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.
Follow us on Twitter!
I suggest that we all learn how to play the game and adversely affect Car Dealers and reduce Revenues to the 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.
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????
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!
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).