This March the birthday tax and sales tax on new cars and trucks are going away, replaced with a one-time title tax. But what does that mean for those thinking about buying a vehicle now? It depends on a variety of circumstances.

A new state law goes into effect March 1, 2013 that eliminates the ad valorum tax and the sales tax on vehicles purchased and implements a title ad valorum tax instead.

State Senator Butch Miller owns a Honda dealership in Gainesville. He says if you bought a $20,000 car in 2003, you paid 7 percent sales tax of $1400. Then you paid ad valorum tax each year on your birthday. This year you would pay $217. If you average out the ad valorum tax, which drops as the value of the car drops, you would have paid about $2170 in ad valorum tax over those ten years.

Under the new system, you would pay a one time fee at titling of 6 and a half percent of the fair market value of the car. Using the $20,000 example, Miller says you would pay $1300. There would be no ad valorum tax after that.

The law only applies to vehicle sales after March 1,2013. You will have to pay the ad valorum or birthday tax on cars and trucks you already own for as long as you own the vehicle.

But Rick Gardner with the state Department of Revenue says if you bought a vehicle in Georgia between January 1, 2012 and March 1, 2013, you can opt in to the new plan.

“They’ll go down to their local county tag office. They’ll show them the bill of sale, where they paid the sales tax, where they paid the ad valorum tax for that year if it was due. And they will essentially get a credit for those taxes paid against the title fee.”

You have from March 1,2013 to January 1, 2014 to go down to the county tag office and opt in.

That’s good news for everyone in Georgia buying a car or truck. But it will mean a much bigger tax bill for those moving into the state and getting Georgia plates.

Rick Gardner says you can spread out the payment.

“There is a provision that allows for that to be paid over time. So they will have to pay 50 percent of the title fee. And then they will have 12 months from that date to pay the other 50 percent of the title fee.”

So if you’ve just moved to Georgia this year, you might want to consider getting your car registered with the state before March first to avoid a 6-point-5 percent tax on the vehicle.

There are also ramifications for the sales tax. Gardner says it depends on whether you are buying from a car dealer, or a private individual.

“Under current law, if you buy a car from a dealership you pay sales tax. Whereas if you buy a car in a casual sale, it is not subject to sales tax. Under the new title fee, the imposition of the tax is on the titling of the vehicle itself. So whether you buy a vehicle from a dealership or whether you buy a vehicle from your next door neighbor, it will still be subject to a title fee.” he says.

The state department of revenue has a tax calculator on its website so you can figure out whether you will save money opting into the system.

Tags: sales tax, Department of Revenue, State Senator Butch Miller, birthday tax, buying cars, ad valorum tax