The sale of motor vehicles in the State of Minnesota is regulated by Minnesota Statutes § 168.27 and Chapter 7400 of the Minnesota Administrative Rules. The statute is clear on the requirements of an auctioneer concerning the sale of motor vehicles. Minnesota Statute § 168.27 indicates in part:
Subdivision 1a. (b): No person shall engage in the business of selling used motor vehicles or shall offer to sell, solicit, deliver, or advertise the sale of used motor vehicles without first acquiring a used motor vehicle dealer license.
This is very clear, and takes all auctioneers (and all persons) out of the business of selling used motor vehicles. There are exceptions that allow the sale of motor vehicles without licensure that come later in the statute.
Subdivision 1a. (h): No person shall engage in the business of auctioning motor vehicles for more than one owner at an auction or shall offer to sell, solicit or advertise the sale of motor vehicles without first acquiring a motor vehicle auctioneer license.
This is very clear that no auctioneer can sell, solicit or advertise the sale of motor vehicles for more than one owner at auction.
Subdivision 5a: No person may solicit, accept, offer for sale, or sell motor vehicles for consignment sale unless licensed as a new or used motor vehicle dealer, a motor vehicle wholesaler, or motor vehicle auctioneer. This requirement does not apply to a licensed auctioneer selling motor vehicles at an auction if, in the ordinary course of the auctioneer’s business, the sale of motor vehicles is incidental to the sale of other real or personal property. Incidental means up to a total of ten but no more than ten percent of the items in the posted auction bill are motor vehicles.
In this subdivision lies the loophole. This statute exempts an auctioneer from Subd. 1a.(h) (which states an auctioneer shall not sell, solicit or advertise the sale of motor vehicles for more than one owner at auction) provided no more than ten percent of the items on the auction are motor vehicles.
While the letter of the law indicates by selling ten times the number of smaller items as compared to the motor vehicles, an auctioneer is exempt from motor vehicle licensure. I believe the spirit of the law would preclude an auctioneer from doing so. In addition, many auctioneers (many of whom are auto dealers and many who are not) have commonly held that you may not sell for more than one seller at any given time. This statute seems to go against that belief. That said, I am familiar with enforcement actions against auctioneers for selling for more than one seller, and for selling more than ten vehicles at a large one-owner auction.
It is quite easy to take the exception from this subdivision at its surface value. However, when reviewed in the entire scope of the statute, I believe the court would hold that an auctioneer conducting a large consignment auction with 50 vehicles, and 500 other lots, would be subject to licensure, as the spirit of the law in several places appears to preclude an auctioneer from doing so. However, as you notice, the letter of the law can be read quite different. Furthermore, my understanding is the State of Minnesota dealer licensure division is interpreting the exception to the letter of the law saying you may sell a number of motor vehicles up to ten percent of the total items on the auction bill, rather than to the spirit of the law.
Subdivision 8. (b) in part: Isolated or occasional sales or leases of new or used motor vehicles are exempt from this section…. “Isolated or occasional sales or leases” means: … (3) sales by a licensed auctioneer selling motor vehicles at an auction if, in the ordinary course of the auctioneer’s business, the sale of motor vehicles is incidental to the sale of other real or personal property.
Again, the exemption granted in Subd. 5a. is stated. Previously the definition of incidental was given – up to a total of ten but no more than ten percent of the items in the posted auction bill being motor vehicles.
However, I again argue, the spirit of the law should be considered. While one may argue that the letter of the law allows 50 vehicles from 50 different sellers so long as there are 500 other non-motor vehicle items to be sold and listed on the auction bill, I do not believe the intent of the law was for such an event to occur.
I have also reviewed the applicable Minnesota Administrative Rules and there does not seem to be any further clarification. A call to motor vehicle licensure department confirmed that the letter of the law is being enforced in many instances, rather than the spirit of the law.
While this loophole exists, and I believe it needs to be closed, I have mixed feelings on the matter.
I. If the motor vehicle licensure department is indicating the auctioneer seeking consignments, and selling motor vehicles is acting within the letter of the law so long as no more than ten percent of the items are motor vehicles, should we as an association be pushing for closure of the loophole?
II. I believe the auctioneer is not acting in good faith, or within the spirit of the law. When reading the statute, it seems clear the intention was to disallow auctioneers from conducting regular consignment auctions of vehicles without being subject to the dealer license laws. This makes sense to me on several levels including matters of liability, bonding, sales and transfer taxes, and insurance.
III. I do not believe the board or executive committee can act without the direction of a majority of the membership. To lobby for a law change when the state is accepting of the position is not, in my opinion, within the board’s power. That said, if legislation were proposed or the membership desired the loophole closure, the association would need to take a position on the topic, and could then begin the necessary lobby efforts. This is a reactive approach and quite the opposite of how I would like to proceed. I would much prefer to head off any troubles prior to them beginning. However, it is best either to wait for legislation from outside the structure of the association, and to respond at that time, or to pursue closure of the loophole at the direction of the membership.
IV. I am aware of many auctioneers in the State of Minnesota who also hold their motor vehicle dealer license. They are acting in good faith, and should not be subject to competition from others who are not acting in good faith and are circumnavigating the intent of the statute.
V. I believe revision of the definition of incidental from “Incidental means up to a total of ten but no more than ten percent of the items in the posted auction bill are motor vehicles” to “Incidental means up to a total of ten motor vehicles” would sufficiently remove the loophole.