Georgia State House Bill 386 passed on Tuesday and is expected to meet very little resistance in the Senate vote today. It is a 50 page bill that sets out to change almost every facet of taxation in the state of Georgia. It will impact everyone living in Georgia but one of the most significant areas of impact will be the taxation of motor vehicles.
Georgia is one of very few states that currently offers a sales tax exemption for the purchase of a pre-owned car from a private owner. That means that if you buy a car that is currently registered to a private individual (not leased, not in a company name) then you would not pay sales tax on it upon registration. That policy will end with the passing of this bill. Additionally, and most triumphantly, Ad Valorem tax will end in the state of Georgia. The added revenue from a flat sales tax applied to all vehicles sold will make up for the deficit. The flat tax rate will begin at 6.5% and potentially increase to 7% in 2014.
Ad Valorem taxes as well as some other taxes that are done away with in the bill go directly to fund local governments and county budgets in Georgia. There will be approximately $217 million dollars in revenue lost from the removal of these taxes to the local governments but the state will share the new revenue from other areas.
If signed into law, the bill would go into effect partially in August and then entirely in March of next year. For cars owned prior to that date, owners will still continue to pay Ad Valorem Tax each year. For any car sold after that date, the new rules apply. This will inevitably be a big change for us all here but it streamlines the taxation policy for us. I am definitely a big fan of that (and not getting a $1,200 bill each October for the Gallardo tag!).