Thanks to legislation adopted in last year’s General Assembly session, a confusing new motor-vehicle tax law takes effect March 1.
While state media has addressed the change, which does away with the so-called “birthday tax” for vehicles purchased on or after March 1, Liberty County Tax Commissioner Virgil Jones has been tasked with getting the message out locally.
“It really is major in the sense that every car owner will be impacted at some point,” Jones said.
The tax commissioner advises those conducting business in his office allow for longer wait times and be patient, as the rule will require some increased service times.
Title Ad Valorem Tax
Under the law, car buyers now will pay a title ad valorem tax, or TAVT, in lieu of sales tax at the point of sale when purchasing from a dealership.
Through Dec. 31, the tax rate will be 6.5 percent. On Jan. 1, 2014, the rate increases to 6.75 percent, and in 2015 it will increase to 7 percent. After that time, it will remain at 7 percent unless target revenue rates are not met.
Even once the TAVT is paid, owners still will be required to register their vehicles each year and pay a $20 tag fee.
For casual sales — those between two private individuals — the state will assess a tax value to be levied upon titling.
By basing the tax value of a casual sale on the Department of Revenue’s motor-vehicle ad valorem assessment manual, the government is eliminating fraudulent reporting of the vehicle’s purchase amount in attempt to pay a reduced tax, Jones said.
Potential buyers who would like to know the assessed tax for a vehicle may contact the title office.
Exemptions and opt-in
For vehicles titled before Jan. 1, 2012, owners will continue to pay their ad valorem taxes when they register the car annually. When or if they purchase new vehicles in the future, however, the new rule will apply.
There is an opt-in provision for owners of vehicles purchased between Jan. 1, 2012, and March 1. 2013. Owners may continue making annual tax payments upon registration, or they may convert to the new system.
“I think persons who keep their vehicles for a very long time will probably come out better opting in; those who don’t, they may not,” Jones said.
To do so, they must prove that the sales and property taxes they already have paid will exceed what they would have paid through TAVT, according to a state document. If the amount of taxes paid is less than the TAVT owed, the owner can pay the remaining difference and convert.
Vehicle owners must make the transition before Dec. 31. Vehicles purchased out of state, however, are not eligible for opt-in. There is an online formula for calculating the differences available at onlinemvd.dor.ga.gov/Tap/welcome.aspx.
Jones added that there are provisions that allow transfer of title among immediate family members with significantly lower tax rates.
Military and out-of-state
While existing exemptions for military and veterans will remain, those who relocate from out of state and title their vehicles will be subject to the TAVT in two installment payments. They still will have to pay the title and registration fees for which they were responsible in the past.
Because this results in increased cost for transfers from out of state, it also is a new source of revenue.
Since the board of commissioners recently received a presentation on its dwindling revenues from taxes and real and personal property, the shift prompts questions about whether eliminating the sales and annual ad valorem taxes will hurt local revenues.
“The state tells us that about 60 percent of all title transfers are person to person; that is where the state is supposed to make up the money that it looks like we’re losing,” he said.
Currently, anyone who comes in with a title from a casual sale does not pay that 6.5 percent, but rather only the ad valorem assessed value. Under the law, however, they will.
Jones acknowledges allocating money between the state and county will create some “accounting challenges.”
But the local percentage of tax is supposed to be distributed to the vehicle owner’s county of residence — regardless of where the vehicle was purchased.
That’s a change because current sales-tax collections mean that if a Liberty County resident purchases a vehicle in Chatham County, Chatham retains a local portion. Under the new law, Liberty would receive that portion of revenue from a resident’s vehicle purchase.
The General Assembly is examining House Bill 80, which proposes some revisions that aim to address the law’s weaknesses.
“We’re going to start out with what’s already being approved, but if HB 80 passes, then we’ll have to go back and change those things that they’ve amended,” Jones said. “It could change year to year, because I think there are some unseen issues that could come up.”