Winners, losers from new tax reform bill still unclear

Published 5:38 am Thursday, March 29, 2012

Buying a used car from a friend will get more expensive next year, if Gov. Nathan Deal signs a new tax reform bill into law.

That law will exempt automobiles from both the sales tax and the ad valorem tax. But it replaces those taxes with an excise tax that will be charged each time a vehicle is registered or changes registrations.

Currently, when someone buys a used car from an individual, the new owner doesn’t pay sales tax. But under the new law, the owner would have to pay the excise tax. That tax will be paid in the county the vehicle is registered in, not the county it is bought in.

“That eliminates the advantage of buying from an individual. Now, it doesn’t matter who you buy from you are still going to have to pay the (excise) tax,” said Whitfield County Tax Commissioner Danny Sane. “That’s probably an advantage for automobile dealers.”

Sane was one of several Whitfield County officials who sat in Wednesday on a call with Association County Commissioners of Georgia Legislative Director Clint Mueller on the impact of a tax reform bill that passed the General Assembly last week.

Mueller said the excise tax on a used car will be based not on its purchase price but on the blue book value. He said those moving into the state will have to pay the tax when they register their cars. Those who don’t have to register their cars, such as members of the military and college students who aren’t permanent residents, will not have to pay.

But the state doesn’t intend to let those who don’t buy a car escape from taxation. Mueller said owners will still have to pay ad valorem taxes their current vehicle until they sell it.

Sane says it isn’t clear that the tax burden on automobile owners will fall under this new system.

“If you buy a car and keep it, say, 10 years and average out that payment over that time, you will probably end up about even,” he said. “But change cars every two or three years, and pay that tax every time, I’m not sure there’s much of a savings.”

The bill would also remove all state and most local sales taxes on energy used in manufacturing, mining and agriculture. The one exception is for Special Purpose Local Option Sales Taxes (SPLOSTs) imposed by local school systems. Mueller said lawmakers could not find a constitutional way to let school systems make up for those lost revenues.

But the law would allow local governments to impose their own excise taxes on energy. Mueller said the law’s definition of manufacturing is pretty broad.

Whitfield County Board of Commissioners Chairman Mike Babb noted the law’s definition of energy is also broad.

“It’s not just electricity. It’s (all) energy, so the diesel in that truck moving yarn from Calhoun up here isn’t taxed,” Babb said.

Sane agreed.

“It looks to me that the gas and electricity at Chick-fil-A is going to be exempt, too,” he said. “They take raw meat and convert it into meals. Is that manufacturing?’

Mueller said the state would also provide some funds over the next 10 years to local governments to help them adjust to the new tax system.

But Babb said that even with that aid it isn’t clear if the total revenues collected by the county are going to go up or down or stay the same.

“The bottom line is that we don’t have a very good idea of how much this is going to cost us,” he said. “Nobody knows yet. We will have to go through some experiences before we know what the total cost is going to be.”

To find out more about Georgia’s new tax reform bill, go to www.accg.org. Those with questions about how the bill will affect taxes on vehicles can call the Whitfield County tax commissioner’s office at (706) 275-7510.