Dealing for Dollars
Local car dealers hope Hartselle doesn't follow state in sales tax increase
Tracy B. Cieniewicz, Hartselle Enquirer
Hartselle car dealers aren't as concerned with the possibility of a state car sales tax increase as they are with the possibility of a city sales tax increase.
Gov. Bob Riley's proposed $1.3 billion tax package would affect Alabama auto dealers by increasing state sales tax on cars from 2 percent to 2.5 percent, raising $48 million a year; doubling state tax on auto leases and rentals from 1.5 percent to 3 percent, raising $20 million a year; and implementing a new 4 percent state tax on labor charges for repair and installation charges, raising $50 million a year.
Brothers Ronnie and Keith Abercrombie of Abercrombie Chevrolet in Hartselle said Riley's proposal may actually spur a short-term stimulation of car sales before implementation.
"People will buy in an effort to beat the tax," Ronnie said. "Once implemented, Alabama will still have some of the lowest state car sales tax. I don't expect it to be a long-term deterrent for new car sales."
According to Keith, a typical new car sells for approximately $25,000. On average, Riley's proposed half-percent tax increase would cost consumers $125.
"Car dealers will be at an even disadvantage with a statewide car sales tax," Keith said. "However, it would be detrimental if local municipalities were motivated by this increase to raise local sales tax."
Ronnie, also a Hartselle City Schools Board of Education board member, agreed saying the issue is a double-edged sword.
"People are very conscious of car and other merchandise prices in surrounding areas," Ronnie said. "Being a school board member, I know how badly the school system needs revenue, but a local sales tax increase would cause Hartselle to be at a disadvantage with businesses in Cullman, Decatur, and other areas. "
Keith said the largest majority of consumers who will be most immediately affected by Riley's tax proposal are those who lease vehicles.
"Any time you double a tax it makes a pretty large impact, regardless of the percentage," Keith said. "About 30-40 percent of our sales consist of leased vehicles. I don't see it as being good for business, but this tax increase may be the necessary price people will have to pay to make sure Alabama's education and services don't deteriorate."
As for the labor tax, both Ronnie and Keith said they have expected it for a long time.
"It's something most other states have had for years," Ronnie said.
Both said they would prefer to see an increase on car registration prices as opposed to increased state or local sales tax.
"Registration increases would probably net more revenue without the negative affect on businesses," Keith said.