The so-called "birthday tax" that Georgia vehicle owners pay will end in March 2013 – for people who purchase a new vehicle.
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.
The value of the vehicle is dependent upon the Georgia Department of Revenue motor vehicle valuation database, which calculates the average of the current wholesale and retail values of the motor vehicle. The calculation is determined by subtracting the trade-in value from the "fair market value" of the vehicle and then multiplying this number times the title ad valorem tax fee rate.
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. The rate will be capped at 9 percent. But you will not be paying the ad valorem tax on that new vehicle on your birthday every year.
But the difference in 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 $18.00 title fee and tag fee," Forsyth County Chief Deputy Tax Commissioner David 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, the private sales that traditionally were exempt from being taxed, will now be.
"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.
If you buy your new car privately after March 1, you must turn in the application for your title and tax fee payment within 30 days of the purchase of the vehicle. If you're later than 30 days, you'll get charged a penalty of 10 percent of the fee owed, plus an additional one percent per month for every month late.
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.
For more information on HB 386, download the PDF to the right of this article.
Will the new Georgia tax affect your decision to purchase a new vehicle? Share your thoughts in the comments below.
Christine Foster and Steve Burns contributed to this article.