Many readers will remember the long lines and long wait at their local tag offices just to obtain the renewal decal for their vehicle license plate. In the 1980s and early '90s, it meant standing in one line to have a form typed, another line to have the fees calculated and yet another to finally pay the taxes and fees to acquire the renewal decal. Usually, by the time the taxpayer walked out of the tag office on Lexington Road, he had not seen the light of day for several hours. Often, a victory dance immediately ensued.
Eventually, the long lines and the time-consuming process to renew vehicle registrations prompted the General Assembly to find a way to improve the system and reduce the time their constituents had to invest in obtaining a renewal decal. House Bill 379 of the 1995 legislative session changed everything and created what has become known as the “birthday tax.” This law required local tag offices to convert to a year-round renewal system that mandates vehicle registration and payment of taxes on or before the owner’s birthday.
The birthday tax law allows vehicle owners to pay taxes and fees 60 days before the deadline, but there is something in the human genome that screams “Put it off until the last minute!” Of course, in this case, that's the vehicle owner’s birthday. By listening to the dark side of our conscience, we often postpone payment until the deadline and resent having to pay taxes on our birthday. On the bright side, vehicle owners no longer had to spend hours standing in line to buy a renewal decal. So, the legislation was effective in reducing the long lines at local tag office and provided for a more consistent flow of tax revenue from vehicle registration, but no one predicted the resentment that would result from the change.
The anti-birthday tax sentiment led the General Assembly to pass House Bill 386 in 2012; it takes effect Mar. 1. Upon the governor’s signature, the cry from the Gold Dome was “Death to the birthday tax!” Many news outlets and legislators have echoed that same declaration.
Is that really what happens on Mar. 1? No. The new law is complicated and comprehensive, but it does not eliminate the birthday tax as many Georgia citizens have been led to believe.
One positive aspect of the legislation is that sales tax on vehicles purchased from a retail outlet—new and used car dealers—will no longer be collected. In essence, the sales tax is being replaced with the new Title Ad Valorem Tax (TAVT). The legislation sets the TAVT rate at 6.5 percent of the vehicle’s value in 2013, 6.75 percent in 2014, and 7 percent in 2015. It also allows the state to raise the rate to as much as 9 percent, if necessary, beginning in 2016.
Most title transfers will be assessed the TAVT, whether purchased from a dealership or from an individual. There are two ways for the TAVT to be paid: either by the dealership where the vehicle was purchased or by the taxpayer when the title is transferred at his local county tag office. For individuals who purchase cars from dealers, the transition will essentially be transparent, with most of the required paperwork and fees being collected and remitted to local tax commissioners without any inconvenience to the vehicle owner. Customers are still required to pay a tag renewal fee each year on or before their birthday, but no ad valorem taxes will be due.
What concerns me most is the unsuspecting citizen who purchases used cars from private individuals, such as neighbors or friends. Currently, the fee required to transfer a vehicle between private parties is typically $38, regardless of the vehicle value. However, under the new program, vehicles purchased from private parties will be subject to the TAVT when the title and tag is issued at the tag office. The TAVT rate on Mar. 1 will be 6.5 percent and is calculated based on the value of the vehicle as determined by the Department of Revenue's Motor Vehicle Division. Customers who fall under the new system will not pay ad valorem taxes on their birthday each year as long as they own the vehicle, but they will need to be prepared to pay considerably more for their first tag. Though no annual tax will be collected on the vehicle, the TAVT will be assessed again before a subsequent owner can obtain a tag and title.
Georgia residents who purchase vehicles from an out-of-state dealer will pay the TAVT to their local county tag agent when the title is transferred. New residents to Georgia will be required to pay a minimum of 50 percent of their TAVT when the vehicle is registered and will pay the remaining 50 percent within 12 months. As long as the total TAVT has been paid by the original owner as required, no additional taxes will be due.
If you recently purchased a vehicle, you might be saying to yourself, “I wish I’d waited a few more months before buying my new car; I could have avoided paying birthday taxes forever.” Fortunately, the General Assembly provided an opt-in clause in the legislation just for that circumstance. If you purchased a vehicle from a Georgia dealer or an individual on or after Jan. 1, 2012, you may qualify for the opt-in provision and be eligible for birthday tax exemption. The rules for opting in are varied, so I recommend you visit our website for additional information.
As I am sure you’ve been able to surmise, the new legislation only applies to vehicles being acquired and titled, or transferred from out-of-state on or after Mar. 1, with the exception of vehicles that qualify under the opt-in program. So, what happens to the vehicle I currently own and renew every year? Nothing, you’ll continue to register the car and pay birthday tax annually.
So much for the death of the birthday tax!
Schrader is the Clarke County tax commissioner.