HB 386 offers dramatic changes for car buyers

Natoya Hill, left, looks at a 2013 Nissan Sentra with the help of Sales & Leasing consultant Gregory Garth Thursday at Five Star Nissan of Albany on Oglethorpe Blvd.

Natoya Hill, left, looks at a 2013 Nissan Sentra with the help of Sales & Leasing consultant Gregory Garth Thursday at Five Star Nissan of Albany on Oglethorpe Blvd.

ALBANY, Ga. — While House Bill 386 is generating quite a stir as its March 1 implementation date approaches, particularly for its impact on the way the state collects motor vehicle taxes, most Georgians are unaware of the far-reaching impact of the bill.

HB 386 is expected to have a huge positive impact on Southwest Georgia’s economy in general, on the area’s car dealerships specifically. And while the good news will be celebrated up and down Albany’s Motor Mile and at other automobile dealerships, there’s even a measure of good news in the bill for Joe Q. Citizen.

“We’re still working on the details, but I offer the analogy of steering a ship,” House District 152 Rep. Ed Rynders, R-Leesburg, said of the legislation. “Before you get things right, you have to make some adjustments. The Legislature is making adjustments as we speak on some of the unintended consequences of the bill — such as the cost of leasing vehicles — but once we get the ship going, we’ll get it on the right path.”

Dougherty County Tax Director Denver Hooten said it’s important for the car-buying public to understand the provisions of HB 386 so that they aren’t caught unaware when purchasing a vehicle, whether new or used.

“The biggest change,” she said, “is in casual sales of vehicles in the state. In the past, caual sales — sales that don’t involve licensed dealers — have not been taxed. Research shows that from 50 to 55 percent of all car sales in Georgia are casual sales.

“Under HB 386, before a person can obtain a title in the state of Georgia for a vehicle he bought from a non-dealer, he must pay a 6.5 percent flat fee based on the value of the vehicle. That’s where we’ll have initial problems. If citizens aren’t aware of the new law, they’ll be surprised — and I’m sure some will be angry — to find out they have to pay that fee.”

For automobile dealers, the law is expected to level a playing field that their representatives say has long left them at a disadvantage.

“You see different numbers, but research I’ve read shows that as many as 60 percent of all car sales in the state are casual sales,” John Prince, owner of Tifton-based Prince Automotive Group and of Prince Chevrolet in Albany, said. “Because dealers must charge a 7 percent tax on sales in Georgia, they’re at a big disadvantage.

“I think (HB 386) is going to be good for dealers and a great thing for the state and for the counties in Georgia. There’s going to be more (tax) money coming in. You start collecting taxes on 60 percent of the automobiles sold in the state, that’s going to be a tremendous amount of revenue. I’ve heard some people complaining about this already, but why wouldn’t Georgia do it? It’s one of only three states that doesn’t collect taxes for casual sales.”

Hooten, who talked with The Albany Herald after making a preliminary presentation on the new motor vehicle tax before the Dougherty County Commission Monday, said HB 386 eliminates the motor vehicle “sale and use tax” in favor of a title ad valorem tax on vehicles sold after March 1. Instead of the 7 percent rate currently charged, the new tax will start at 6.5 percent this year, increase to 6.75 percent next year and to 7 percent the next.

“The Legislature has the processes in place to go up to 9 percent if they see a need to,” Hooten said.

Additionally, taxes paid on tag renewals each year — the so-called birthday tax, based on the millage rate in a car owner’s county of residence — will go away for all new car owners under HB 386. Only fees of around $38 will be due upon renewal.

Owners of vehicles — new and used — purchased between Jan. 1, 2012 and March 1 can opt to register their vehicle under the new law, but Hooten suggests looking at individual circumstances before making a decision.

“If you’ve already paid taxes, on the purchase and on your tag, and the amount is greater than the 6.5 percent (under the new law), you may be able to opt in at no cost,” she said. “Any ad valorem tax paid (on vehicles) can be applied as credit.

“But if someone plans to keep their car for only a year or two, it might not make financial sense for them to do so.”

(To opt in online, go to www.etax.dor.ga.gov, click on “motor vehicle” and follow the prompt to “tax calculator.”)

The 6.5 percent tax on casual sales, which is based on Kelly Blue Book value of the vehicle, can be appealed to the Board of Tax Assessors, much as property owners can appeal their assessed property values.

“There may be a compelling reason that the actual value of the vehicle is less than the Blue Book value,” Hooten said. “An owner will have to pay the tax based on the estimated value, and if he wins his appeal the money will be refunded.”

Hooten warns that owners of vehicles purchased before Jan. 1, 2012 will continue to pay taxes as they currently exist.

“The first time you hear about all this, it can be overwhelming,” she said. “Once you get into it, though, it’s pretty simple, for the taxpayers and for the tax office.

“The biggest potential problem I see is that transactions will now take longer. The lines will probably be longer at the tax office. We just ask people to be patient as we all get used to the new process.”


FryarTuk 2 years, 10 months ago

Why didn't this article include tax on leased vehicles? Why didn't it deal with the tax on the monthly lease installments?

AH: "HB 386 is expected to have a huge positive impact on Southwest Georgia’s economy in general, on the area’s car dealerships specifically." Please explain how creating sales tax on leased vehicles and their monthly payments along with adding a tax to John Q. Public when he sells his car to a neighbor helps Southwest Georgia's economny in general. Keeping in mind the government decides the value of the car which will be taxed at 6.5%. I think there are a lot of John Q. Public voters who want to understand this GOP tax hike.

AH:"For automobile dealers, the law is expected to level a playing field that their representatives say has long left them at a disadvantage." A disadvantage at what? Most of the time people sell a vehicle is to purchase a new one from a dealer? What this really does is reduce the desire of a casual seller to transact privately and accept a low trade in from a dealer? Is that what you mean by leveling the playing field?


rightasrain 2 years, 10 months ago

The money-ladened Auto dealers in the state obviously "lobbied" these politicians and "convienced" them to pass this bill. It's obvious that the politicians kept the consideration of such a bill and "the vote" a secret because they knew the outrage that would come from their constituents. This bill only serves to penalize the private citizen for selling his/her private property to another individual. Ed Rynders says this is a great thing and he obviously voted for it. IF he runs for re-election, he should be voted out of office. All these politicians (from local to DC) have got their hands so deep in my pockets, they've got me by the balls are are squeezing hard to force me to "cough up" more and more in taxes. Not only is this "new law" unconstitutional, I understand that (according to a local dealer) that the state's "value" on used vehicles will increase over the previous year, thus allowing the counties to collect more money from the private sales! This is not right and we citizens should inundate our state politicians with our outrage over this law. If they have time to "fine tune it", they have time to repeal the bill.


SWGAconservative 2 years, 10 months ago

Wow, I read the comment "only serves to penalize the private citizen for selling his/her private property to another." I have to ask what effect does it have on the private citizen, it picks up a tax on the sale. It has no effect on ownership. The fee is paid by the user not the seller. I must be missing something where do you see that it penalizes a private citizen or negatively effects their private property. This comment baffles me, and would love for you to explain. What is your solution? Or would you prefer that casual sales continue because you purchase your vehicles that way. You receive benenfit individually but not everyone does. The last time I checked you are responsbile for reporting casual sales and use even if tax is not collected at the time of sale. I assume that all of us have done just that when purchasing non taxes items and reported that as such?


FryarTuk 2 years, 9 months ago

"I must be missing something . . . ." You bet you are.

"It has no effect on ownership. " Say what? Read your comment " . . .it picks up a tax on the sale." Who do you think buys the car? A Martian?


USTPC 2 years, 9 months ago

Vehicle transactions between two private citizens was exempt from sales tax until this bill was passed. Now the purchaser will pay 6.5%. Therefore, it penalizes the private citizens who purchase their vehicles from other private citizens.


FryarTuk 2 years, 9 months ago

Rynders used the analogy of turning a large ship. I will borrow from his example. This law is like a vessel without a rudder and helmsman. Furthermore it is not a large ship it is more like a garbage scow. The law is designed to shift the taxes from the large multinational and international corporations are paying to the small businesses and middle class.

If the taxes are wrong just pass a law to stop collecting them. They didn't they passed a law to shift the taxes to the people who have no lobbyist in Atlanta. Mark my word, relief will be found for the folks who have money to put in the political pots. It all boils down to the fact that politicians do not serve the people but themselves no matter democarats or republicans.


whattheheck 2 years, 9 months ago

I am delighted that the notable consummate politician Ed Rynders took the time to team up with a proponent of all government and taxes to tell us why this is a good deal. .Ed, if it were just a matter of reading the bill and the light would come on for us, why didn't you read the bill and eliminate the "unintended consequences"? I can only conclude you didn't read the bill or didn't understand it.

What Hooten says about possibly challenging the value established by the Kelly Blue Book may be possible under the process but like with the value of a house, the tax office generally prevails and in any event the process is arduous. So, when a car is bought from a local and Kelly has five categories of "values based on options and condition", which one is used for the tax transaction? If the car is in "poor" shape, how many of the local poor and downtrodden on subsidized living, Carlton's constituency, are going to be savvy enough to say anything? An unintended consequence for sure!

Car dealers are hoping for more used car sales so there is more potential to pork. The state wants more upfront money and already has the mechanism to increase the tax rate in place. Who do you see as the winners and losers on this one?


USTPC 2 years, 9 months ago

Good questions. I would add one more.

Will the vehicle value on transactions between private parties be based on the "private party value" or on the "retail value"?

Logic would say private party but since the government is involved you throw logic out the window.


USTPC 2 years, 9 months ago

Let's see if I understand how the bill works.

1) All vehicle sales whether new or used, whether between private citizens or dealers will be charged 6.5% (with the potential to go as high as 9% in the coming years) at the time of purchase as of March 1 2013.

2) All vehicles purchased on or after March 1, 2013 will no longer pay an ad valorum tax on the vehicle.

3) All vehicles purchased or owned prior to March 1, 2013 will continue to pay the ad valorum tax even if the ad valorum taxes already paid exceeds the 6.5% title fee of the value of the vehicle when it was originally purchased.

Yep, typical government shafting of taxpaying citizens. I hope everyone has some KY handy to ease some of the pain.

Oh, and to all you car dealers jumping for joy about this, I still will not buy my vehicle from you. I will continue to purchase it from an individual. I may get shafted by the government, which is painful enough, but I am not going to add to that pain by getting shafted by a car dealer as well.


FryarTuk 2 years, 9 months ago

DOR summary of ad valorem taxes as it was passed last year. May change. http://www.accg.org/library/ACCG_HB386_Tax%20Reform%20Legislation%20Overview.pdf.

I infer from DOR chart that after year of new purchase, ad valorem taxes will continue to be paid on all vehicles. Perhaps the AH writer will ask Denver Hooten. Thanks for your note USTPC. This is not a law which helps job development because it smacks down small business and middle class taxpayers. John Prince owns several vehicle dealerships and I believe is a good person, the law may help him in a backhanded manner but I fail to see how it helps his leasing folks. It sure doesn't help the small businesses and taxpayers that lease (25% of new car purchases). The bill is designed for the large corporate entitities that pay taxes on energy use. If it is a bad tax then stop it but don't shift the burden on to the middle class and small businesses. This redistribution of wealth takes from the midlings and gives to the politicians and big guys. For the life of me, I can't understand the particular AH writer's incomplete reporting. Politics makes strange bedfellows.


trudy2 2 years, 9 months ago

And I thought the crooks were in D.C.


Sherwood_Eagle_Alum 2 years, 9 months ago

Not about leveling any play fields, but rather about implementing new means to collect tax revenue.


rightasrain 2 years, 9 months ago

Just wait...the next move will be to increase the tag fee. BTW, Ed Rynders said that he would welcome his constituents telephone calls and emails; let's light up his phone and send the emails. He's already feeling the heat and will be quite defensive when confronted about his part in all of this!


ustaknow 2 years, 9 months ago

Basically, it is double taxation. The cars have already been taxed once before at original point of sale. So to tax it again and again ( every time it is sold) is just paying taxes over and over for the same thing.


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