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

Answers to actual problems and questions from Georgia consumers.
Brought to you by the Governor’s Office of Consumer Protection -Re-Posted with Permission

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

Dear Consumer Ed:
Car
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?

A: The decision to collect 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 should not collect sales tax, use tax, or even TAVT on your behalf.  Instead, the dealer is required to 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.  Thus, 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.

Why Debt Settlement May Hurt Consumers More than It Helps

ELLEN HARNICK AND LESLIE PARRISH
“Be debt-free in 36 months!”

“Reduce your debt by up to 50%!”

We’ve all heard commercials from debt settlement companies that use pitches like these, promising troubled borrowers that they can get out of debt by paying just a fraction of what they owe.  The industry that the New York City Department of Consumer Affairs once called the “top fraud of the year” is now fighting hard to set up shop in additional states across the country. While several states—such as New Jersey, New Mexico, Arkansas and Wyoming —do not currently authorize debt settlement, industry lobbyists have been making the rounds in state capitals trying to rustle up support to allow the practice.

But it may be in consumers’ best interest to keep debt settlement companies at bay. A recent report by the Center for Responsible Lending confirms that debt settlement is often not worth the risk—and leaves many consumers even worse off.
Debt settlement seems like a viable alternative for families struggling to break free from excessive debt. Enlisting the services of a professional to negotiate down debts appears equivalent to hiring a lawyer to deal with complex legal proceedings.

But there’s a catch. In order to sign up for debt settlement, clients must first default on all of their debts. The money they once spent on minimum credit card or other debt payments is then instead used to fund a special account that can eventually be used for settlements.[1] While consumers wait for settlements that may never come, their debts continue to grow due to late fees and other default charges.

In some cases, creditors simply refuse to negotiate with debt settlement firms. Clients face the significant risk that creditors may instead sue them to collect on these defaulted debts. For example, a Maryland regulator found that one in four clients had been suedby at least one of their creditors during the first year of their debt settlement program.

These drawbacks led the Federal Trade Commission in 2010 to bar debt settlement companies from charging fees until they had settled at least one debt on behalf of their clients. But the CRL report shows that while this regulation may have led to some improvements in business practices, serious risks remain for debt settlement clients.

A debt settlement company would have to settle at least two-thirds of a client’s debt in order for her to emerge better off from the process than when she started, according to the CRL’s analysis of data published by the industry trade association, the American Fair Credit Council. If the potential tax liability on settled debts and the monthly cost of maintaining a special account for settlements are considered, a debt settlement company would have to settle over 80% of a client’s debts for the savings to exceed the costs of the settlement process.

Historically, only a small portion of clients have achieved such successful outcomes. In 2010, the industry reported that over 42% of clients were unable to have even a single debt settled

More recently, the Colorado Attorney General reported that over half of clients in that state who enrolled in debt settlement programs in 2011 had dropped out of their programs by the end of 2012. During that same time period, fewer than 8% had all of their debt settled.

While there are exceptions, it’s clear that debt settlement is inherently risky for financially vulnerable families, potentially leaving many people much worse off than they were in the first place.

Any state should think twice before offering a welcome mat to the industry—unless and until debt settlement companies can show that clients typically settle enough debt to actually benefit from these programs.

The debt settlement chapter of the Center for Responsible Lending’s State of Lending series is available on the CRL website. Ellen Harnick is senior policy counsel and Leslie Parrish is deputy director of research at CRL.

Is Debt Settlement Legitimate?

Re-posting from the “Ask Consumer Ed” publication of the Georgia Governor’s Office of Consumer Protection
Published October 11, 2013

Dear Consumer Ed:

I owe close to $30,000 in credit card debt. I contacted a company that said it could help me get out of debt.  The counselor I spoke to told me to stop making credit card payments for six months and that he would then contact my credit card company and offer to settle my account for $10,000.  Well, it’s now six months later, and the credit card company has refused to accept the debt settlement offer.  Because I didn’t pay anything for six months, I now have an even worse credit rating, not to mention my creditors have added late fees to my balance and have turned my account over to a collection agency.  What can I do?

A:  This company is engaged in an illegal practice known as “debt settlement.” While services known as “debt adjustment” may legally be provided to Georgia residents, these are strictly regulated by Georgia’s 2003 Debt Adjustment Act.  The reason such practices are stringently regulated is that people seeking these services are among the most vulnerable consumers:  those already in dire financial straits.

Before July 2003, debt adjustment, along with debt settlement, debt negotiation, and debt “counseling”, were all illegal in this State.  When our legislature began to allow some of those services to be provided to Georgia consumers, it enacted tightly written laws that established clear and rigid standards through which such businesses could ply their trade.

If a debt adjuster is charging for its services, it cannot provide them to Georgia consumers using any business model or fee structure other than the one contemplated under the Act.  Under this model, the debtor sends money directly to the debt adjustment company, which places the funds in a trust account and then disburses the money to the debtor’s creditors after taking a percentage of not more than 7.5 percent off the top as its fee. While up-front fees, which are fairly common, may be permitted (debt adjustment companies may charge you an up-front fee, monthly fee, or both), the combination of these fees may not exceed 7.5 percent of the amount paid monthly by the consumer to the debt adjustment company for distribution to his or her creditors.  In addition, the debt adjustment company must disburse all funds received from the debtor, less any fees, to creditors within 30 days of receiving them.

The company you contacted is using a model whereby the company tells consumers not to make payments to their creditors, then attempts to negotiate a lump-sum “settlement” with those creditors.  This practice is not permitted under the Debt Adjustment Act.

Companies that commit these types of violations can be subject to legal action on State and Federal levels. In fact, the Consumer Financial Protection Bureau recently took action against Meracord, LLC, a debt settlement payment processor that is alleged to have charged millions of dollars in illegal fees to over 11,000 consumers, nearly half of whose accounts were closed without ever being settled. The company must now pay $1.376 million in penalty fees and immediately cease all illegal activities.

If you believe the business you’re working with may have violated the Debt Adjustment Act, you can file a complaint with the Governor’s Office of Consumer Protection (www.consumer.ga.gov or 404-651-8600), and/or file a private a legal action of your own.  If the company is found to be in violation, it could be required to refund all of the fees you paid and, in a private action, you may request an additional $5,000 as restitution.

Because your debt has been turned over to a third-party debt collector, you are entitled to certain protections under the Federal Debt Collection Practices Act (FDCPA).  Among other things, the FDCPA prohibits a debt collector from contacting you at unreasonable times and places, using abusive tactics to collect the debt, or falsely representing themselves.  For more information about your rights under the FDCPA, visit: http://consumer.georgia.gov/consumer-topics/debt-collectors.