Car dealers, taxpayers confused by new title tax

Mike Combs has one word for Georgia’s new automobile tax law: “nightmare.”


Combs, the general manager at Fairway Ford in Evans, said it has been tough since the new law was implemented March 1.

That’s not because his car sales have dropped. It’s because of confusion over how to abide by the law that does away with the annual “birthday tax” on automobiles and replaces it with a one-time title tax that has to be paid at the time of purchase.

Combs says there’s been a steep learning curve and little training for his employees or tax officials on the complexities involved with collecting the tax and distributing it to the proper authorities.

“Nobody was ready for this,” he said. “There should have been a trial period before this went into effect.”

Georgia’s new title ad valorem tax does away with sales tax on automobiles and imposes a 6.5 percent tax on every car purchase, even those that take place between private individuals – which were exempt from sales tax under the old system.

Part of the intent of the law was to capture some of that lost sales tax revenue from private sales and to “level the playing field” between private sales and those that take place at a dealership, which was always responsible for collecting sales tax, said Bill Morie, the president of the Georgia Automobile Dealers Association.

Morie’s organization was a strong backer of the legislation that changed the car tax law.

“We supported parts of the original bill that we were involved in,” he said, referring to those sections that address private, or “casual,” sales. “There were parts that we had to amend after the original bill passed.”

Morie said that on average about 38 percent of used car purchases nationwide were casual sales, but in Georgia that number was as high as 60 percent. He said that was because Georgia was one of only three states that did not tax casual sales. He said there were many individuals who were basically unlicensed car dealers taking advantage of that loophole. The new law will change that, he said.

He said not every aspect of the new law is to his liking, but he thinks issues will be ironed out in coming legislative sessions.

“When we do this kind of major overhaul, it is hard to think of everything,” Morie said. “I think, in time, we believe a lot problems will work themselves out.”

In the meantime, he has been getting an earful from frustrated car dealers.

“I can imagine it is an administrative nightmare,” he said. “It is such a huge learning curve, but we are doing everything we can to answer their questions.”

Dianne Lacey, the controller at Fairway Ford, said there are problems in collecting the correct amount of tax because there can be small differences in interpreting the law county to county. In addition, tax officials are learning the system at the same time as car dealers, so mistakes are being made.

“This past month has been a disaster,” she said.

One new aspect she and other dealership accountants have to deal with is distributing the taxes. Before, when it was only sales tax being collected, it was fairly simple – a portion went to the county and a portion went to the state.

Now, it all depends on where the new owner resides. Money collected for the new tax has to be sent to the owner’s county tag office. In some cases, such as sales to military members, the new law doesn’t apply.

“That’s a paperwork nightmare,” she said, explaining it requires pay stubs, orders, letters from commanding officers and other paperwork to apply the military exemption.

Tax officials agree that there are still many details to work out before the system runs smoothly.

Jenny Bales, the director of motor vehicle for the Columbia County Tax Commissioner’s Office, said some of the problems involve companies that process titles for the dealers.

“There are many, many errors being made that we are having to clean up at the local tag office,” she said. “There’s still a lot of confusion with the dealers on what the taxable value is and what the tax is.”

Takiyah Douse, the motor vehicle director for Richmond County, said such mistakes make for unhappy customers.

“I would describe the problems as a disconnect between the state and the implementation of the law and the system being able to carry out the demands of the new law,” she said. “Mainly, we are finding it commonplace that the customers are not aware of the new law.”

Douse said she has been explaining the law to baffled taxpayers who are surprised that they will have to pay a tax that amounts to 6.5 percent of the automobile’s fair market value.

Before March 1, purchasing a used car through a private or casual sale meant the taxpayer had to pay $38 – $20 for the tag and $18 for the title. Now, the 6.5 percent title ad valorem applies. For a used car valued at $5,000, the tax would be $325.

By state law, taxpayers have only seven days to pay the tax. After that, they will be driving illegally.

Columbia County Tax Commissioner Kay Allen said that can be a shock for unsuspecting taxpayers.

“We’ve had some people who have walked out because they just didn’t have the money,” she said. “We can’t give them a tag, so I don’t know what they do.”

Tax commissioners urge patience with new auto taxes
Georgia law on March 1 does away with ad valorem tax on vehicles
Tax officials expect confusion with tag changes
Use the Department of Revenue's Title vs. Ad Valorem Tax Calculator