The so-called "birthday tax" that Georgia vehicle owners pay will end in March 2013 – for people who purchase a new vehicle.
Visit the Fulton County Tax Commissioner's North Fulton Office in Alpharetta, on Royal Drive just off North Point Parkway, and next door to the North Fulton Regional Health Centers.
Vehicles purchased on or after March 1, 2013 and titled in this state will be exempt from sales and use tax and the annual ad valorem tax, according to the Georgia Department of Revenue. Instead, these vehicles will be subject to a new, one-time title ad valorem tax (House Bill 386) that is based on the value of the vehicle.
Forsyth County Chief Deputy Tax Commissioner David Hicks explains what these major changes mean.
"When you go to the dealer, like you use to, you pay sales tax when you bought a vehicle and that sales tax was based on whatever rate of the county where it was purchased," he said. "That's going away, so it's kind of a wash in that regard."
If you buy a new vehicle where as you were paying sales tax on that vehicle, now it's called a title tax and is pretty much the same rate, according to Hicks.
It's going to be 6.5 percent in 2013, 6.75 percent in 2014, in year three it will increase to seven percent and so on. But you will not be paying the ad valorem tax on that new vehicle on your birthday every year.
But the difference in how the new tax law will affect individuals who purchase a vehicle from another individual.
"Let's say you found an auto on Craigslist and you went to the people's house and paid for the car, you would come in [tax commissioners office] to apply for a title and in the past you would just pay the $18 title fee and tag fee," Hicks said. "Now there's going to be the title tax on that kind of purchase as well on a private sell."
The tax is based on the fair market value of the vehicle at the time of the purchase or the sales price whichever is higher.
"So you get a great, great deal on a car, but it's actually worth, let's say you paid seven for it, but the Bluebook value, for example is 10, you would pay [taxes] based on the $10,000," said Hicks.
Hicks said that's the only real change: private sales that traditionally were exempt from being taxed, will now be taxed.
"And that's to help offset any shortfalls in revenue from the annual ad valorem tax going away," he said.
However, you will continue to pay the annual ad valorem tax on vehicle(s) that you currently own.
Other aspects of the new law:
- The new title tax is based on a percentage (6.5 percent in 2013) of the fair market value of the vehicle, not the sales price, as determined by the Georgia Department of Revenue.
- If you purchase a vehicle in Georgia between January 1, 2012, and March 1, 2013, you have the option of paying the new title tax instead of the current annual ad valorem tax. You have from March 1, 2013, until December 31, 2013, to opt into the new program. Note: Vehicles purchased out-of-state are not eligible to opt in.
- All other existing annual vehicle registration requirements, including annual tag renewal fees, decals, and emission tests (if applicable), remain in effect for all vehicle owners.
What vehicles are not subject to the TAVT?
Non-titled vehicles and vehicles that do not meet the statutory definition of a motor vehicle will continue to pay the annual ad valorem tax. For example, the following do not qualify as titled vehicles:
- Pull-behind campers.
- Any vehicle for which a title cannot be issued, such as
- Vehicles manufactured prior to 1963.
- 1963 -1985 year model vehicles that do not have a current Georgia title.
Will the new Georgia tax affect your decision to purchase a new vehicle? Share your thoughts in the comments below.
Steve Burns contributed to this article.