Everett, Wash.
Published: Friday, December 5, 2008

Thousands of people wrongly taxed for transit

A Snohomish woman is suing Sound Transit, which collected over $3 million from people outside its boundaries

By Bill Sheets
Herald Writer

 A Snohomish woman has filed a class-action lawsuit to force Sound Transit to refund more than $3 million in taxes on cars and trucks wrongly charged to people in three counties.

The transit agency plans to send refunds within two months to thousands of people in Snohomish, King and Pierce counties who paid the tax, though they do not live in the district where the tax is assessed.

Sound Transit received as much as $3.5 million in payments from people who live outside the district's boundaries between June 30, 2005 and to July 1 of this year, agency spokesman Geoff Patrick said.

The problem occurred because of deficiencies in the computer systems that determine which addresses are inside the district and which ones are outside, said Brad Benfield of the state Department of Licensing.

Motor-vehicle excise taxes were mistakenly paid about 95,000 times during the three years. Some people might have paid the tax more than once, and on more than one vehicle, so it's uncertain exactly how many taxpayers are involved, Patrick said.

The excise tax is 0.3 percent, or $30 per $10,000 of vehicle value at the time of purchase. The average tax payment is slightly less than $30, Patrick said.

In addition to asking that those who wrongly paid the tax be reimbursed, Rachel Ogle of Snohomish also seeks in her lawsuit that the system be fixed so the error doesn't occur again, said her attorney, Mike Myers of Seattle.

Sound Transit and the licensing department say they are working to upgrade their computer systems.

The errors were brought to the attention of Sound Transit and the licensing department last summer by the state Auditor's Office following a complaint, Patrick said. Ogle filed her suit in King County Superior Court in August.

"Seeking an individual refund doesn't address the problem," Myers said. "Without court supervision, these agencies are going to continue to study the problem and it's not going to be fixed."

Depositions have been taken in the case, but it has yet to go to trial.

The tax, which supplements sales taxes to pay for Sound Transit bus and rail operations, is supposed to be paid only by people who live in certain urban areas of Snohomish, King and Pierce counties. The northern boundary of Sound Transit's district is the northern tip of Everett.

Sound Transit officials are still working to nail down who has refunds coming to them and is aiming to get the payments sent out within the next two months, Patrick said.

Benfield of the Department of Licensing said the problem arose because some addresses have ZIP codes included in the district even though the residences are not in the Sound Transit district.

In cases where it couldn't be determined whether an address was inside or outside the district, the resident was sent a tax bill printed with a notification that they could take it to their nearest licensing office and have the charge removed if they were not in the district.

This was thought to be a tiny number of people, officials said.

"The rate of error far exceeds anything that Sound Transit or the Department of Licensing previously knew about or expected," he said.

For whatever reason, many people paid the tax anyway, Patrick said.

Now, the technical staffs for both agencies are working on their systems and on the coordination between the two, officials said.

"We've made improvements to the way addresses inside the Sound Transit district are reported to us," Benfield said. "We're going to match up a much, much higher number of them" with Department of Licensing records, he said.

"We've been working very diligently to correct this as quickly as possible."

Myers is skeptical.

"If the agencies demonstrate that they're incapable of fixing these problems and these processes then the court could order someone else to do it," he said.

Reporter Bill Sheets: 425-339-3439 or sheets@heraldnet.com.
© 2009The Daily Herald Co., Everett, WA