State Laws on Direct-Sales

Kristy Hartman, Energy Program Director, kri[email protected]

Laura Shields, Energy Policy Associate, laura.shields@ncsl.org

Direct-Sales

In the past five years, a number of states have amended existing dealer franchise laws to either explicitly prohibit or allow for direct-sales of

motor vehicles within the state. Most enacted state law authorizing limited direct-sales appears to be narrowly tailored to apply to Tesla by

requiring that a manufacturer either have no existing franchise agreements in a relevant market area and/or have an existing direct-sales

operation. Recently introduced legislation has been trending toward providing for new manufacturers to engage in direct sales.

Most states that provide for the direct-sales model still require a manufacturer to obtain a dealer license or permit to be able to operate in the

state. Some states, like Utah, restrict the use of the direct-sales model to only those manufacturers that sell new non-fossil fuel powered

vehicles, like those that rely on electricity or hydrogen fuel. Other states, like Ohio, provide for the direct-sales model, but only for

manufacturers engaged in the market by a certain date and place a limit on the number of dealerships that direct-sale manufacturers may

operate within the state.

In some states, like Arizona, Tesla’s ability to sell vehicles through its direct-sales model is a result of a favorable judicial or administrative ruling

regarding the applicability of state law as opposed to changes in the statutory text. In these states, the question of whether manufacturers may

sell vehicles directly to consumers would likely be decided on a case-by-case basis. Other states, like Louisiana, have recently enhanced

protections for franchise dealerships by explicitly prohibiting direct-sales.

The chart below includes a summary of state action on direct-sales. At least 17 states have laws on the books that expressly ban direct-sales,

while at least 18 have laws that expressly allow for manufacturers to directly sell vehicles to consumers. Additionally, at least 9 states have laws

prohibiting all new direct-sales, while allowing for manufacturers already engaged in direct-sales in the state to maintain a certain number of

sales locations. Of those states that provide for direct-sales, at least 8 states tied their direct-sales provisions to a requirement that the

manufacturer exclusively sell non-fossil-fuel, electric, or zero-emission vehicles.

State

Source

Provides for

Direct-Sales?

Description

Alabama

Franchise Law

Ala. Code § 8-

20-4(3)(h)

Alabama’s franchise law prohibits manufacturers from selling or leasing new vehicles to

consumers. In 2016, proposed Senate Bill 22 would have amended Ala. Code § 8-20-4 to

provide for direct-sales of “alternative fuel vehicles,” but died in committee.

Alaska

Franchise Law

Alaska Code §

45.25.300

UNCLEAR

Could not identify any statutory provision that explicitly provides for or prohibits direct-

sales.

Arizona

Franchise Law

Ariz. Rev. Stat

Ann. § 28-4460

UNCLEAR

(limited

direct-sales)

State franchise law generally prohibits manufacturers from unfairly competing with motor

vehicle dealers. However, Arizona DOT granted Tesla a license to sell vehicles after an

Arizona administrative law judge determined that Ariz. Rev. Stat Ann. § 28-4460

governing manufacturer-dealer competition and discrimination does not apply to the

company. Although Tesla now has a license to sell vehicles in the state, it is unclear

whether other manufacturers that, like Tesla, do not have any franchise dealerships in

Arizona would be able to directly sell vehicles to consumers. Due to the licensing

structure and the lack of any explicit legal authority to engage in direct-sales, it is likely

that direct-sales decisions would be determined on a manufacturer-by-manufacturer

basis.

Arkansas

Franchise Law

Ark. Stat. Ann. §

23-112-403

Arkansas law prohibits manufacturers from engaging in direct-sales to consumers except

to their employees, charitable organizations and the federal government.

California

Franchise Law

Cal. Veh. Code §

11713.3

YES (limited

direct-sales)

California franchise law only prohibits manufacturers from competing with franchised

dealers selling the same line make in a particular market area. This provides for

manufacturers to engage in direct-sales so long as no existing franchise is engaged in the

sale of the same line make in the area.

Colorado

Franchise Law

Colo. Rev. Stat.

§ 44-20-126

YES

In 2020, the legislature enacted Senate Bill 167, which allows a manufacturer to own,

operate, or control a motor vehicle dealer if the manufacturer makes only electric motor

vehicles and has no franchised dealers of the same line-make. The law had previously

prohibited manufacturers from owning or operating a dealership, but allows for some

exceptions. In particular, the law does not prohibit a manufacturer from operating a

dealership if there are no other dealers selling “the same line-make” in the state. The law

had previously allowed for manufacturers to continue to operate an existing dealership

provided that the dealership was in operation on January 1, 2009, and had been in

continuous operation since then.

*Connecticut

Franchise Law

Conn. Gen. Stat.

§ 42-133cc

Dealer licensing

law

Con. Gen. Stat.

§14-52b(b)

Connecticut franchise law generally prohibits manufacturers from unfairly competing with

dealers with existing franchise agreements to sell the same line make in a relevant market

area. This could allow for limited direct-sales, however, relevant dealer licensing laws

prohibits manufacturers from obtaining dealer licenses to operate as a dealer. House Bill

7142 was proposed in 2019 to amend Con. Gen. Stat. § 14-52b to allow certain

manufacturers to engage in direct-sales, but ultimately failed. Under this proposed

legislation, to obtain a dealer license and engage in direct-sales, manufacturers must be

all-electric and could not have any existing franchise agreements within the state.

Delaware

Franchise Law

Del. Code Ann.

tit. 6 § 4901 et

seq.

UNCLEAR

Delaware franchise laws prohibit manufacturers from unfairly competing with new motor

vehicle dealers selling the same line-make and operating under a franchise agreement in

a relevant market area. It also prevents manufacturers from owning an interest in or

operating or controlling a dealership, except for instances of temporary ownership.

Florida

Franchise Law

Fla. Stat. §

320.645

YES (limited

direct-sales)

Under Florida law, manufacturers may engage in direct-sales of motor vehicles provided

there are no franchised dealerships selling such vehicles within the state.

Georgia

Franchise Law

Ga. Code. § 10-

1-664.1

YES

(limited/no

Under Georgia law certain manufacturers may engage in direct-sales if certain conditions

are met. In 2015, the Georgia General Assembly enacted House Bill 393 which was

narrowly tailored to provide for Tesla to engage in direct-sales in the state. Relevant law

new direct-

sales)

provides that a manufacturer may engage in direct-sales of motor vehicles at not more

than five locations so long as the manufacturer:

1) Had been selling motor vehicles in the state as of January 1, 2015;

2) Exclusively sells zero emission vehicles;

3) Has never sold its vehicles through a franchised dealer in the state; or

4) Acquired a controlling interest in a franchisor.

Hawaii

Franchise Law

Hawaii Rev.

Stat. §437-1 et

seq.

UNCLEAR

I could not identify a provision that expressly prohibits or allows manufacturers to engage

in direct-sales. Hawaii law employs a broad definition of vehicle dealer to include any

entity engaged in the sale of “three or more vehicles within a calendar year” that is not

expressly excluded by statute. A number of entities are excluded from Hawaii’s definition

of dealer, but vehicle manufacturers are not.

Idaho

Franchise Law

Idaho Code §

49-1601 et seq.

UNCLEAR

I could not identify a statutory provision that expressly provides for or prohibits direct-

sales.

Illinois

Franchise Law

Ill. Rev. Stat. ch.

815 § 710/4

UNCLEAR

(pending

legislation to

allow for

limited

direct-sales)

Illinois law prohibits manufacturers from operating as dealer franchises, but does not

appear to directly prohibit direct-sales. There is legislation pending (House Bill 2857) that

would expressly prohibit direct-sales, but provides for certain exceptions including for

those manufacturers that have a repair service center in the state, do not have any

existing franchise agreements, and had previously been granted new vehicle dealer

license.

Indiana

Franchise Law

Ind. Code § 9-

32-11-20

YES

(limited/no

new direct-

sales)

In 2017, the Indiana General Assembly enacted House Bill 1592, amending state law to

expressly prohibit direct-sales. However, the law effectively provides for Tesla to continue

operating in the state by creating an exception for those manufacturers that were

granted a license to sell vehicles before July 1, 2015 and established a service center in

the state prior to January 1, 2018.

Iowa

Franchise Law

Iowa Code §

322.3(14)

Iowa law prohibits manufacturers from being licensed as a motor vehicle dealer, or

owning an interest in, operating, or controlling a dealer.

Kansas

Franchise Law

Kan. Stat. Ann.

§ 8-2438

Kansas law prohibits manufacturers from owning or operating a new vehicle dealership.

This provision is included in Article 24 of the state’s code, which also includes provisions

related to franchise agreements.

Kentucky

Franchise Law

Ky. Rev. Stat. §

190.070

Kentucky law prohibits manufacturers from owning, controlling, or operating a vehicle

dealership.

Louisiana

Franchise Law

La. Rev. Stat.

Ann. §

32:1261(A)(1)(k)

In 2017, Louisiana enacted Senate Bill 107 explicitly prohibiting direct-sales.

Maine

Franchise Law

Me. Rev. Stat.

Ann. 10 § 1174

YES (limited

direct-sales)

Maine Law appears to provide for direct-sales under certain circumstances. State law

prevents manufacturers from owning or operating any dealership in any line make, unless

the state Motor Vehicle Franchise Board determines there is no independent dealer

available in the relevant market area.

Maryland

Vehicle

Business

Licensing Laws

Md. Transp.

Code Ann. § 15-

305

YES (limited

direct-sales)

Maryland’s dealer licensing law explicitly provides for manufacturers to obtain up to four

dealer licenses to engage in direct-sales if certain conditions are met, including that a

manufacturer exclusively sells non-fossil-fuel vehicles and has no franchised dealers

within the state.

Massachusetts

Franchise Law

Mass. Gen.

Laws Ann.

Ch.93B § 4

UNCLEAR

(limited

direct-sales)

Massachusetts law prohibits a manufacturer from owning a dealership. However, in a suit

challenging Tesla’s direct-sales in the state, the Massachusetts Supreme Court held that

state dealers lacked standing to sue because the provisions prohibiting direct-sales were

intended to prevent manufacturers from treating dealers unfairly and only applied when

a company already had an established dealer franchise in the state. Based on the

Supreme Court’s interpretation, manufacturers may be able to engage in direct-sales in

the state if certain requirements are met.

*Michigan

Franchise Law

Mich. Code

Ann. §

445.1574

UNCLEAR

(limited

direct-sales

for Tesla

only)

In 2014, Michigan enacted House Bill 5606, which prohibits manufacturers from selling

new vehicles directly to consumers and requires that sales occur through franchised

dealers. The law carves out an exception for nonprofit organizations and government

agencies. In early 2020, the state of Michigan settled a lawsuit with Tesla and the

resulting agreement allows for Tesla to sell vehicles directly to consumers and have those

vehicles serviced in the state.

Minnesota

Franchise Law

Minn. Stat. Ann.

§ 80E.13

UNCLEAR

(limited

direct-sales)

Minnesota law prohibits manufacturers from competing with franchised dealers selling

the same line-make in the state. In 2013, the Minnesota Department of Transportation

ruled that the state law did not prevent Tesla from becoming a licensed dealer in the

state.

Mississippi

Franchise Law

Miss. Code Ann.

§ 63-17-115

UNCLEAR

(limited

direct-sales)

I could not identify any provision expressly providing for or prohibiting direct-sales. State

law provides for manufacturers or distributors to own or operate new motor vehicle

dealerships, but prohibits such dealers or distributors from unreasonably discriminating

against another dealer with an existing franchise agreement in the same line or make.

Missouri

Franchise Law

Mo. Rev. Stat. §

407.826

UNCLEAR

(limited

direct-sales)

State law prohibits a franchisor from owning or operating a new motor vehicle dealership.

Tesla currently has a license to engage in direct-sales in the state and a Missouri appeals

court dismissed a challenge to their license on standing grounds. It is unclear whether

other manufacturers would be granted a license to engage in direct-sales in the state.

Montana

Franchise Law

Mont. Code

Ann. § 61-4-208

Montana law prohibits manufacturers from engaging in direct-sales.

Nebraska

Franchise Law

Neb. Rev. Stat.

§ 60-1438.01

NO (pending

legislation)

Under Nebraska law, manufacturers are prohibited from owning, operating, or acting in

the capacity of a new vehicle dealership. In 2019, Legislative Bill 51 was introduced

amending Neb. Rev. Stat. § 60-1438.01 to allow manufacturers without existing dealer

franchises to engage in direct-sales in the state. This bill failed.

Nevada

Franchise Law

Nev. Rev. Stat. §

482.36349

YES (limited/

no new

direct-sales)

Nevada law generally prohibits manufacturers from engaging in direct-sales, but exempts

manufacturers if certain conditions are met, including that the manufacturer exclusively

manufactures electric passenger vehicles, only sells vehicles that it manufacturers, and

was selling passenger vehicles in the state on or before January 1, 2016. Note that this

exception is narrowly tailored to apply only to Tesla and does not provide for new

manufacturers to engage in direct-sales.

New

Hampshire

Franchise Law

N.H. Rev. Stat.

Ann. § 357-C et

seq.; N.H.

Senate Bill 126

YES

In 2013, New Hampshire enacted Senate Bill 126 also known as the “Dealers Bill of Rights”

which among other provisions, explicitly provides for direct-sales of new vehicles. In

particular, S.B. 126 provides that manufacturers and dealers may sell vehicles within the

state so long as they are “licensed as a dealer” and “no dealer or other franchisee sells

and services the same line make in New Hampshire.” Note that SB 126 does not restrict

the type of vehicle (i.e. electric or gasoline-powered) that may be sold through a direct-

sales model.

New Jersey

Franchise Law

N.J. Rev. stat.

Ann. § 56:10-

27.1

YES

(limited/no

new direct-

sales)

In 2014, the New Jersey Legislature enacted Assembly Bill 3216 which provides for zero-

emission-vehicle manufacturers that were licensed to sell vehicles before January 1, 2014

to engage in direct-sales at up to four locations in the state. In 2019, Senate Bill 3493 was

introduced increasing the number of zero-emission vehicle manufacturer dealerships to

fourteen and the number of service centers to seven. This bill failed.

New Mexico

Franchise Law

N.M. Stat. Ann.

§ 57-16-5

New Mexico law prohibits manufacturers from becoming a licensed dealer or servicing

vehicles within the state. In 2019, Senate Bill 243 amending the prohibition on direct-

sales to create an exception for manufacturers that do not have any franchise dealers

within the state, was proposed, but ultimately failed.

*New York

Registration

Requirements

N.Y. VAT. Stat.

Ann. § 415

YES (no new

direct-sales)

(legislation

pending to

provide for

future limited

sales)

New York law generally prohibits direct-sales, but created an exception for manufacturers

that had obtained a registration certificate prior to March 26, 2014 provided that the

manufacturer exclusively manufactures zero-emission vehicles. Proposed Senate Bill 6299

would remove the prior certification requirement and would allow for manufacturers to

hold up to five certificates to engage in direct-sales. This bill is still pending.

North Carolina

Franchise Law

N.C. Senate Bill

384

YES

(limited/no

new direct-

sales)

In 2019, the North Carolina General Assembly enacted Senate Bill 384 which provides for

all-electric vehicle manufacturers to engage in direct-sales at five locations in 2020

increasing to six in 2021. However, this legislation does limit new direct-sales

manufacturers by requiring that a manufacturer have at least one dealership licensed in

the state as of January 1, 2019.

North Dakota

Franchise Law

N.D. Cent. Code

§ 39-22-24

North Dakota law prohibits manufacturers from owning or operating vehicle dealerships.

Ohio

Licensing

Requirements

Ohio Rev. Code

Ann. § 4517.12

YES

(limited/no

new direct-

sales)

In 2014, the Ohio General Assembly enacted Senate Bill 260 prohibiting the registrar of

motor vehicles from granting a dealer license to any new direct-sales manufacturers. In

particular, the bill provides that to engage in direct-sales a manufacturer must have been

selling or distributing vehicles in the state as of January 1, 2014. It also establishes a

three-store limit for manufacturers engaged in direct-sales.

Oklahoma

Franchise Law

Okla. Stat. tit.

47 §565(11)

(legislation

pending to

provide for

limited

direct-sales)

Pursuant to Okla. Stat. tit. 47 § 47-565, the Oklahoma Motor Vehicle Commission may

deny a license to a manufacturer seeking to engage in direct-sales. Senate Bill 790,

proposed in 2019, would allow manufacturers to engage in direct-sales provided that the

manufacturer has never had a dealer franchise in the state. This bill failed.

Oregon

Franchise Law

Ore. Rev. Stat. §

650 et seq.

UNCLEAR

(limited

direct-sales)

While Oregon law expressly prohibits manufacturers from competing with franchised

dealers, it is not clear whether a manufacturer, like Tesla, that does not have franchised

dealers in the state would violate the prohibition on competition. Tesla currently has a

license to sell vehicles in Oregon.

Pennsylvania

Franchise Law

Pa. Cons. Stat.

Ann. 63 §

818.310

YES

(limited/no

new direct-

sales)

In 2014, the Pennsylvania General Assembly enacted Senate Bill 1409, which authorizes

electric vehicle manufacturers to operate up to five dealerships provided there was no

existing dealer franchise selling their vehicles. Under this law, the manufacturer must

have continuously offered electric vehicles for sale for a year prior to the effective date of

the legislation.

Rhode Island

Franchise Law

R.I. Gen. Laws §

31-5.1-4

UNCLEAR

(limited

direct-sales)

Rhode Island franchise law prohibits manufacturers from competing with their own

franchise dealerships located within the state. Based on a plain reading of R.I. Gen. Laws §

31-5.1-4, a manufacturer without any existing dealerships in Rhode Island could be

allowed to engage in direct-sales.

South Carolina

Franchise Law

S.C. Code Ann. §

56-15-45

South Carolina franchise law prohibits manufacturers from owning or operating a new

vehicle dealership. Note that in 2019, Senate Bill 379 was introduced to exempt electric-

vehicle-only manufacturers from the state’s ban on direct-sales. This bill is pending.

South Dakota

Franchise Law

S.D. Codified

Laws Ann. § 32-

6B-80

South Dakota law prohibits manufacturers from owning or operating a vehicle dealership.

Tennessee

Franchise Law

Tenn. Code

Ann. § 55-17-

114

UNCLEAR

(limited

direct-sales)

Tennessee law prohibits manufacturers from competing with dealers selling the same

line-make under a franchise agreement. It is unclear whether manufacturers, like Tesla,

that engage in direct-sales and do not have any franchise dealerships in Tennessee would

be in violation of state law.

Texas

Franchise Law

Tex. Occ. Code

Ann. § 2301.476

Texas law prohibits manufacturers from owning, operating, or acting in the capacity of a

franchised or non-franchised dealership.

Utah

Dealer

Licensing/

Franchise Law

Utah Code Ann.

§43-3-101 et

seq.; House Bill

369

YES

In 2018, Utah enacted House Bill 369, amending state law to provide for a direct-sale

manufacturer license. Utah’s definition of a direct-sale manufacturers includes only those

manufacturers that sell exclusively new electric, hydrogen fuel cell, or other vehicles

fueled by “another non-fossil fuel sources.” Utah law also restricts qualifying direct-sale

manufacturers to those manufacturers that are located in the United States and are not

franchise-holders.

Vermont

Franchise Law

UNCLEAR

Vermont law prohibits manufacturers from competing with dealers in the same line-make

under a franchise agreement. It is unclear whether manufacturers, like Tesla, that engage

Vt. Stat. Ann.

tit. 9 § 4097

in direct-sales and do not have any franchise dealerships in Vermont would be in violation

of state law.

Virginia

Franchise Law

Va. Code. §

46.2-1572

YES (limited

direct-sales)

Virginia law generally prohibits manufacturers from owning, operating or controlling a

motor vehicle dealership, but does provide for some exceptions. In particular, if after a

hearing, the state Department of Motor Vehicles Commissioner determines that there is

no dealer other than the manufacturer available to operate a franchise in the area, then

the manufacturer may engage in direct-sales. Tesla has utilized this process to engage in

direct-sales in the state.

Washington

Franchise Law

Wash. Rev.

Code §

46.96.185

YES

(limited/no

new direct-

sales)

Washington law generally prohibits direct-sales, but allows for “final-stage

manufacturers” to own or operate a dealership and provides for manufacturers that

obtained a dealer license in Washington prior to January 1, 2014 to operate a new vehicle

dealership that exclusively sells the manufacturer’s makes that are not sold by a

franchised dealer.

West Virginia

Franchise Law

W. Va. Code.

§17A-6A-10

West Virginia law prohibits a manufacturer from operating or acting in the capacity of a

new vehicle dealer. House Bill 2219 authorizing certain manufacturers to engage in direct-

sales was introduced in 2019, but failed. The proposed bill was narrowly-tailored to apply

only to Tesla in requiring that a manufacturer be in production since 2008 and exclusively

manufacture zero-emission vehicles.

Wisconsin

Franchise Law

Wis. Stat. Ann.

§ 218.0121(2m)

Under Wisconsin law, manufacturers are prohibited from owning, operating, or

controlling a vehicle dealership in the state. Assembly Amendment 1 to the 2019 state

budget (AB 56) would have allowed electric-vehicle manufacturers without existing

franchise agreements to engage in direct-sales, but was vetoed by Governor Evers before

the budget was signed into law.

Wyoming

Franchise Law

Wyo. Stat. § 31-

16-101; Senate

File 57

YES

In 2017, Wyoming enacted Senate File 57, amending Wyoming law to explicitly provide

for direct-sales of vehicles within the state. The law requires direct-sale manufacturers to

obtain a license from the state Department of Transportation prior to operating within

the state. Although Wyoming’s direct-sales law does not mention Tesla specifically, it

prevents manufacturers that have sold new vehicles through dealerships from

transitioning to a direct-sales model. See Wyo. Stat. § 31-16-101, the definition of direct-

sales manufacturers does not include “an affiliate or wholly owned subsidiary of a

manufacturer’s line make that is presently sold or has previously been sold in [the] state

through a new vehicle dealer.”