storm Water Contamination
  • NHTSA Rule on Air Bag On-Off Switches
  • OSHA Spray Booth Regulations

General management/Human resources

  • Americans with Disabilities Act
  • Family and Medical Leave Act of 1993
  • Title VII of Civil Rights Act of 1964
  • Immigration Reform & Control Act
  • Consolidated Omnibus Budget
  • Reconciliation Act of 1985 (COBRA)
  • Age Discrimination in Employment Act of 1967
  • Employee Drug Testing
  • OSHA Employee Emergency Plans and Fire Prevention Standards

There appear to be few solutions to this perplexing dealership problem. We certainly cannot expect the regulatory requirements to diminish over time. They will continue to grow in number, complexity and exposure.

The only solutions seem to be extensive training in this area for the general manager and the department managers or the use of outside consultants to evaluate compliance.

The objective of such an evaluation of compliance would be to review current policies, procedures, paperwork and record keeping for compliance with federal regulations, to recommend areas for review by legal counsel or other professionals, and to suggest various strategies for reducing risk.

Penalties for non-compliance can range from $1,000 to $100,000 per violation. Many dealers have so much exposure in some of these regulatory areas, it is difficult to understand how they sleep at night.


Don Ray is the president of the George B. Jones Companies, a national accounting and consulting group for retail automobile dealers. If you would like to know more about tax issues facing dealers, contact him at 800-323-6726 and donr@gbj.com.