Think you know everything about doc fees?
Document fees can be a steady source of revenue and should cover the administrative costs of completing a vehicle sale. We know that doc fees are legitimate out-of-pocket expenses, but in the absence of state imposed limits on these fees (which is the case in about 40 states), some dealers have pushed this cost higher than the courts have allowed. These rulings can be extremely costly, as seen in large doc fee settlements.
Understand the doc fee limits in your state
If you operate in one of the ten or so states that do put a cap on doc fees, be certain that you understand the limits and don’t exceed them. It’s not always as simple as finding a dollar limit. For example, the maximum allowable doc fees in Ohio are the lesser of $250 or 10% of the vehicle purchase price. While it may not get you in trouble very often, you wouldn’t want to get in the habit of sticking $250 in doc fees on each vehicle sold in Ohio. Watchdog groups have taken a particular interest in doc fees so the best practice is to double check that you are in compliance.
Also remember that doc fees are subject to gross receipt taxes where they exist. For example, in Ohio these fees are included in the calculation of Commercial Activity Tax (otherwise known as CAT). Again, the best practice is to be certain that these numbers are included in gross receipt tax calculations.
Doc fees may seem like a small issue, but it is the accumulation of small things that can make or break a dealership’s profitability. The Dealership Advisors Team at Brady Ware understands the leverage points that can make your dealership more profitable and allow you to keep more of your earnings in the dealership.
To learn how we can help your dealership prosper, contact Sam Agresti, Brady Ware’s Dealership Advisors Team Leader, at 614.384.8410 or sagresti@bradyware.com.
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