Georgia lawmakers are considering whether to charge sales tax on the sale of cars, boats and airplanes between private individuals.
Auto dealers, who already collect the tax on new and used cars, have long favored the proposal, but the idea did not sit right with Sandy Springs resident Christina Davis. Davis recently bought a used Pontiac G6 from a dealership, but she said she would have much rather bought the car from an individual seller.
“If I had got it from someone instead of a dealership it would have been nice to save a few hundred dollars,” she said.
For consumers, the cost of the tax would not be incidental. For a $12,000 used car, purchasers could expect to add between $720 and $960, depending on the local sales tax rate.
The state probably would collect the tax from the new owner when he or she pays county ad valorem tax on the new vehicle. The new owner would provide the county with a bill of sale from the seller, and the county would assess sales tax at the same time it's collecting the tag fee and property tax on the car.
In addition, when a person buys a car from a dealer, he or she has the option of financing the sales tax as part of the total price. That would not be the case in a peron-to-person deal.
“Person-to-person transactions should be different,” said LaMont Moore, another northside resident who just bought a used truck from a dealer for his wife. “Why am I paying taxes on something I’m buying from you?”
The proposal is part of an omnibus tax plan devised by the Special Council on Tax Reform and Fairness for Georgians, a citizen-led council created last year by the Legislature to overhaul the state’s tax code.
Georgia State University economist and tax council member David Sjoquist said the council recommended applying the tax on so-called “casual sales” out of fairness to the car dealers, but also because there was a lot of money in it.
Using figures from the GSU Fiscal Research Center, the council estimates that applying the state’s 4 percent sales tax to these purchases would draw in $151 million -- although dealers claim that figure is much higher. Either way, it shows how many cars, boats and planes are sold by individuals, Sjoquist said.
Sen. Butch Miller, R-Gainesville, is general manager of a Honda dealership and chairman of the Georgia Automobile Dealers Association. He maintains that "casual" sales far outnumber those by dealers.
But Miller was reluctant to wade into the issue, citing concerns about conflict of interest.
Instead, he referred questions to the association’s president, who did not return calls. But GADA and the Georgia Independent Association of Automobile Dealers both provided the tax council with position papers supporting the tax.
In its statement, GADA noted that Georgia is one of six states that do not charge sales tax on casual sales of vehicles, and three of those states have no sales tax at all.
Auto dealers are an influential lobby at the state Capitol. Dealers made about $440,000 in political contributions to state candidates and committees in the 2010 election cycle, according to the National Institute on Money in State Politics.
Patti Gettinger, vice president of the Georgia Tea Party, formerly the Cobb County Tea Party, said she sees the proposal as just another new tax being pushed by a special interest. More troubling, it could create new tax cheats by encourage people to fudge the bill of sale to get around paying the full amount, she said.
In their position paper, the independent auto dealers noted that Florida's system of taxing casual sales flags unusually low prices as a way to guard against cheating.
Gettinger, whose organization has been critical of the entire tax reform effort, said she believes the state should move away from income taxes and toward more consumer taxes. However, she said, the government should stay out of personal transactions.
“Is this an appropriate role for them?” she said.
The Georgia Tea Party noted that there is no proposal to collect tax on other types of casual sales, like person-to-person sales of used appliances or electronics. Sjoquist said it is impractical to try to tax most casual sales because of the difficulty in collecting it.
"Cars you have to register, so there is an obvious way to collect it. If you buy a refrigerator from your next-door neighbor you don't have to register it," he said.
Behrouz Samimi, a Georgia Perimeter College student who recently bought a used car for his father from an individual seller, said he can see the argument in favor of applying the sales tax to all vehicles. First, it is fair because it treats all buyers equally, he said.
"And the tax money all goes back to society, hopefully,” he said.
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