New state car tax law coming in March
by Jon Gillooly
December 20, 2012 12:39 AM | 16974 views | 21 21 comments | 30 30 recommendations | email to a friend | print
Cobb County Tax Commissioner Gail Downing speaks about the upcoming new taxation of motor vehicles.  (MDJ Staff/Laura Moon)
Cobb County Tax Commissioner Gail Downing speaks about the upcoming new taxation of motor vehicles. (MDJ Staff/Laura Moon)
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Cobb County Motor Vehicle Division Manager Sheron Dorsey speaks about the upcoming new taxation of motor vehicles. (MDJ Staff/Laura Moon)
Cobb County Motor Vehicle Division Manager Sheron Dorsey speaks about the upcoming new taxation of motor vehicles. (MDJ Staff/Laura Moon)
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MARIETTA — Drivers who buy a new car or truck every two or three years may get a dose of sticker shock under Georgia’s new car tax law, which goes into effect March 1.

Under the new law, vehicle owners will pay an upfront fee that replaces the sales tax and annual ad valorem tax. But while the initial cost may be surprising, those who keep their vehicles for five years or longer can expect to pay less total under the new law, and drivers who buy cars or trucks more frequently will pay far more.

For example, a driver who buys a $30,275 pick-up truck will pay about $1,970 up front under the new law, but would not have to pay an annual tax. Under the old law, if the driver kept the same vehicle for 10 years, he would have to pay about $3,170 in annual ad valorem taxes, as well as approximately $1,800 in sale taxes when he bought it, a total of about $3,000 more.

Cobb Tax Commissioner Gail Downing is bracing for March 1, when the law goes into effect.

“I never dreamed it would pass. It’s just such a big change,” Downing said in a Wednesday interview with the Journal.

Starting March 1, all motor vehicles titled in Georgia are subject to a one-time Title Ad Valorem Tax fee, which replaces ad valorem and sales tax. When a vehicle owner applies for a title, the TAVT is collected based on the fair market value, not the purchase price. Any vehicle subject to TAVT is exempt from sales tax. Lease and rental vehicles are exceptions.

Motor vehicles purchased in Georgia between Jan. 1, 2012, and Feb. 28, 2013, may opt in to the new system between March 1, 2013, and Dec. 31, 2013.

Vehicles already on the annual ad valorem system that are not eligible to opt-in remain on the ad valorem system.

Registration requirements remain the same for all vehicles regardless of whether they are on the TAVT or ad valorem tax system.

“Our goal here is to kind of get out in front of this bill because I feel like you’ve probably all heard the way it’s been promoted so far has been the end of the birthday tax, and it just kind of stops there,” Downing said. “There’s so much more to that story. It’s really not the end of the birthday tax for anyone who owns a vehicle purchased prior to Jan. 1 of ’12. Any vehicles you owned prior to Jan. 1 of ’12 will remain under the annual ad valorem tax. Any vehicle you purchased in Georgia on or after Jan. 1 of 2012 up through Feb. 28 of ’13 will have the option of going into the new plan after March 1 of 2013.”

Per state law, “They have between March 1 and Dec. 31, 2013,” Downing said. “Anyone who purchased a car in Georgia after Jan. 1 of this year and before March 1 of next year can opt in. The sales tax that you pay, any ad valorem you pay in 2012 and 2013, you’re credited towards the title ad valorem, if you elect to opt in. We’ll essentially have dual systems forever and nothing changes for people who owned their car before Jan. 1, 2012.”

The law was brought forward by Georgia’s car dealer lobby, she said.

Some of the very lawmakers who voted for the bill during the 2012 legislative session are confused about it, she said.

“The day that it passed, I was in Athens at our training and had a legislator — who will remain nameless — call my office hysterical almost that she had gotten lots of questions, and she didn’t know how to answer them,” Downing said. “She had like less than two hours to read and sign the bill, and the bill was, I don’t know, hundreds of pages long, and she was getting bombarded with questions, and she didn’t know how to answer them, and so they tracked me down in Athens. At that point we didn’t have enough knowledge to even answer the questions.”

Everyone in the Cobb Legislative Delegation voted for the bill except state Rep. David Wilkerson (D-Austell), who voted against it, and state Sen. Judson Hill (R-east Cobb), who was marked excused from the vote, Wilkerson said.

Downing said her intention is not to point the finger of blame at anyone. She just wants the public to be aware of what they’re in for.

She and division manager Sheron Dorsey are estimating an average of eight more minutes per face-to-face transaction, which is why she’s encouraging residents to do as much as they can online or by mail or phone.

“I am very concerned about the service-level impact because it’s very difficult to grasp, it’s very detailed, and it’s very difficult to grasp all of the minutiae that goes along with it,” Downing said. “I think our service transaction is going to increase significantly. And I think we’re going to have to send a lot of people away to get information that they don’t have. We’re going to engage law enforcement and have them on standby because I do expect we’re going to have some angry — if not hostile — customers to deal with.”

James Pehrson, director of the Cobb Finance Department, said it is unclear how the new law would affect the county’s revenues.

“At this point we do not have enough data to predict how this will trend,” he said.

Downing expects most new car dealers to title the vehicle on the buyer’s behalf.

“We anticipate that is going to be wrapped into financing that car just like the sales tax was. It’s 6.5 percent in 2013, then goes to 6.75 percent in 2014, to 7 percent in 2015. It can go as high as 9 (percent).”

Dorsey put it this way: Say you have a new car and the ad valorem tax runs around $250 to $300 per year for five years for a total of $1,500. If you switch to the TAVT system, you pay a one time fee of perhaps $800 or $900 on that same vehicle.

“Someone who trades frequently, they’re going to be paying that more often and it’s really not in their best interest,” Dorsey said.

Downing said for 2013, those who have a renewal period that falls within the January/February cycle will still have to register and pay the ad valorem tax. If they elect to opt in to the TAVT system, they will need to apply between March 1 and Dec. 31, 2013. Notices will be mailed in a cycle throughout 2013 for those eligible vehicles.

Another important point is the casual sales category. Currently, someone who buys a car from an acquaintance doesn’t pay a tax on the transaction.

“You bring it into our office to register and you pay a title fee, a tag fee to register and transfer that title,” Downing said. “Now you will be paying this 6.5 percent.”

Another category is new residents.

“You move from another state, say from Alabama, and you just renewed your car in Alabama in December, you will pay that 6.5 percent on every vehicle that you bring to the state,” she said.

“So if you go and buy a car from out of state now and bring it to Georgia and you’re a Georgia resident, you’re going to be on the ad valorem system for the duration. After March 1, 2013, you buy a vehicle from another state when you come in then you’re on TAVT,” Dorsey said.

Leased vehicles and rentals are an exception. They will still be subject to sales tax but also subject to TAVT.

“In the TAVT world it’s an either or thing except those two categories,” Dorsey said. “So if I buy a car, I’m either subject to sales tax or I’m subject to TAVT. Leased car, the lessee will still probably be paying that sales tax to the leasing companies. And they will still pay TAVT.”

For the parents who give the family car to their teenager, Dorsey said, it depends on the status of the vehicle at the time they get ready to transfer the title.

“Let’s say I inherited a vehicle in 2013, and the vehicle belonged to my parent and was under the ad valorem system,” Dorsey said. “I can choose to leave it on the ad valorem system if I wanted to. However, if the opt in had been done and it was on the TAVT system then, I would be obligated to continue on the TAVT system. You have several choices there depending on the status of the vehicle going into the transaction. Once it’s opted in, then it’s in the system. It won’t go back to ad valorem and that’s the way it is for everybody. Same way with family transfers.”

Downing encourages anyone with ideas on how to get the word out to email her at tax@cobbtax.org.

For questions about motor vehicle titling and registration, please call her helpline at (770) 528-8247.

 

Comments
(21)
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Watcher...
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December 20, 2012
Who created this atrocity?

I suggest that we all learn how to play the game and adversely affect Car Dealers and reduce Revenues to the County!
MortalWombat
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December 20, 2012
This is a way for the government to collect 5-10 years worth of ad valorem taxes upfront. They take the sting out of this by saying that we will pay less in the long run if we simply keep our vehicles longer. They will go ahead and spend all of the upfront tax on more wasteful sidewalks and street lights in neighborhoods that people wouldn't even be caught dead in during the daytime. Finally, when a majority of people can't afford to pay a massive upfront ad valorem tax for a new vehicle, they will reintroduce the annual tax that you were supposedly all done with by keeping the car that has now started costing you 1500-3000 bucks a year to keep in a safely drivable condition.
boxer612
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December 20, 2012
another lobbist gets their way. Why do we have legislatures that do not think through the bill before them. Too big to read = too big to pass. Where do all these looser leaders come from?
Bob Bummer
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December 20, 2012
I think the reason all cars do not go on the new system is to increase auto sales. This would make sense since the article says that the dealer's lobbying association was the one pushing for the change. Also it eliminates the person to person sale from being tax free which is another component the dealers wanted to end. So please thank a dealer today.
Gringo Bandito
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December 20, 2012
I don't understand why people think this is complicated. It's a simple system and it is cheaper on the taxpayer in the long run. What's not to like?
boxer612
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December 20, 2012
Are you kidding? How is it cheaper if you replace your car ever two years, and finance the tax bill? You must be in the legislature.
Gringo Bandito
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December 20, 2012
This upfront tax replaces the sales tax. You break even almost immediately. Only math challenged people are crying about this.
Dumb Government
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June 05, 2013
Gringo Bandito you have to be the dumbest person I've ever seen on a blog! I'm new from out of state and will be refusing to pay this insane tax and waiting for the $100 ticket every time. Actually thinking about transferring to another branch of my new job, purely because of this idiotic tax! Thus taking my income tax and economic additions away from Georgia. Will also be openly discouraging anyone I know from moving here.
Ask your legislator
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December 20, 2012
Our "wonderful" legislators who listen to us and do what we need for them to take care of - ASK THEM. They created this stupid more tax story.
Butch y
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December 20, 2012
Can anyone tell the public what impact this change has on local tax issues? I.e. this will certainly decrease the amount earmarked for schools under the special 1 per cent as the sales tax on high ticket items (autos) will no longer be distributed as sales tax collections. And areas with local option which requires a property tax roll back. If the collection of sales tax is less, this affects home owners across that county.

Media needs to educate themselves on what politicians are doing to the people. This is not just an administrative problem for the county, but a huge tax increase for all citizens in more ways than one.
Turnip Blood
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December 20, 2012
I see more homemade temporary license plates in our future.
Question for Downing
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December 20, 2012
Ms. Downing, are residents living in suburban neighborhoods in Cobb through HUD's Section 8 vouchers, who relocated here from, say, New Jersey, and still have Jersey plates a year later, subject to any kind of tax or penalty, or are they exempt from taxation here because they fall under the category of Obama's "chosen people"????

They appear to be exempt from HOA rules (i.e. not repainting their $400,000 home after it was vandalized through paint, keeping up the lawn, running a drug business out of their home)but how about at least making them pay their car tag????
Julie Smart
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December 20, 2012
We are getting a boot up out butts either way we turn. The government does not want businesses to thrive or people to work. Just something else to be shot down toward socialism.
Kennesaw Resident
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December 20, 2012
Many people will end up financing this new tax, since most folks can't fork out several hundred extra dollars on top of the purchase price. They may very well end up paying more when you add the interest on the taxes to the tax bill!
Gringo Bandito
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December 20, 2012
People are already financing the sales tax. This is no different.
VFP42
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December 20, 2012
This is intended to be a serious penalty for any budget minded Georgian who doesn't fall prey to the constant barrage of new car advertisements.

You have to ask, why isn't Georgia reducing taxes on used cars each year for the next five years until taxes on existing cars can be phased out and the dual tax system put to bed?

Should I really pay ad valorem forever on my older car when the purchaser of a brand spanking new Escalade pays a limited amount of ad valorem?

I have already paid more ad valorem on my car than someone will pay on a brand new Escalade!

This is great for the Escalade purchaser (gotta pull that boat around with SOMETHING, right?), but why throw me under that Escalade?

SO... Let's see, how can I get my old car on the new plan... There has to be a loophole for the rest of us.

For a used car purchase you will pay 6.5% TAVT on the supposed "fair market value" of the car as determined by the State of Georgia.

The state seems to overvalue cars quite a bit from what I can tell. My oldest car is worth about $4000 by their estimation. Really? I bought it for $2000 TEN YEARS AGO. It doubled in value? Neat! I wish I'd put ALL my money into crappy old cars. Georgia has my next oldest car overvalued by about 30%. Wow. So 6.5% is really more like 10%. This must be that same math insurance companies use when paying 100% for a trip to the dentist.

You can appeal the state's grossly inflated estimate the same as appealing any property tax. That sure sounds like fun.

As far as I can tell, you can probably sell your non-new car to your partner (for $1, who cares, it's your partner, sometimes called "spouse" in these parts), pay 6.5% on its determined-by-Georgia value (seemingly 10% to 20% on the ACTUAL value, or try to appeal the value), and get out from under infinite ad valorem even on your old car.

If your old car somehow happens not to be in the state's valuation database, you reportedly pay 6.5% on the sale amount, which if you are selling & buying with your partner for $1 would be a great deal for you, resulting in immediate savings.

By my calculations, payback on TAVT for an "in Georgia's valuation database, with TAVT paid on Georgia's inflated estimated value" used car looks to be 4 years.

Finally, a tax loophole for the married who are among the 98%.

I can pay nearly $800 once for an old Camry or keep paying $200 every year for the next 10 to 25 years depending on how long the Camry keeps going.

Now that's the kind of math that makes me feel better.

Thanks, Georgia! I know you didn't mean to, but your new tax scheme will save me some serious money!
another mess!
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December 20, 2012
This is the biggest mess! Would love the names of all who voted for this, because we need to know! This is going to affect a lot of people and none of it is going to be good. I am so sick of politicians and yet we couldn't get a principled, smart businessman elected. All of this just goes on and on.
Unamused
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December 20, 2012
You're right to blame politicians; to hear of the panick of this lady politician who had no idea about a bill she signed onto/voted for when she had to answer questions about it is infuriating...yet there is no accountabilty. Clearly, it's likely the lions share of them did the same as she (just signed off) because whomever their leader was, told them to). Truely maddening.

You're certainly entitled to your opinion, and if you are suggesting (since you didn't specify), that Romney is principled and assumed a good business man, I can't argue with your opinion; still, states legislatures control state policy making, budgets and financing, not the Federal government or the President, so, it seems to me you would better direct your contempt to the Republic legislature of Georgia who passed the law(s).
boxer612
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December 20, 2012
I believe the Rebublic legislators to be very responive to business lobby groups who dreamed up this process.
Wesmarietta
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December 20, 2012
Just another way to shaft the public. We need to make all taxes easier to understand. Time to totally overhaul the tax system from the federal to local level.
Joe Jackson
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December 20, 2012
Would like to see our State government publish a complete list of taxes. The same for our Counties and our cities. Then get some people with half a brain come up with a way to slash our government and our list of taxes in half. It could be done. No incentive for our big governments to do it. When will our RINO's in Georgia do what we elect them to do?
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