Hammer Time: Read My Lips!

Steven Lang
by Steven Lang
hammer time read my lips

Taxes and fees are the pedal and the metal of state governments. Without em’, all you would be looking at is a bunch of big buildings with no one doing anything in them.

Most police cars would be busy hiding out in secret hideaways awaiting the next revenue source. Property taxes would go way up. Appraisals for those properties wouldn’t follow market realities, and the state and county governments would be busy up trying to drum up every pork barrel budget possible from the Federal government. From airports with no aviation traffic. To winding roads that lead to the eternal fountain of no accountability.

But then again, my kids need to be educated. Roads and sewers fall apart. Bad guys (and girls) need to be put away and rehabilitated. Parks need to be protected. The roads need to be repaired. Restaurants need to be hygenic. Fire departments. Libraries. Electric power. Water. Disaster relief…. and dare I say it… health care. That last one is a real big issue for a lot of folks.

How does the government pay for it all? Simple. By trying to be fair. Stop laughing.

Here in Georgia we just passed a new bill. House Bill 386 removes the Casual Sales Tax Exemption for individuals buying and selling vehicles between each other.

This means two things. First, Georgia and Vermont now have one less thing in common. Second, a lot of Good Ol’ Boys are going to get real ticked off when they find out that the government has officially treated their personal property as financial collateral.

“This ain’t fair!”, will be the battle cry from Atlanta’s pleasant valley suburbias, to the hinterlands of Deliverance country. “They can’t tax me! Why I’ll just lower the sales amount so that it won’t seem like so much.”

It won’t matter. The Georgia Independent Auto Dealers Association (which I am a proud member of) put it all in black and white.

” Sales Tax on vehicle purchases will be replaced with a “Title Fee” which will start at 6.5% in 2013, 6.75% in 2014 and 7% in 2015. There is a 2% option to use if necessary after that time. The calculation will be determined by the “fair market value” of the vehicle, not by the “selling price.” Again, the new Title Fee will replace the Sales Tax, not add to it.”

So you want a title and tag for the vehicle? Great! Pay the same money as everyone else.

Don’t want to pay your share of the $150 million in estimated proceeds? Enjoy your new museum piece.

You would think that this battle encouraged a lot of debate since it effectively results in a nine-figure tax bump. Nope. It passed 54-0 in the Senate. No objections and no abstentions.

And you know why? Because it’s fair… to a degree.

First off it’s fair for the government. Everyone and their uncle tries to get out of paying taxes. Don’t believe me? About a third of my calls from interested buyers eventually come with the following question.

“Do I have to pay sales tax?”

“Why yes you do!” Even if I cut my price, you still have to pay a car dealer for a retail transaction.

So what ends up happening from my personal several hundred dollar disadvantage? A lot of things. First, people hang up the phone or start nickeling me down from the get go. That’s a cost that comes with selling a product that millions of other people happen to already have on their driveways… and I’m OK with that.

Second, many car buyers at the auctions become curbstoners. They put their vehicles on a variety of corner lots and busy intersections. They then put the titles in the names of their wives, uncles, cousins and random people in the phone book. Or better yet, they just keep the title ‘open’ in the prior owner’s name.

Every person can buy or sell five vehicles a year in the state of Georgia without being taxed or licensed for the privilege. Play your cars right and you can make thousands of dollars tax free. Play other people’s cars right and you can get tens of thousands of dollars tax free.

So you buy the car from the so-called private party. And then what happens after the transaction? You may find the vehicle breaks down, has flood damage, electrical issues aplenty, or is a rolling deathtrap. Sound too extreme? It happens here all the time.

Vehicles that have been impounded by the local tow company and sold at auction are an exceptionally nice target since the state doesn’t require the vehicle to be immediately titled. Even if they did, the transaction would be legal unless you could prove that the ‘individual’ knew of the salvage history.

These illegal transactions number well into the tens of thousands of vehicles. They cost the public and the state government tens of millions of dollars.

Dealers and the public also have an opportunity to cheat. Lower ‘transactions’ on bills of sale results in lower taxes collected by the state government for that transaction. It also results in more money that needs to be collected from everyone else.

The current tax policy for automobiles that has been developed in Georgia is fair from where I stand because it…

1) Treats everyone the same.

2) Eliminates most of the freeloading and ‘cheating’ issues related to collecting sales tax.

3) Puts the burden of payment squarely on the car buyer.

Sorry, but my job is not to pay your sales tax. It also shouldn’t be the job of anyone else.

Disagree with me? Then let me know of a better plan.

Join the conversation
2 of 51 comments
  • Omnifan Omnifan on Apr 03, 2012

    Kind of the same treatment with "dealer fees" that have been legalized by many state governments. Used to be called "dealer prep," and when competition drove that to 0, then the dealers used their lobbyists to pass the dealer fee laws. The state ended up imposing this "dealer fee" tax on the consumers. When I bought my last Chrysler vehicle, the dealer told me that since I was using an employee discount I would not have to pay dealer fees. But if I had no discount, I would pay it.

  • Trucky McTruckface Trucky McTruckface on Apr 03, 2012

    There's a lot of unanswered questions here. Steve didn't mention that the new "title fee" does away with Georgia's dreaded annual Valorem Tax, which taxes you a percentage of your vehicle's value every year. On a new car, it can be pretty steep; on my Mustang it was about $450 the first year. However, Georgia's phasing out the tax over the next 10 years; If you currently own a vehicle, you will have to continue to pay the tax until 2023, or until your purchase another vehicle (and pay the title fee). Great. The title fee is about the same as the current sales tax, but I've yet to find a couple of critical details. Obviously, private sales will now be "taxed." But what about the trade in credit on new cars? I had a $15k trade in when I bought my Mustang, which cut the amount of sales tax I owed by nearly half...will that continue under the new law? What about new Georgia residents? Will they have to pay at the title fee when they transfer their out-of-state title to Georgia, or will that be exempt? And what about the counties? They're obviously going to take a hit once the valorem is phased out. Is there anything stopping them from charging you additional fees of their own? The local press and politicians are hyping this up as the end of the sizable "birthday tax" motorists face each year. Something's missing here. There's no such thing as a free lunch and Georgia never saw a tax it didn't like. I sincerely doubt they're losing revenue in this deal.

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