A new Georgia car tax beginning next month will elminate yearly vehicle property taxes for future car buyers.
The new title ad valorem tax law will apply to all vehicles purchased after March 1, which will no longer be subject to annual ad valorem tax. Instead, those vehicles receive a one-time fee that will need to be paid before a title is issued.
“It touches every group in a different way,” said Troup County Tax Commissioner Gary Wood. “But the people most affected by this is casual sales, leased vehicles and people moving in from out of state.”
The tax is to be paid at the time the owner registers and applies for the vehicle, and sales tax will not be applied to the purchase of the vehicle. The one-time title ad valorem tax is calculated at 6.5 percent of the vehicle’s value, not the sales price, as defined by the Department of Revenue’s motor vehicle ad valorem assessment manual. When there is no value available in the manual, the higher of either the bill of sale or a reputable used car market guide will determine the value.
For cars purchased with trade-ins, the 6.5 percent title tax will be applied to that amount after the trade-in car’s value is deducted from the purchasing car’s value.
Essentially this means that the cost to title a vehicle is going to be higher than what it may have been previously, but buyers will not have to pay a sales tax if they purchased the car through a dealership, and they will not have the annual ad valorem tax to pay every year.
At any point that a title is being transferred after March, they will have to pay the title ad valorem tax.
If a car is purchased from someone outside of a dealership, the buyer will have to pay the 6.5 percent title tax, instead of the normal $38 for the tag and title.
Vehicles transferred from another state to Georgia will be subject to the title ad valorem tax in two installment payments, in addition to the title and registration fees that they were responsible for in the past.
Wood said that law enforcement officers will play a big role in getting this done.
“There will be a tremendous amount of revenue loss if law enforcement does not catch the out of state tags,” Wood said. “It’s their job to do so.”
People moving from out of state have 30 days to register their vehicle to the state of Georgia and Wood said that it is also the job of residents to call law enforcement when they observe that a out of state tag has been at residence for more than 30 days.
The title tax will most likely have a greater effect on leased vehicles.
The dealership is responsible for paying the title ad valorem tax, and may likely include this cost in the term of the lease, thus making it more pricey for leasees. Wood said that dealerships will more than likely factor the 6.5 percent title fee into the leasee’s monthly payments, plus they will be paying the sales tax on the car, since the title will not be in the leasee’s name. In the long run, if the leasee decides to purchase the car, they will have to pay the 6.5 percent title tax to take over the title from the dealership.
In the case that vehicle titles are transferred between family members — applying only to spouses, parents, children, siblings grandparents or grandchildren — the family member who is titling the vehicle has the option to pay the full ad valorem tax or continue to pay the annual ad valorem tax under the old system if the vehicle was bought before March 1. For vehicles purchased after March 1, the family member that will be titling the vehicle is only subject to a 0.5 percent title ad valorem tax only if the prior family member paid the full 6.5 percent title ad valorem tax.
Wood said that a $5,000 fine will be given to anyone who abuses the law.
The title tax only affects cars purchased or titles transferred after March 1, however cars that were purchased since January 2012 have the opportunity to opt into the new system, according to Wood.
“You have to show us where you paid the sales tax on that vehicle for the year 2012, and we’ll figure up the value based on the sales tax,” said Wood. “It’s still better than paying about $300 a year for the birthday tax.”
The deadline for those to opt in is Dec. 31.
Wood said that this law may be tweaked in the future and there will be a graduate increase in the amount of the title tax over the years. Next year he said it will go up to 6.75 percent, and possibly up to 9 percent in later years.
Also under the new title ad valorem tax, salvage vehicles and vehicles donated to charities will pay a reduced ad valorem tax at a rate of 1 percent and veterans who were exempt from annual motor vehicle ad valorem tax will also be exempt from the title ad valorem tax.
For more information on the new title ad valorem tax, go to www.etax.dor.ga.gov and click on “Motor Vehicles” and then the “Tax Calculator” button.