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Tax reform legislation enacted by the Georgia General Assembly in 2012 created a new system for taxing motor vehicles registered in Georgia – and it goes into effect March 1.

“This is a major change for motor vehicle taxation,” tax commissioner Becky Carlan said. “All motor vehicle sales will be exempt from sales tax, but all (including individual-to-individual) sales will be subject to a new Title Ad Valorem Tax.”

As a result, the annual vehicle ad valorem tax, often called the “birthday tax,” will change to a state and local title ad valorem tax on that day ( March 1). The new system for taxing vehicles only applies when the ownership of the vehicle is transferred through a title exchange. All other vehicle owners will continue to operate under the current system and pay the annual ad valorem taxes until they no longer hold the title to their vehicle.

The TAVT will function very much like a sales tax. The beginning rate for the remainder of 2013 is 6½%. In 2014 the rate will increase to 6¾%. In 2015 the rate will increase to 7%.

Once this TAVT is paid on a vehicle purchase, that owner will not be subject to the annual ad valorem tax that is paid with their tag renewal. But each time the vehicle goes to a new owner (except for inheritances and immediate family member transfers) it will again be subject to TAVT.

Most Georgia motor vehicle owners will remain subject to ad valorem on their vehicles until they trade or buy a new vehicle. If a vehicle was purchased between January 1, 2012, and February 28, 2013, an owner can take advantage of an opt-in provision. If sales tax was paid at the time of purchase most owners will qualify without additional cost. If no sales tax was paid at the time of purchase the owner may elect to pay the TAVT and then pay no ad valorem going forward at renewal time.

New residents will have the addition of TAVT to their title and tag fees at initial registration in the state. These folks will have the option of paying 50 percent at the time of the application for title and the balance within 12 months. The title will not be issued until the balance is paid.

Certain disabled veterans, former POW’s, Purple Heart recipients, and a few others that are currently exempt from ad valorem will continue to be exempt from TAVT. Trucks registered under IRP will not be subject to TAVT.

Carlan will have an open house on March 12 from 5:30 p.m. – 7:30 p.m. to allow anyone to come into the office to ask questions they have regarding the new TAVT.

“There is no need to rush into the office on March 1, unless you have a birthday the first part of March,” Carlan said. “If you did purchase a vehicle between the dates of January 1, 2012 – February 28, 2013, you will receive a letter regarding the opt-in option prior to your birthday.”

The City of Baldwin has appealed to the Georgia Supreme Court a ruling by the Court of Appeals that it must pay $203,000 to an engineering firm for work it did on the city’s wastewater treatment plant. The city argues there was never a valid contract for the work.

In 2008, federal stimulus funds became available for construction projects through the Georgia Environmental Financing Authority. The city of Baldwin had an old wastewater treatment plant in need of repairs, so it approached Woodard & Curran, Inc., an engineering and design firm, to help it apply for the funds. In May 2009, the city and firm entered into a contract stating that for $5,000, Woodard and Curran would provide supporting engineering documents for the city’s funding application for the stimulus funds.

The May agreement also stated that “under separate covers we will be preparing a scope, budget and schedule for the actual design work” and a grant application to fund the development of a master plan for the wastewater system. In June 2009, the firm submitted a proposal which contained a schedule of the work and a scope of services for a total fee not to exceed $210,000. Then-Mayor Michael Kelley signed the June proposal, authorizing the firm to proceed with the work necessary to continue the application process, which included hiring surveyors, hiring geo-technical core drillers, getting bids for the work, and completing the design plans. The city paid Woodard & Curran the $5,000 as it had contracted to do. But when the engineering firm submitted an invoice to the city for $203,870.44, after completing a substantial amount of the work, the city denied payment, claiming the June proposal was “ultra vires” – or unauthorized – and therefore not binding because it had not been approved by a quorum of the city council, as the city charter required. The city also claimed that the June 2009 proposal was to secure the stimulus funds and the firm failed to get them.

Woodard & Curran then sued the city in Habersham County Superior Court, seeking $210,000 for breach of contract or, in the alternative, $203,870.44 as the value of the services it had already provided. At trial, a tape was played for the jury of a city council meeting in September 2009 where representatives of Woodard & Curran told the city officials about the work they had completed and the work that still needed to be done before filing the application for funds. The jury returned a verdict in favor of Woodard & Curran for $203,000. On appeal, the Court of Appeals upheld the verdict.