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South Carolina implemented a law on July 1st that saw the rise of sales tax cap up to $500 for cars that cost $10,000 or more.
US News and World Report is reporting that the sales tax, which was implemented at the same time as a gas tax increase, is meant to help the Department of Transportation in the state rebuild roadways and bridges that have been deteriorating over time. The state will need over one billion dollars in the next 25 years to fully upgrade and repair the existing network of roads, and the money taken from the sales tax cap will help fund that venture.
The Law
The legislation that brought about the sales tax cap implemented several new changes in the state, all of which will go to the plan to rebuild the roads.
One such element is the fact that the sales tax on buying a new or used car is capped at $500 for all purchases; people who pay less than $10,000 for their car will be expected to pay sales tax of approximately five percent of the sale price.
Another element is that South Carolina has implemented its first gas sales tax increase in 30 years, bringing the total sales tax to 18.75 cents per gallon. The full tax will see a total of a 12-cent tax hike that is spread out over six years.
Also included in the law is a one-time registration fee for people moving to South Carolina. The $250 fee is the new standard and must be paid for each individual vehicle for new residents of South Carolina.
The last notable inclusion in the legislation is the $16 increase in annual vehicle registration fees; new fees for hybrid and electric cars, which are $60 and $120 respectively, have already taken effect.
The law helps build a fund for infrastructure repair that, along with the annual auto property tax that South Carolina residents pay, will see significant improvements to over the next 10 years.
Reactions From South Carolinians
The response from South Carolina citizens is mixed, with most agreeing that if the sales tax helps to build new highways and roads and repair existing bridges and streets.
“I don’t think it will make that much difference to most buyers,” Kia of Anderson owner Bobby Wood told The Independent Mail. “I don’t see it as a deal-breaker.”
This might be because South Carolina has one of the lowest sales tax caps for vehicles; even with the $500 cap, the state is well below the one-time seven percent fee of the total value of any car that Georgia has instituted. In fact, the state has had one of the lowest sales tax on vehicles since 1984.
“I can’t say I like it, but we need to get roads fixed, and something has to pay for it,” said Bobby Wood, an Upstate auto dealer for more than 40 years, who echoed the sentiment of a lot of South Carolina residents. “The good thing is, we’ll still have a $500 cap. That’s better than the tax in a lot of states.”
Most states have a higher sales tax cap for buying vehicles, with some not having a cap on sales tax at all. South Carolina is one of the few to institute a cap because the state wants to make it possible for people to buy cars.
However, on a $10,000 car, residents of the state will be expected to put down at least $1,539, which includes a down payment, the sales tax and registration fees, before they can drive off the lot.
The Political Conversation
The law was hotly contested in the state’s legislature and was even vetoed by Governor Henry McMaster in May before it was finally overridden by the state assembly. Even now, some politicians have indicated that the sales tax cap might be difficult for some citizens.
“Some folks could have a hard time paying any additional taxes,” Senator Larry Grooms, a Republican representing Berkeley County, told WCNC reporters.
Grooms, who co-wrote the bill, stated that while the initial jump in sales tax increase might prove difficult for some people to afford, the state has chosen to provide incentive, stating that “we created a mechanism for folks who live in South Carolina and are working that you would have the ability to get back every dollar that you paid in additional gasoline taxes.”
Because it is possible to get some money back on the sales tax of a purchased vehicle, South Carolina is urging people to keep receipts for gas, car maintenance, and any vehicle purchases beginning in January of next year, which will be of enormous value come tax time.
“We’re going to have a separate schedule that goes with the tax return,” Director Hartley Powell, who heads the South Carolina Department of Revenue, told reporters. “It’s going to walk them through it. It’s going to be a formula that you’re going to put in and it’s going to tell you the amount of refund per vehicle that you’re entitled to.”
The Infrastructure Plan
The law, now that it has been implemented, is expected to raise more than $600 million annually for infrastructure; however, due to the fiscal year ending in October of this year, the amount raised this year is likely to be closer to $180 million.
The Department of Transportation will use the money raised by the sales tax cap, registration fees, and gas increase to rebuild the majority of the state’s roads, highways, and bridges. It is currently estimated that over 465 bridges are slated for repairs within the next ten years, while $50 million will be spent annually on safety improvement for deadly roads, such as rural stretches that have no safety precautions set forth.
While the increase may seem steep for South Carolina residents, the state believes that this is the best way to start fresh on roadwork and make driving in the state much safer, both for residents and tourists.
