New-tax collection would fall to DMV after Senate action

RICHMOND

When Hampton Roads residents start paying a new tax on car sales on April 1, they might not be able to add the tax to their payment to the car dealer.

Instead, they would have to write a check for potentially hundreds of dollars - depending on the vehicle's price - directly to the state Department of Motor Vehicles, under legislation approved Tuesday by the Senate.

The new titling fee, which is 1 percent of a car's value, is part of a package of taxes and fees approved by the General Assembly last year to help pay for major transportation projects in the region. For example, someone buying a $30,000 car would have to pay a $300 titling fee.

The bill, HB649, which was approved 39-0 by the Senate on Tuesday, prohibits car dealers from collecting the titling tax or any other fees to be controlled by the Hampton Roads Transportation Authority, which was established to finance and oversee the major local projects. The bill was sponsored by Del. Clarke Hogan, R-Halifax.

Senate Majority Leader Richard Saslaw, D-Springfield, said car dealers are asking for the change because their customers may misunderstand the tax.

"People are interpreting that as part of the price of the car, and they want to ship it over to DMV," Saslaw said.

"What difference does it make? They still have to pay it."

Gov. Timothy M. Kaine would prefer to see car dealers collect the fee.

Paying the fee separately at the DMV is "an unnecessary inconvenience, and it takes away from consumer choice," said Gordon Hickey, a spokesman for Kaine.

The change required by HB649 would increase collection costs for the DMV by an estimated $3.4 million, according to a legislative impact statement.

Don Hall, president of the Virginia Automobile Dealers Association, which has lobbied for the change, said the governor's office doesn't understand the car business in 2008.

Five years ago, banks would have rolled the fee into the cost of the loan, said Hall, whose organization represents 550 new-car dealers.

But because of how the lending business has tightened up, "for most car buyers in Virginia, banks will not finance the extra fees," Hall said.

Hickey disputed Hall's argument and noted that he recently bought a car and was able to roll fees into his financing package.

"I don't know that I understand the car business, but I understand what I paid," Hickey said.

Car dealers already collect state motor vehicle sales and use taxes and the state portion of the registration fee.

Del. Chris Jones, R-Suffolk, who helped develop last year's transportation package, said the intention was always that the DMV would collect the

titling fees in a lump sum, but Kaine amended the bill to allow for the dealer collection.

"This is just putting it back in the original form," Jones said.

Hickey dispute s Jones' explanation and says that when the legislation arrived on the governor's desk in 2007, it said car dealers would collect the tax.

Kaine did not amend anything to move that fee over from the DMV to the car dealers, he said.

State campaign finance records show that Jones, Hogan, Saslaw and Kaine each received contributions from car dealers in 2007.

According to the Virginia Public Access Project, car dealers gave Saslaw $33,000, Jones $5,750, and Hogan $3,000 in campaign contributions.

Kaine's campaign for governor and political action committee received a total $289,000 from auto dealers, according to the VPAP.

Jen McCaffery, (757) 446-2627, jen.mccaffery@pilotonline.com