In April of 2007, I was involved in a six-car pileup on the freeway. I was car five of six. Emergency services were required for the driver of the vehicle in front of me. The remainder of the individuals involved were able to walk or drive away from the accident. As you’d imagine with an accident of this nature, there was much wrangling with insurance companies. Except for the driver behind me – she didn’t have car insurance. As a result, damages to my car, which was totaled, were not covered. I won a judgment against the driver in the car behind me, and had the opportunity to obtain restitution. But, “blood from a turnip” was a piece of advice that stuck with me. My insurance company covered damages to the vehicle immediately in front of me, and the claims were closed in the middle of 2007. Or so I thought.

Fast forward two years to April of 2009. I receive correspondence addressed to “whom it may concern” from the local municipality that provided emergency services. The correspondence explains Minnesota Statute § 415.01, subd 2, allows cities to charge for emergency services to non-residents if they pass a city ordinance authorizing such action. If payment is not received within 30 days, Minnesota Statute § 366.011 provides a city may use lawful means to collect the debt, and Minnesota Statute § 366.012 provides a city can certify unpaid amounts against real property owned by the debtor. The correspondence goes on further to explain that such an ordinance was passed by the city in January of 2007 and provides that each party in an accident shall pay $350 per hour per fire department vehicle. Within the correspondence is a bill for $350 for a “Fire Service Billing” and a suggestion to submit a claim to my insurance company.

Needless to say, I was not happy. I didn’t yell or scream, rather I took the high road and wrote a letter to the city fire chief explaining my position. I did this within a week of receipt of the initial correspondence. I explained that I received no emergency services, and that in fact, I was not approached or assisted by the fire department, and that I suffered no injuries in the accident, and my vehicle was not at risk of fire. I also explained my belief that billing over two years after an accident was not fair nor equitable governance by the city, and that the suggestion to submit a claim to my insurance company two years after the claim was laughable. I further suggested that six vehicles times $350 per vehicle resulted in $2,100 collected for a six vehicle accident that involved no fire, no threat of fire, and a single injury (read back surgery aggravated). I explained I found it difficult to understand how the fee was equitable when the fire department provides similar services and often more services to most in the city through annual property taxes of less than $2,100.00 per year alloted to fire services.

I did not hear from the city, and believed they had reviewed my correspondence and decided that my position was correct, and I should not be assessed the $350. Imagine my surprise this morning, when I received notice that the city would be increasing the fee to $510, and assessing the full amount against the real estate where I live. I immediately wrote to the fire chief and the city administrator via email expressing my disbelief that they did not reply to my correspondence, and instead increased the fee and were going to assess the property where I live. I also explained that they were assessing property that I did not own, but rather were assessing property in which I am a tenant. Interestingly enough, the property is owned by a local law firm [imagine the letter they wanted to send to the city]. The fire chief responded to my email and said that they city’s position is that even though over two years passed, there was not a statute of limitations and I was a party at the scene and “it was determined by the responders through a visual observation or verbal contact with you that you were ok, however we did respond, we did check on you, and the city incurred an expense providing a response.” My thought: I’m glad that you responded, but to send me a bill for $350.00 to visually observe me standing in the ditch of a freeway (they didn’t get within 50 feet of me), and mentally note I looked okay seems excessive. The position of the city is that I received a service (they looked at me apparently from 50 feet away), and thus am responsible for payment of the fee.

In reading the Minnesota Statutes and the City Ordinances, the city is correct in their position. I did receive the service (if you call visual observation from over 50′ away service), and they are within their rights to charge me a fee for this service. I have since written to the finance director of the city to arrange removal of any assessment against real estate not owned by me (interestingly, the city assumed that since I live in a house, I must own the property), to arrange a reduction in the fee to the $350 (which was increased by my non-payment predicated by their non-response to my dispute), and to arrange my payment.

I’m still quite perturbed by this situation, and still am tossing around the idea of taking the city to small claims court. It seems a person can get in an accident, be seen from a distance at the scene of the accident by emergency personal, and receive a bill for services rendered in the amount of $350. To make matters better, it’s all within the rights of the city. However, it sure seems like a financial fishing trip by the city. If I would have received the invoice within a timely manner (say 90 days), I certainly would have been more willing to make full payment. However, two years later? If I pulled a stunt like that in our business, I’d be out of business in no time at all.

The bad news is that I’m going to be $350 lighter thanks to the city. The good news is that I’m now familiar with this practice, and have vowed that I will do something about it. My plan is to work directly with my State Representative and State Senator to get the statute amended to include language that claims for emergency services rendered must be made within 90 days by the agency providing said services. I’m not sure what the results will be, but it’s ridiculous that a city can send an invoice for an accident that occurred over two years ago.

In the State of Minnesota the sale of real estate is regulated by the Minnesota Department of Commerce. Specifically, Minnesota Statutes Chapter 82 Real Estate Brokers and Salespersons speaks to the sale of real estate. In Minnesota, auctioneers are allowed to sell real estate at auction without being a licensed real estate salesperson or broker. This power is provided in Minnesota Statutes § 82.23 Exceptions which states in part:

Unless a person is licensed or otherwise required to be licensed under this chapter, the term real estate broker does not include:

(h) any person who acts as an auctioneer bonded in conformity with section 330.02, when that person is engaged in the specific performance of duties as an auctioneer, and when that person has been employed to auction real estate by a person licensed under this chapter or when the auctioneer has engaged a licensed attorney to supervise the real estate transaction;

Based on the statute, in the sale of real estate at auction, you are allowed only to engage in the specific performance of duties as auctioneer (i.e. calling bids to find a high bid), and may only do so when employed by a real estate broker or salesperson or the transaction is supervised by an attorney. Any activities beyond this would need licensure as a real estate sales person or broker.

In conjunction with the above, I was recently asked by another state to clarify the state’s position on bidding for the seller. In Minnesota, auctioneers are regulated by the Uniform Commercial Code which has been codified in state law as Minnesota Statutes § 336.2-328 Sale by auction which states in part:

(4) If the auctioneer knowingly receives a bid on the seller’s behalf or the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved, the buyer may either avoid the sale or take the goods at the price of the last good faith bid prior to the completion of the sale. This subsection shall not apply to any bid at a forced sale.

The statute is very clear that before making or procuring such a bid, notice must be given that liberty for such bidding is reserved. Without notice, there are severe complications. Our company does not bid for the seller in real estate auctions. We present the highest and best offer to the seller, and if not satisfactory, enter into a closed negotiation with the high bidder and the seller. Far too often, we have experienced sellers that prior to auction were firm in their reserve price, but upon the conclusion of the auction are much more willing to accept the high bid even though lower than their reserve price.

In fact, within the past several years there was litigation brought against an auctioneer by a bidder at auction. The auctioneer was bidding on the property on his own behalf without disclosure or notice that liberty for such bidding was reserved. The auctioneer was the high bidder, and purchased the property. However, the back-up bidder won a judgment in excess of $400,000 against the auctioneer for not reserving the right to bid. There are deeper legal implications in a situation where an auctioneer bids on his own behalf at auction (i.e. auctioneer acting as agent for seller, yet buying on his/her own behalf (possibly construed as self dealing)) that I’ll address at a later time.

Simply put, an auctioneer is not required to a be a licensed real estate broker or salesperson in the State of Minnesota. However, to best serve and fully represent his/her client, it is recommend practice that an auctioneer selling real estate in Minnesota be a licensed real estate broker or salesperson.

This is a hot topic in the State of Minnesota. As recently as a few years ago, the Minnesota Department of Revenue began to audit auction companies for compliance with sales tax laws. The audits were not completed uniformly, and different standards were applied. As a result, the Minnesota State Auctioneers Association has had numerous seminars on the topic. Even today, it continues to be a often discussed topic. The question above was most recently addressed to me in an email.

I understand that if selling for a business that would have charged tax, I need to collect on their items. However, it is unclear if I am selling for people downsizing, left over estate items for the deceased or someone just cleaning house…

I am under the understanding from the MSAA that tax MUST be collected on this type of sale. Yet the first response I recieved from the state tells me I do not have to collect sales tax.

There are two other auction houses within 30 miles of mine and they are not collecting tax. I am and this is creating a conflict with my customers.

Minnesota has rules governing the collection of sales tax. The particular area that applies to auctions of personal property is: Minnesota Administrative Rules 8130.5800 ISOLATED OR OCCASIONAL SALES AND SALES OF PERSONAL PROPERTY USED IN TRADE OR BUSINESS.

The answer from the state is correct – but only to a point. They are correct that tax is generally not collected in instances where you are selling for that seller and only that seller (an auction by their definition) not at consignment auction. However, regularly scheduled consignments auctions are not considered auctions (I know it sounds crazy – but that’s the law – see Rules 8130.5800 Subp. 10 B.), and are instead considered consignment auctions. As a result, Subp 10 applies.

Subp. 10. Consignment sales and consignment auctions.
A. For purposes of this part, consignment sales are sales in which a retailer maintains a place of business where tangible personal property owned by others is sold by the retailer in the normal course of business. The retailer may also sell property owned by the retailer. A consignment sale is not an auction, as defined in subpart 8.

B. Consignment auctions are events that are regularly scheduled, are open to members of the public to sell their items, and are held at the same location. Consignment auctions are not selling events, as provided under Minnesota Statutes, section 297A.87. Consignment auctions are not auctions, as defined in subpart 8.

C. The sale of items held in inventory, taxable services, and property primarily used in a trade or business is generally subject to tax, as provided in Minnesota Statutes, section 297A.68, subdivision 25.

D. Consignment sales and consignment auctions are exempt from tax if:

(1) the title to the property passes directly from the owner to the buyer;

(2) the payment does not pass through any accounts of the retailer or auctioneer;

(3) the retailer or auctioneer does not carry insurance on the property; and

(4) the rights to accept or reject any offer are retained by the owner.

If all four of the exceptions apply at consignment auction, you are not required to charge tax. If an auctioneer fails to meet any of the four, tax is required to be collected. Of course, there are exemptions that the buyer can have – and most require them to have a tax id number, and all require them to complete an exemption form.

To answer your question, if it’s a regularly scheduled consignment auction, tax should be charged. If is a stand alone auction for a seller, tax is not required to be charged if it meets the exemption explained in the correspondence from the state. In fact, our company has taken the collection one step farther, and collect sales tax on all consignment auctions. We have found the term regularly scheduled to be unevenly applied, and find it financially prudent to charge tax on all consignment auctions rather than risk an audit, and assessment of unpaid sales tax.