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Changes coming to ad valorem
Elimination of 'birthday tax' set for March
Tax WEB 1
Brett Rudow, center, shows a car to Erik, left, and Ryan Miller at Andean Chevrolet. Changes to the state’s ad valorem tax will take effect March 1. - photo by Autumn Vetter

There are a few details still to be fine-tuned before Georgia’s new ad-valorem tax rules take effect.

If all goes according to plan, though, the changes likely will eliminate the annual car tax for those who buy a vehicle after March 1.

District 23 state Rep. Mark Hamilton said the annual ad valorem levy car owners must pay on or before their birthday is “the most despised tax that we have.”

“Once we get this started, this will be a much easier, simpler and less expensive way to implement the tax,” Hamilton said.

His fellow Republican colleague from Cumming, District 27 state Sen. Jack Murphy, said car owners soon will be “done with” the so-called birthday tax.

“You don’t have to worry about it every year,” he said. “Plus it’s going to make it a lot less complicated when you’re talking about keeping up with all these birthday taxes being received at certain times of the year on certain birthdays.

“Local governments are guaranteed by a formula that they’ll receive a certain amount of reimbursement to cover what they were receiving under the old birthday tax … [but] they lose a little bit of the guarantee every year.”

Here’s how the new system will work: When a person goes to a dealership and buys a new or used vehicle, there will no longer be a state or local sales tax charge. Instead, there will be a one-time 6.5 percent combined fee for tax and title. In 2015, that will increase to a 7 percent charge.

Because the new one-time fee isn’t much higher than what was collected in sales tax, the law has another component focused on casual sales, aimed at helping make the change revenue-neutral.

Casual sales — those where one person sells a vehicle directly to another — currently don’t fall under sales tax requirements. Under the new setup, however, they will be no different than a used car sale.

“Before … we collected the sales tax for the state and individuals didn’t. They just signed the title,” said Jerry Williams, general manager of Andean Chevrolet in Cumming.

“So now when an individual buys a car from another individual, when he goes to the state to register, he’s got to pay the tax for the ad valorem. I think it will be good for the dealer.”

Bill Howell, vice president of Billy Howell Ford-Lincoln-Mercury, said the elimination of the birthday tax likely won’t change business for dealerships. But the new casual sales rules are “what’s really going to help us.”

“The people that are selling cars themselves and not collecting sales tax have a distinct advantage over dealers that have to charge the sales tax,” he said. “This basically levels the playing field and does what’s fair.

“And a lot of people will have small businesses that are operating without licenses selling used cars. It’s going to make them at least play by the rules now.”

Questions remain, however, about how those rules will be processed and enforced.

Forsyth County Tax Commissioner Matthew Ledbetter said he’s not sure about what to expect, though training classes will be held in early 2013.

“We understand there are going to be some more changes coming,” he said. “But we just don’t know enough about it at this point. We don’t want to misinform the public.”

Hamilton said a few details still need to be worked out, including the logistics involved with letting those who bought a car in 2012 opt in to the new system.

“This is a major piece of legislation that’s revamping a significant part of our tax code,” Hamilton said. “Even though this was worked on very had for the last four years, we know there are going to be some tweaks and some changes.

“In fact, there are meetings going on as we speak so that during the session, we can adjust anything we’ve found that needs to be adjusted … I will expect there will most likely be a clean-up bill.”

In addition to casual sales being taxed under the new plan, Hamilton noted revenue will come from sales that need to be reported.

“We feel like there are situations were presently sales tax could be either not reported or under reported,” Hamilton said. “So we think that we’re going to simplify this. And if there are people out there that are trying to avoid the tax, this new system will help to make sure that’s not the case.”