Birthday tax fix may confuse Georgia residents

Birthday tax fix may confuse Georgia residents

December 26th, 2012 by Tim Omarzu in Local Regional News

Catoosa County Tax Commissioner Sandra Self stands outside her office in Ringgold. Photo by Mike O'Neal

Georgia residents haven't been crazy about the so-called birthday tax, an annual vehicle tax due on its owner's birthday.

State lawmakers heeded voters' wishes and axed the tax in April as part of House Bill 386, a tax reform package that was rushed through the Legislature in a mere three days, passing the Senate unanimously and getting only nine "no" votes in the House.

Be careful what you wish for, said Catoosa County, Ga., Tax Commissioner Sandra Self, who thinks residents are in for a surprise on March 1 when the birthday tax's replacement kicks in -- a one-time title fee that starts at 6.5 percent of a vehicle's value and could go as high as 9 percent.

"It's going to be interesting, to say the least," Self said. "I think there's going to be a lot of confusion."

Some key changes:

• The new law eliminates sales taxes on cars sold by dealerships and other commercial outlets and does away with the annual ad valorem birthday tax that's levied on 40 percent of a vehicle's fair market value.

• Every car purchased after March 1 will be subject to a one-time title tax of 6.5 percent of the vehicle's value. The state will determine the vehicle's fair market value; it won't be tied to the sales price.

• The title tax will increase to 6.75 percent in 2014 and 7 percent in 2015. Beginning in 2016, the state revenue commissioner may increase the title tax fee to a maximum of 9 percent.

• Privately traded cars will be affected. Currently, there's no sales tax on private car transactions. After March 1, all vehicles sold will be subject to the title fee.

• People moving to Georgia will have to pay the title tax. They can pay 50 percent up front and the remaining 50 percent in five months.

• Vehicles purchased before Jan. 1, 2013, will remain on the current ad valorem system. The birthday tax will fade away over time as these cars are sold or junked.

• Those who purchase a vehicle before March 1 may have the option of paying the annual birthday tax or the new title fee.

Check with your county's tax commissioner's office.

Schools, city and county governments will get a revenue boost during the first three years of the title fee -- but will lose revenue over time due to the change, Georgia Municipal Association spokeswoman Amy Henderson said.

"We do have some concerns about the future, but we were not opposed to it," she said of the new law.

"For the state, it's a windfall," Henderson said, because the new system captures previously untaxed private car sales.

Walker County, Ga., Tax Commissioner Carolyn Walker says the new law won't lighten the workload for her office, as employees will have to process the new title tax as well as the ad valorem tax for vehicles sold before 2013.

The title tax may be less expensive for someone who buys a car and hangs onto it for a long time, Walker said, but the new system could increase costs for someone who swaps out vehicles frequently.

The disappearing birthday tax can be a deal for people with old cars, Walker said. Her sister-in-law, for example, pays only $3 for her vehicle made in the 1990s.

County tax commissioners around Georgia, who are tasked by the state with providing vehicle tags and titles, are bracing for the change. Cobb County Tax Commissioner Gail Downing told the Marietta Daily Journal that her office was going to have law enforcement personnel on standby because she anticipates angry - and potentially hostile - customers.