For years, California auto dealers have struggled to meet the requirements of the State’s Tire Recycling Act. The current law requires sellers of new tires to collect a fee of $1.75 for each tire sold. The Act has posed an undue burden on many dealers and has subjected some to lawsuits for improperly charging customers. Since only new tires are subject to the fee, dealers must determine whether a new vehicle has a spare tire or dual rear tire and whether used vehicles had new tires installed prior to a sale. Liability and audit costs have become a problem for many dealers – leading to the introduction of AB 1981.

AB 1981 seeks to mitigate a dealer’s liability when it comes to tire fees and simplify an overly burdensome process. For new vehicle dealers, the bill replaces the existing per tire fee with a “vehicle tire” fee of $10.50. That fee would be applied to every new vehicle sold before January 2015, after which the fee is reduced to $5.50. In addition, the bill exempts used vehicles sold by a new car dealer from any tire fee. The legislation specifies that the fee be listed separately from the tire fee on the conditional sale or lease agreement. Finally, the bill distributes the funds raised by the fee be split between the Tire Recycling Management Fund and the Air Pollution Control Fund.

The legislation is not without its detractors. Certain groups remain opposed to the bill, arguing that economic conditions could cause an increase in used car sales, resulting in insufficient funds for the state’s tire recycling program. While the opposition failed to prevent the bill from moving through the Assembly, passage in the Senate might require a heavier lift. The bill is currently awaiting consideration by the Senate Environmental Quality Committee; please be assured that we will continue to monitor the progress of this important legislation.