Finance

South Carolina Increases Sales Tax on Vehicles

On July 1, 2017, South Carolina saw the rise of sales tax on all vehicles, planes and boats, which means that anyone who buys any of these items for more than $10,000 now has to pay $200 more in tax than they did previously. This has led many auto dealerships to worry about how the change will affect sales, and in fact, many dealerships had special offers and announcements attempting to convince customers to buy before the new law went into place. Although it is still far too early to tell whether or not the sales-tax changes will lead to a decrease in vehicle sales, it is nonetheless important to look at the new law in more detail to determine how it will affect consumers.

South Carolina's New Gas-Tax Laws

The sales tax increase was included as part of legislation designed to help South Carolina generate additional funds to pay for necessary roadwork improvements. The primary part of the legislation was related to state gas tax, which was raised by 2 cents per gallon. Previously, the state had the nation's third-lowest gas tax at 18.74 cents per gallon, but as of July 1, customers now pay a total of 20.75 cents per gallon in tax.

In addition to raising the gas tax, the legislation increased the sales tax cap on vehicles from a maximum of $300 to $500. However, it is important to note that the tax is still at 5%, which means the tax cap increase will mostly only affect those buying vehicles over $10,000. Still, there is a bit of a twist as the state no longer refers to this 5% as sales tax. Instead, it is now called an infrastructure maintenance fee. Whatever the state wants to call it, this infrastructure maintenance fee still functions exactly the same way as sales tax and it's not the only other increase include within the new legislation.

Anyone who wishes to moves to South Carolina and wishes to register their out-of-state vehicle will also have to pay a new infrastructure maintenance fee. In this case, any person registering a vehicle in South Carolina for the first time will now have to pay a $250 fee in addition to the standard $39 license-plate fee. This is nearly a 1,000% increase over the previous fee of $24.

Improving South Carolina's Roads

South Carolina's road infrastructure isn't generally in the best condition, and the state's Department of Transportation estimates that it will cost an estimated $1.1 billion a year over the next 25 years in order to fully bring the transportation network up to the proper condition. This is exactly the reason that state lawmakers made the decision to push forward and pass the new legislation in spite of it being vetoed by Governor McMaster. Although the legislation won't allow the state to fully fund all the necessary repairs, it is still predicted to generate approximately $600 million a year for roadwork projects.

How Will the Infrastructure Maintenance Fees Affect Consumers?

The biggest effect of the new infrastructure maintenance fees will most definitely be on those who move to South Carolina from out of state. Under the new law, anyone who moves to the state with three vehicles—for instance, two vehicles and a boat—will now have to pay $750 up front to get them registered.

On the other hand, some dealerships aren't expecting that the new tax cap increase will have that much of an effect on vehicle sales. Although consumers will now have to pay $200 more than they did previously, the fact remains that, at only 5%, South Carolina's vehicle sales tax is still lower than most other states. This means that even with the tax cap increase, it is still cheaper to purchase a vehicle in South Carolina than in many other states.