The New Title Ad Valorem Tax
Starting March 1, it will cost more to register and title a vehicle in Georgia. The annual ad valorem tax, paid on a person’s birthday, will remain for people who owned their cars before 2012. But for everyone else, a new law will mean changes to the way vehicles are taxed. For some, it will mean big savings. For others, it will be a big expense.
- Under the new law, the fee for all vehicles titled between March 1 and the end of 2013 will be 6.5 percent of the worth of the vehicle. The figure will rise to 6.75 percent for 2014, and 7 percent in 2015. It eventually could climb as high as 9 percent of the vehicle’s worth.
- Those who bought cars between Jan. 1, 2012, and Feb. 28, 2013, will have the option to pay the ad valorem tax for the life of their car, or to opt into the new title tax. The opt-in period lasts from March 1 until the end of 2013. Those who opt in will not get refunded for any ad valorem they already paid, but will get credit for paying sales tax if the car was not purchased in a private sale.
- The old ad valorem tax system will continue to exist for vehicles titled in 2011 or earlier.
- People who lease cars will continue to pay sales tax and the dealership will pay the title ad valorem tax. Dealerships could include the cost of that tax in their fees.
- People who move into Georgia with a car after March 1 will have to pay the new tax on any vehicles entering into the state when they register their cars in Georgia. New out-of-state residents will have to pay half the fee up front, and will have a year to pay the rest.
- Vehicles passed between immediate family members — spouses, parents, children, siblings, grandparents or grandchildren — will pay a reduced fee of 0.5 percent of the car’s worth to title the vehicle, provided the full one-time title ad valorem tax already has been paid.
- People who were exempt from paying the annual car tax, such as disabled veterans, are exempt from the new tax.
- Vehicles that are older than 1985, and are not required to have titles, are only affected if the owner decides to get a title after March 1.
- Vehicles that aren’t titled, such as boats and trailers, aren’t affected by the new law.
To calculate how much the new tax would cost you, see http://onlinemvd.dor.ga.gov/Tap/welcome.aspx
Georgians who buy used cars from Craigslist, neighbors or friends are about to see the cost of their purchases rise sharply. But buyers who shop at dealerships are in luck.
Beginning March 1, a new law intended to collect taxes from private vehicle sales will mean the upfront cost of registering and titling a car in Georgia will increase for those who don’t buy from dealers.
The new one-time tax may change the way Georgians shop for cars by eliminating sales tax savings from private sales.
“If you are someone who bought cars from a dealership and held them, you’re better off under the new system, almost from day one,” said Douglas MacGinnitie, Georgia’s tax commissioner. “If you’re someone who buys from a casual sale frequently, you’re worse off.”
The annual ad valorem tax that Georgia residents pay for their cars on their birthday will disappear for all newly acquired vehicles. It will be replaced by the new one-time title tax that, while higher than the individual’s average annual ad valorem bill, could add up to savings for car owners who keep their vehicles for many years.
Timothy Nash of south Fulton County, who plans to buy a car for his 16-year-old son, said he’s glad the annual birthday tax is going away. Nash said he buys used cars from dealerships so he can finance his purchase.
Those who buy from dealerships likely won’t notice the difference at first. While they will no longer pay sales tax, the sales tax savings in most cases will be about the same as the cost of the new “title ad valorem tax.”
In 2013, that new one-time tax will be 6.5 percent of the vehicle’s worth. The figure will rise to 6.75 percent for 2014, and 7 percent in 2015. It eventually could climb as high as 9 percent of the vehicle’s worth.
Car shoppers who buy from places other than dealerships are used to paying only an $18 application fee and a tag fee when they register their vehicle. In the future, they’ll have a higher initial cost.
Srivatsan Ramachandran of Lilburn — who estimates he has bought 20 cars in private sales, and is shopping for another now — said the new tax is problematic for people who buy used cars because they can’t afford to buy new.
“If you were going to buy a car from a friend who was going to give you a good deal, that deal is gone,” he said. “They’re snatching it away.”
The change will likely make private sales more difficult, Ramachandran said, and encourage both buyers and sellers to simply go to dealerships.
About 60 percent of car sales in Georgia come from private sales, said Vicki Lambert, the director of local government services and the motor vehicle division for the Georgia Department of Revenue.
By collecting the new tax on private sales, Georgia will add an estimated $71 million to its coffers in 2013, said Ken Heaghney, the state’s fiscal economist. By 2014, that number is expected to rise to $260 million. In all, the state will collect an estimated $600 million to $700 million annually from the title ad valorem tax.
“We can only speculate on how people may react when you start taxing something you haven’t taxed before,” Heaghney said. “The title fee may cause people to shift from casual deals to the dealership.”
Kyle Jessen, who bought a new Range Rover on Thursday, said he would be opportunistic if he were still in the market for a car. The Brookhaven resident said he thinks if the system drives people to dealerships instead of private sales, that’s good — it could mean more jobs. An individual reselling a car doesn’t have the same impact on the economy, he said.
While he isn’t sure that already-purchased vehicles should be taxed again, Jessen said he likes that the new tax will hit all car buyers.
Effect on casual sales
Customers who in the past chose to sell their old cars themselves may instead elect to trade their vehicles in after March 1 because of the addition of the tax, said Jamey Holt, the Internet sales director for Global Imports BMW in Atlanta. That would be good for the dealership, he said, as would a system that taxes all vehicles at registration.
“It would drive more people to the dealer, absolutely,” said Corey Sanford, general manager of America’s Auto Auction — Atlanta. “If you’re buying cars that way (in private sales) to avoid the tax, to get around it, it’s not worth it anymore to do that.”
MacGinnitie said there is no provision in the law for a payment plan, so car shoppers making a private purchase must ensure they have the funds to pay the new one-time title tax before they buy.
The change should have an effect on the pricing of casual-sale vehicles, he said, which may become less expensive to accommodate the tax addition.
MacGinnitie is concerned, however, that people who are not used to paying sales tax on a private-sale purchase will not realize they will owe a lump sum when they register their car. For a 2005 Toyota Corolla worth $8,000, the one-time title tax in 2013 would be $520.
“It’s the biggest change, and could cause the most friction,” he said. “We can’t waive it, and we can’t delay it.”