August 14, 2014

As a Tennessee resident, do I have to pay GA sales tax on a car purchased in Georgia?

Dear Consumer Ed:

I'm looking to buy a used car in Georgia, but I live in Tennessee. What is the law for collecting sales tax? I've been told Georgia dealers won't collect sales tax. I’ve also heard that if I pay cash, they won't collect sales tax, but if I finance it, they will collect my Tennessee tax and mail it to Tennessee. The Georgia Secretary of State said by law the dealer must collect Georgia sales tax and I may also have to pay Tennessee sales tax. Is it up to the dealer?

Consumer Ed says:

The decision to collect Georgia taxes on the purchase of your vehicle is not in the dealer’s discretion. Instead, it depends on whether you apply for certificate of title in Georgia or another state (like Tennessee).  On March 1, 2013, Georgia’s motor vehicle tax rules changed:  as of that date, instead of the old sales tax, use tax, and annual ad valorem taxes being levied, any car purchased or leased and then titled in Georgia will instead be subject to a one-time tax called the Title Ad Valorem Tax fee (“TAVT”).  The TAVT is now the sole and exclusive method for taxing the purchase price of an automobile.  The TAVT is calculated by multiplying the Fair Market Value of the vehicle by the TAVT rate, which is currently set at 6.75% through the end of 2014.  The new law requires dealers to collect this TAVT from the customer, then submit the TAVT and the application for certificate of title to the particular county in Georgia where the vehicle will be registered.

But if you purchase a vehicle in Georgia and apply for certificate of title in another state, the dealer may not necessarily collect sales tax, use tax, or even TAVT on your behalf.  Instead, the dealer may have the purchaser execute a Nonresident Certificate of Exemption Purchase of Motor Vehicle (also referred to as Form ST-8), to allow for a “drive out” exemption.  This certificate is signed by both the purchaser and the dealer to affirm that the nonresident purchaser will immediately transport the vehicle out of Georgia and apply for title in his/her state of residence.  There are circumstances, however, particularly with financed transactions, where the dealer may collect and remit taxes on your behalf. Regardless, nonresidents won’t pay TAVT or Georgia sales tax, but will be subject to the taxing rules and policies of their home state when they apply for a certificate of title and register their vehicle in that state.

Keep in mind that if you later become a Georgia resident, you’ll be required to pay the TAVT on your vehicle.  This is because new residents moving into Georgia are required to register and title their motor vehicle in Georgia, which is when the TAVT is charged.  According to the new motor vehicle tax rules, new residents must pay 50% of the TAVT within 30 days of moving to the state, and the remaining 50% must be paid within the next 12 months.

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