House Bill 80 sailed through the lower chamber almost unanimously on a 159-4 vote Valentine’s Day and went to the Senate. The measure would eliminate the required payment of property tax every year when auto tags fall due on the owner’s birthday.
The bill, fulfilling a promise by Republicans, provides a complicated, drawn-out schedule for imposing a new one-time motor vehicle title tax at the time of purchase.
The title tax replaces two taxes — the sales tax at time of purchase and the annual property tax.
The bill also sets up a system designed to insure that counties get the same amount of tax money in the future as they do under the “birthday tax” system.
The title tax rate starting March 1 will be 6.5 percent of the “fair market value” of a vehicle when it is purchased.
On a car that cost $25,000 the tax would be $1,625 by my calculator.
The good news is that no tax would be due each year that the owner keeps the car.
Also “fair market value” as defined by HB 80 includes layers of provisions that can lower the tax.
A key provision — based on the language of the bill as interpreted by this non-lawyer — is that the fair market value of a new vehicle is reduced by “the trade-in value of another motor vehicle and any rebate or any cash discounts provided by the selling dealer and taken as the time of sale.”
There are provisions covering leased vehicles and used autos, but again, the bottom line is that the tax is paid at purchase one time.
No more auto taxes due on your birthday. And the title tax rate tops out at seven percent after 10 years.
But the new tax applies only to autos purchased beginning March 1.
If you keep the vehicle you have, you will continue to pay the “birthday tax” every year.
An exception is made for owners that acquired or acquire titles to vehicles since Jan. 1, 2012.
They will be allowed to opt into the new title tax system to escape the current annual tax “at any time prior to Feb. 28.”
Likewise, family members inheriting vehicles may opt into the new system.
If the vehicle transferred is under the new law, there is a small tax imposed, based on the fair market value.
There are concerns about problems that may arise if thousands of eligible auto owners want to get into the new system.
This option has to be exercised in person at a given county office, and the Fulton County tax commissioner has found through simulating the process that it can double the time a clerk takes to do the necessary work, and more workers will need to be hired.
It seems that killing the “birthday tax” won’t be quick or easy.