The Atlanta Journal-Constitution reports a bill that eliminated the birthday tax on new cars does not account for car leases — which represent about 42 percent of new car transactions in the state.
After March 1, consumers who buy new cars will pay a single 6.5 percent sales tax at the time of purchase. Consumers who lease cars will pay the same 6.5 percent title tax as people who buy cars outright, but will also have to continue paying monthly sales taxes in the jurisdiction in which they leased the car.
The Georgia law may be the first of its kind, said Danielle Fagre, senior vice president of the American Financial Services Association, whose members include lease-financing companies.
“We don’t know any other state that treats leases negatively compared to purchases from a tax perspective,” Fagre added. She said Georgia has a higher rate of leases than most other states. The national car-leasing average is about 17 percent compared to 42 percent in Georgia, according to Experian Automotive.
The newspaper reports state lawmakers will likely tweak the-car tax bill this year.
“Almost every time, there will be one or two or three things that will wind up with unintended consequences, and things not turn out the way we had intended to at the time,” said Rep. Mickey Channell (R-Greensboro). “The car title thing is certainly one of them.”
Rep. Tom Rice (R-Norcross) has filed proposed legislation aimed at addressing the issue by lowering the initial title tax on leased cars to 4 percent.
However, the proposed legislation would not address the monthly sales tax, and Rice says the Legislature may struggle to help cities and counties recover projected revenue losses from the elimination of the birthday tax.
“We need to ensure there’s enough revenue on these vehicles to make up for the lost (birthday tax),” Rice said. “That’s why there’s any title fee on leased vehicles at all.”