If the car is purchased from a dealership, either new or used, the purchaser will not pay sales tax, but rather a new Title Ad Valorem Title Tax, which is 6.5 percent of the cost of the vehicle. Once that tax is paid, the purchaser is exempt from annual ad valorem tax for the life of the vehicle.
If someone buys a second hand vehicle from a non-dealer, they will also pay the new tax, 6.5 percent of the vehicle’s worth. They will also be exempt from the annual ad valorem tax.
“That’s where the big change is going to come in, because they too have to pay the fee,” said Gordon County Tax Commissioner Scott Clements. “Let’s say I sell you a vehicle, and according to the state’s manual it’s worth $15,000 but I sell it to you for $12,000 … you are going to bring the bill of sale in and pay $38 for the tag and title just like always, then they are going to tell you you’re going to have to pay a 6.5 percent tax on $15,000.”
Those who purchase vehicles, from a dealer or otherwise, prior to February 28 will not be impacted by the new tax. Owners will continue to pay ad valorem tax as usual.
Those who bought or will buy vehicles from Jan. 1, 2012 to February 28 of this year can opt in to the new tax and avoid paying yearly ad valorem fees.
Vehicles purchased out of state are subject to the tax as well.
The yearly tag fee still applies for all vehicles.
The tax is the result of House Bill 386, which was approved by the Georgia General Assembly last year.
The bill provides for a yearly increase in the new title tax to a maximum of 9 percent.
It is projected to increase to 6.75 percent next year and then to 7 percent from 2015-2021, according to Georgia Department of Revenue information.
The state will keep 57 percent of the tax and the remaining 43 percent stays locally during the first year, according to department of revenue information.
The balance will shift, however, over the next decade. By 2021, 72 percent of the tax revenue will stay local.
“That’ll be good if people buy vehicles,” Clements said. “But if people quit trading vehicles, it’s going to hurt.”
Clements’ chief concern is that the tax will take residents by surprise when they come in to buy a tag for a second-hand vehicle.
“It’s not going to hurt anyone buying from a dealer,” he said. “The people I worry about are the ones who pay $3,000 for a vehicle … they are not expecting to pay this extra $200-$300.”
Some see the tax as a means of ending a practice known as “curb stoning,” in which a person parks a car in a lot with a “for sale” sign on it, which takes revenue away from dealerships.
The bill also caps exemptions on retirement income and increases marriage exemptions among other things.
Further information on the bill can be found here: www.legis.ga.gov
More information on the tax can be found at: onlinemvd.dor.ga.gov/Tap/welcome.aspx
An additional tax note from Clements:
“Homestead has no bearing on title ad valorem tax but can make a difference on a real property tax bill.
You can file for homestead in the tax commissioner’s office year-round but you must file by April 1 to get the exemption for this year.
There are several different types of homestead exemptions.
The standard is S-1, which is grants a $2,000 exemption from county m&o as well as county school m&o.
At age 65 people become eligible for a $40,000 exemption from school tax, which increases to $100,000 at age 70.
There are a few other homesteads available as well to surviving spouses of service men or women killed in action, surviving spouses of police officers & firefighters killed in the line of duty and 100 percent service-connected disabled veterans to name just a few.
Residents can contact the commissioners’ office for more information on eligibility. Per state law only one homestead is allowed per immediate family group.
In the event an individual owns two or more houses he or she may only be granted the exemption on their primary residence.
Also applicants for homestead must have owned the real property for which the exemption is claimed on Jan. 1st of the tax year for which a homestead exemption is sought.”