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Changes to Georgia Law Impacting the Taxation of Motor Vehicles

Changes to Georgia Law Impacting the Taxation of Motor Vehicles. HB 386, HB 266, and HB 463. Legislation. HB 386 (2012 Session): Tax Reform Legislation Part of a larger initiative to spur economic growth Effective March 1, 2013 Title Tax Sales tax Income tax

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Changes to Georgia Law Impacting the Taxation of Motor Vehicles

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  1. Changes to Georgia Law Impacting the Taxation of Motor Vehicles HB 386, HB 266, and HB 463

  2. Legislation • HB 386 (2012 Session): Tax Reform Legislation • Part of a larger initiative to spur economic growth • Effective March 1, 2013 • Title Tax • Sales tax • Income tax • HB 266 (2013 Session): Adjustments to HB 386 • Effective March 5, 2013

  3. Overview • What changes occurred for a motor vehicle purchased on or after 3/1/2013? Generally: • Pay one-time state and local title ad valorem tax (“TAVT”) • Exempt from sales and use tax • Will not pay annual ad valorem tax, aka “birthday tax” • Titled as required in Title 40 • Subject to title & registration fees in Title 40

  4. Overview (cont.) • Title work must be presented in county of owner’s residence/county is collector of TAVT • No title transfers at MVD headquarters • Payment of TAVT + $18 title application fee must be paid at time of applying for title • With limited exceptions, all changes in ownership trigger payment of TAVT – this means casual sales are also subject to TAVT • TAVT is imposed on the Fair Market Value (“FMV”) as defined in the law; often different than sales price

  5. * = may fluctuate, but capped at 9% State & Local Title Ad Valorem Tax

  6. Fair Market Value • TAVT is applied to Fair Market Value (“FMV”) of the motor vehicle, which is defined in different ways depending on whether the vehicle is new or used and what valuation data is available for that vehicle in the state assessment manual. • State Motor Vehicle Assessment Manual • the average of the current fair market value and the current wholesale value for all motor vehicles as determined by the commissioner.

  7. Fair Market Value (New) • The greater of the “retail selling price” (or in the case of a lease, the “agreed upon value”) or the value listed in the state motor vehicle assessment manual. The higher number that is used should then be reduced by the trade‐in value, as well as reduced by any rebate or cash discounts provided by the selling dealer at the time of the sale. “Retail selling price” (or in the case of a lease, the “agreed upon value”) includes charges for delivery, freight, doc fees, and other such fees and is meant to mirror the taxable base that was formerly used for sales tax.

  8. Fair Market Value (Used) • The value listed in the state motor vehicle assessment manual less any reduction for the trade-in value when the car is purchased from a dealer.

  9. Fair Market Value (Used) • USED motor vehicle not listed in the state motor vehicle assessment manual • The greater of the bill-of-sale or the value from a reputable Used Car Market Guide designated by the Commissioner OR

  10. Definitions • Trade in Value • Value of the motor vehicle as stated in the bill of sale for a vehicle which has been traded in to the dealer when purchasing another vehicle from the dealer

  11. Calculation of Title Ad Valorem Tax Dealer Sale Casual Sale FMV * TAVT Rate = TAVT Due 35,000 * 6.5% = $2,275 TAVT (FMV – trade in) * TAVT Rate = TAVT Due (35,000 – 15,000) * 6.5% = $1,300 TAVT

  12. Comparison NEW: $35,000 FMV $15,000 trade in $20,000 taxable value Title Ad Valorem Tax Due = $1,300.00 OLD: $35,000 sales price for new vehicle $15,000 trade in $20,000 taxable value $20,000 * 7.0% Sales Tax = $1,400 Ad valorem @ 25 mills = $350 Year 1 taxpayer pays $1,750 Savings $450 first year and the annual ad valorem tax for every year he owns the vehicle

  13. Exceptions • State and local title ad valorem tax fee does not apply to the following titles: • Titles being corrected, replaced, or reissued to same owner • Addition or substitution of lienholders • Bonded titles issued to registered Georgia dealers • Titles issued to certain persons acquiring abandoned vehicle • Titles issued to insurance company paying claim on stolen vehicle

  14. Exceptions (cont.) • State and local title ad valorem tax fee does not apply to the following titles: • Titled issued to registered builder, retail dealer, or manufacturer for the purpose of resale • Foreclosed title issued in the name of the security interest holder pursuant to Article 9 of Title 11 • MV where TAVT was paid and owner moves out of state and subsequently returns & retitles same MV • Motor Vehicles registered in IRP

  15. Remember • Regular sales tax rules are still applicable for any sales other than the sale of a vehicle that is subject to TAVT • Parts for repair work • Pull-behind trailers • Etc.

  16. Dealers • Used or new car dealer must accept the application for title and TAVT funds on behalf of the purchaser of a new or used motor vehicle and submit them to the purchaser’s county of residence • TAVT funds should not be sent to the state • Addresses for all Georgia tag offices available here: http://motor.etax.dor.ga.gov/tagoffices/selecttagoffice.aspx

  17. Dealers • Dealer must transmit documents & full TAVT within 30 days of date of purchase to the county where the vehicle will be registered • Penalty is 5% of the TAVT after 30 days • Penalty increases for every 30 days thereafter

  18. Dealers • Date of purchase on Form MV-1 to determine if subject to penalty • If guilty of converting fees for own use shall be guilty of theft by conversation & if convicted punished as provided in O.C.G.A. 16-8-12

  19. Purchaser • Purchaser on casual sale must transmit documents & full TAVT within 30 days of date of purchase to the county where the vehicle will be registered • Penalty is 10% of the TAVT after 30 days • 1% Penalty for every 30 days thereafter

  20. Changes to ETR Process • ETR: • ACH agreements with 159 counties • Counties will receive ACH reconciliation reports • Provide DOR with ACH data to each county • Continue to ACH title fees to state • Allow address changes • Affidavit required but will change address even if deal not completed • ETR will use purchase date assigned when PEND title is created • Used to calculate applicable penalty • If penalty due not paid, ETR transaction will be rejected

  21. Leased Vehicles • Pre - 3/1/13 Process • MV is exempt from sales tax • Ad valorem tax paid in lessee’s county of residence • Sales & use tax paid on monthly lease payment • New process • TAVT paid to county where vehicle to be registered • Monthly payment in NOT subject to sales & use tax, and no more ad valorem

  22. Lessor Registration • Lessor is required to register with DOR and pay a $100/year fee. • $2,500 penalty for failure to register • Process is in development; DOR will send out notice on when and how this will work and allow lessors time to get in compliance.

  23. Loaner Vehicle • Definition: Dealer owned vehicle (in dealer inventory) used for less than 30 days within the calendar year to any one customer • Allowed for 366 days • Invoice will be sent if not returned to inventory within 366 day period

  24. Rental Motor Vehicle Concern • TAVT rate for qualifying Rental Motor Vehicle Concern is 1.25% • To qualify, entity must own or lease five or more rental motor vehicles, and must have averaged $400 of sales tax attributable to the “rental charge” of each vehicle in previous year • Applies to “motor vehicle(s) designed to carry 15 or fewer passengers and used primarily for the transportation of persons that is rented or leased without a driver”

  25. Exemptions • Motor vehicles owned or leased by state, county, city, school district, or other governmental entity is exempt from the state and local title ad valorem tax • Motor vehicle exempt from sales tax for disabled veteran is exempt from the state and local title ad valorem tax

  26. Veterans Exemptions • Motor vehicles exempt from ad valorem tax for certain veterans: • Disabled Veterans (48-5-478) • Former Prisoners of War (48-5-478.1) • Purple Heart Recipients (48-5-478.2) • Medal of Honor Recipients (48-5-478.3)

  27. Opt In Provisions • Vehicles purchased between January 1, 2012 and February 28, 2013 may opt in beginning March 1, 2013 but the opt-in can only occur through February 28, 2014 and after compliance with: (1) Calculate the amount of state and local title ad valorem tax that would be due if bought after March 1, 2013 and (2) Add the amount of sales tax paid plus the amount of ad valorem taxes paid in 2012 (old) and if applicable ad valorem taxes paid in 2013 (old) and • If (1) is greater than (2) the owner shall remit difference to tag agent or • If 2 is greater than (1) no additional amount is due

  28. HB 463 • Passed during 2013 session • Meant to simplify and expedite the IRP process in Georgia • Effective January 1, 2014 • DOR currently creating program requirements

  29. Overview • Current Law • IRP fees on motor vehicle • Apportioned ad valorem on motor vehicle must be paid at the county level • New Law as of 1/1/14 • Increased IRP fees • No more apportioned ad valorem on motor vehicle • Apportioned ad valorem still exists on trailers

  30. Questions/Discussion Calculator and Other Information available at: www.newtitletax.com

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