ALBANY, Ga. — The state's new "birthday tax" law could have a chilling effect on the number of people who get car leases because of a little known part of the law dealing specifically with those types of transactions.
Beginning March 1, the decade's old tax law that requires vehicle owners to pay a yearly ad valorem taxes is changing to one that requires a one-time 6.5 percent title fee that would be charged at the time of purchase.
Car dealers have applauded the legislation because it includes a new requirement that casual car sales of used vehicles between two people also be charged the title fee, righting a disadvantage that they believe has gone on too long.
But one portion of the law that appears to have been missed by some will impact those consumers who choose to lease vehicles rather than buy.
According to Dougherty County Tax Director Denver Hooten, the current Georgia law requires leasees to pay a monthly fee based on a percentage of the base lease amount as a sales tax to the state and local governments. In Dougherty County, that is 7 percent.
Under the new law that starts March 1, not only will that tax continue, but people who lease vehicles will also have to pay the 6.5 percent title fee that people who are buying vehicles must pay — a move that some believe will discourage people from leasing vehicles and could have a negative impact on the car industry.
"Oh it'll kill it," Hooten says. "I know I would think twice about leasing a vehicle for two years when I have to pay 6.5 percent up front plus the monthly sales tax."
According to the U.S. Department of Transportation's Bureau of Transportation Statistics, in 2010, the latest year listed, there were 51.43 million auto sales and leases in the United States, with the majority being used car sales.
Of the 14.55 million new vehicle sales and leases that year, 2.97 million, or 20.4 percent, were leases.
Hooten said a new piece of legislation has been introduced in Atlanta that will likely reshape the "birthday tax" bill, shifting the amount of up-front tax consumers will have to pay.
"We've heard that it could go as low as 4 percent," Hooten said. "But, as far as I've seen, the issues facing people who lease cars are still going to be there."