Latest News

State Budget Hits New Car Buyers Hard

Jul 11, 2006

Governor Jon Corzine signed a $30.62 billion compromise budget late Saturday night that increases the New Jersey Sales & Use Tax from 6% to 7%, effective Saturday, July 15, 2006 and also includes nearly $3billion in spending cuts. The sales tax increase is expected to bring an additional $1.1 billion to the State coffers.But not all of the money will go to close a $4.5 billion budget deficit, as the Governor had hoped. The budget debate, which shut down State government for several days, was finally resolved when Legislators and the Governor agreed upon a compromise to dedicate 50% of the expected sales tax increase revenue to property tax relief. It is unclear, at this time, how any property tax relief will be structured.In addition to the sales tax increase, there is also a 0.4% levy (the Supplemental Titling fee) slated to go into effect at the same time for new “luxury” and new “non-fuel efficient” passenger automobiles. The 0.4% charge will be collected by dealers and remitted to the Division of Revenue in the same way sales taxes are. But it is not a sales tax; it is a surcharge on title/registration fees for new vehicles with a sale price (not MSRP) of $45,000 or more, or an average EPA gas mileage reading of less than 19 mpg. Simply add the city and highway mileage ratings and divide by two to determine which vehicles are subject to this new levy. The additional levy also applies to leased passenger automobiles and the $45,000 “trigger” will apply to the gross capitalized cost of the vehicle.A few other things about this new levy:· It applies to any new passenger vehicle (car, truck, van, SUV, whatever) that is registered as a non-commercial vehicle;· Dealers will collect the monies at time of sale, report on a form to be developed by the MVC, but remit the money to the New Jersey Division of Revenue. Remittance will be handled in the same way that sales taxes are handled.· The Division of Revenue will be revising its website with reporting instructions to accommodate this new fee. Until that can be done, dealers will simply report sales/leases of vehicles subject to the new fees to the MVC and hold all collections, until instructions are available from the Division of Revenue on remitting those collections.· NJ CAR will be meeting mid-week with MVC officials to go over all details of the new levy and assist in developing the necessary reporting form(s).· NJ CAR and MVC will also post notices and instructions on their respective websites.· MVC will, thereafter, mail a notice, forms and instructions to new car dealersNJ CAR has distributed an Opinion piece to media throughout the State, discussing the impending tax increases and new “levies” and their impact on middle-class consumers, as well as the State’s retail automotive industry. A copy of the Opinion, in its entirety, is attached here. Some of the points highlighted in the Opinion include:· An increase in the State Sales & Use Tax to 7% will generate an estimated $125 million dollars from new car buyers alone. The penalty on so-called new fuel-inefficient and new luxury vehicles will cost new car buyers $25 million. That’s $150 million dollars in new taxes that will go into effect this week on new car buyers.· While Legislators and the Corzine Administration have tried to portray the tax increase and penalty as taxing the rich or conspicuous consumption, it’s primarily going to impact NewJersey’s middle-class families the hardest.· Of the approximately 500,000 new vehicles sold in New Jersey each year, only 7% meet the definition of a luxury vehicle (sale price $45,000 or more). That’s just 35,000 cars.· More than 40% of New Jersey’s new car sales—200,000 vehicles—consist of minivans, light trucks and SUV’s. The overwhelming majority of these vehicles won’t get 19 mpg on average and, therefore, will be subject to the non-fuel-efficient vehicle penalty. In most cases, these are not luxury vehicles and, while they may not get the fuel mileage of a subcompact, a subcompact isn’t a viable option for a family of four or more in New Jersey.In addition, there has been a doubling of the Domestic Security Fee for rental and certain loaner and courtesy vehicles. That fee increase from $2 to $5 per day and is effective immediately. Another $26million from motorists.