Salesman:
Welcome to Ed’s New and Used Car sales. How can I help you?
Customer:
Well, I’d like to look at buying a new car. but I understand that the Georgia State Legislature just passed a new law that will do away with the birthday tax. Is that true?
Salesman:
Yes, it’s true.
Customer:
Can you tell me how it works?
Salesman:
Sure. Currently when you buy a new car, you pay a sales tax on the price of the car when you purchase it. The sales tax can be 6 percent to 8 percent depending on which county you live in. After that, once a year on your birthday, you get a bill from your county’s tax commissioner charging you an ad valorem tax on your vehicle.
Customer:
How is this ad valorem tax calculated?
Salesman:
Using sources such as the "Blue Book," the tax commissioner prepares a uniform evaluation of motor vehicles based on the current fair market value. Once the value of the motor vehicle is set, then the local millage rate is applied to its assessment. The actual tax is calculated by taking 40 percent of the assessed value and multiplying it by the local millage rate.
Customer:
So that’s the bill I get every year when I get my sticker for my tag?
Salesman:
That’s right. Only now that’s changing. Thanks to HB 386 which passed the legislature this year, the ad valorem tax, or "birthday tax" as it’s called, will be eliminated starting March 1, 2013. So will the sales tax that you pay when you first buy the car.
Customer
: So starting March 1, 2013, there will no longer be a birthday tax each year and the 6 percent to 8 percent sales tax on the purchase of the car will be eliminated?
Salesman:
That’s right.
Customer:
So what will replace these taxes?
Salesman:
Starting March 1, 2013, when you buy a new car, you’ll be charged a one-time title fee of 6.5 percent. That fee will go up to 6.75 percent on January 1, 2014 and 7 percent on January 1, 2015.
Customer:
But what if I buy a new car today? Will I still have to pay the sales tax when I buy it and the ad valorem tax on my birthday?
Salesman:
Yes, if you buy a new car before March 1, 2013, you will still have to pay the sales tax. And if your birthday falls between now and March 1, 2013, you will still have to pay the ad valorem tax.
Customer:
Then I should wait until after March 1, 2013 to buy a new car?
Salesman:
No. If you buy a new car between January 1, 2012 and February 28, 2013, you can opt in to the program starting March 1, 2013. If the sales tax and ad valorem tax paid on the car before March 1, 2013 are equal to or greater than what the 6.5 percent title fee would be, then nothing more is required and you no longer have to pay the birthday tax.
Customer
: So the title fee replaces both the sales tax and the annual ad valorem tax?
Salesman
: That’s right.
Customer:
And that’s on a new car or a used car?
Salesman:
That’s right. When you get a title for a car now you have to pay the title fee, regardless of whether it’s a new or used car.
Customer:
What happens if I trade in a $10,000 car for a $30,000 car in regards to the title fee?
Salesman:
Same as the current sales tax law — you pay the title fee on the net value of $20,000.
Customer:
I heard that casual sales of cars between people are now going to be taxed.
Salesman:
That’s right. In order to transfer a title for a car, you will have to pay the title fee unless it’s between immediate family members.
Customer:
So if I sell my neighbor down the street my car, he’ll now have to pay the title fee?
Salesman:
That’s right.
Customer:
I heard my county commissioners and school board members are upset because they say this is going to mean less local tax revenue.
Salesman:
That’s simply not true. The state has guaranteed the locals the amount they have been receiving plus a 2 percent growth rate.
Customer:
Wow, you really know a lot about this legislation. Are you a State Senator?
Salesman:
Bite your tongue! Of course I’m not a State Senator. I’m a used car salesman!
Sen. Buddy Carter can be reached at Coverdell Legislative Office Building (CLOB) Room 301-A, Atlanta, GA, 30334.
His Capitol office number is (404) 656-5109. You can connect with him on Facebook at facebook.com/buddycarterga or follow him on Twitter @Buddy_Carter.
