Valdosta Daily Times

November 17, 2012

Vehicle ‘birthday tax’ abolished

New house bill to establish car title tax in 2013

Jason Schaefer
The Valdosta Daily Times

VALDOSTA — Tax officials from Lowndes County met with lawmakers in Savannah Wednesday to discuss Georgia House Bill 386, which will phase out ad valorem taxes on vehicles and replace it with a one-time title tax.

Parts of the new bill, which will take effect March 1, 2013, were difficult to understand without explanation, and lawmakers are still working out methods to phase the new law into action, according to Tax Commissioner Mary Nell Robertson.

“My head feels stuffed with information,” Robertson said.

Georgia residents currently pay a sales and use tax when they purchase a vehicle, and ad valorem taxes each time they renew their vehicle registration — also known as “the birthday tax.”

The new bill will abolish both of these tax structures and establish a one-time tax of 6.5 percent on the value of a vehicle each time its title changes hands after March 1, 2013, called a Title Ad Valorem Tax (TAVT).

The TAVT was designed to tax vehicles sold from owner to owner, a growing trend that makes it difficult for used car dealerships to stay in the market. Prior to HB 386, vehicle owners who sold their vehicles casually, without the middleman of a dealership, paid no sales taxes.

“The county and the state need the sales tax on cars,” Pipkins Motors Manager Ronny Ball said. “If they came into a dealership, they would have to pay it.”

Lobbyists for car dealerships were large proponents of the new bill to put a stop to casual owner-to-owner sales, or instances in which Georgia residents would go across state lines to Florida, for example, to save on taxes, Robertson said.

With the new bill in place, even casual owners and those who purchase vehicles in other states will be charged a sales tax when they buy Georgia license plates and registration.

Out-of-state residents who recently moved to Georgia will be responsible for 50 percent of the TAVT within 30 days of applying for a Georgia title, and 50 percent within the next year.

Once the TAVT is paid for a Georgia vehicle title, owners will still be required to annually register their vehicles in their home counties and pay a $20 renewal fee. The existing $18 title application fee will also remain in place when drivers purchase a Georgia title.

The TAVT rate will remain at 6.5 percent through Dec. 31, 2013, but it will increase to 6.75 percent Jan. 1, 2014 and again to 7 percent Jan. 1, 2015. The rate may be adjusted in the years after, but will never exceed a 9 percent tax rate, the bill states.

You can calculate the TAVT for your own vehicle using this formula: subtract the trade-in value from the “fair market value” of the vehicle; next, multiply this number by the TAVT rate.

Before the Savannah meeting, Robertson wondered how public schools, which had previously been funded in part through ad valorem vehicle taxes, would be funded under the new TAVT.

Robertson learned that the taxes levied through the TAVT will be broken into thirds to pay for different government programs—one-third for public and private school funding, one-third for the Local Option Sales Tax (LOST), and another third for Special Purpose Local Option Sales Tax (SPLOST).

Governments will be responsible for establishing how to divide LOST and SPLOST funds between cities and counties, Robertson said.

One concern that area car dealerships have with the new TAVT is that the tax responsibility for used cars will fall to them, rather than the owner. Law-makers are still working out the kinks of this issue, Robertson said.



Answers to FAQs:

Source: onlinemvd.dor.ga.gov

• House Bill 386 passed by the 2012 Georgia General Assembly will go into effect March 1, 2013.

• the Title Ad Valorem Tax (TAVT) rate will start at 6.5 percent March 1, 2013; it will increase to 6.75 percent Jan. 1, 2014; and it will increase again to 7 percent Jan. 1, 2015.

• the TAVT will not exceed 9 percent after Dec. 31, 2015.

• drivers who lease their vehicles will not be responsible for the TAVT; the leasing company will.

• non-titled vehicles that do not meet the statutory definition of a motor vehicle (trailers, pull-behind campers, any vehicle for which a title cannot be issued) will be taxed the annual ad valorem tax.

• salvage vehicles will be charged a 1 percent TAVT rate.

• the TAVT will not apply when a title is corrected, replaced or reissued to the same owner.

• vehicles acquired by veterans who would otherwise receive an exemption from ad valorem tax will also be exempt from the TAVT.