S.C.'s CLUNKY CAR TAX

This 2009 Mercedes McLaren 722 S Roadster was the most expensive vehicle on Charleston County's tax rolls in 2013, valued at $470,250. Only 150 of these 641-hp convertibles were produced.

A Dodge minivan valued at $228,000.

A luxury Maserati taxed like it's worth just $4,667.

Honda Accords that mysteriously gain value as they age.

These are a few examples of flaws that persist in South Carolina's car-tax system, 15 years after an audit concluded nearly half of the cars and trucks in the state were improperly taxed.

It's a system built upon auto price lists, bought with public money, that the public isn't allowed to see. The S.C. Department of Revenue refuses to reveal the guides that determine what more than 4 million vehicles statewide are worth, citing copyright issues.

All counties use the same state-provided auto prices. The Post and Courier was able to analyze a representative sample by using the Freedom of Information Act to obtain Charleston County's 344,759 car tax records — more than 8 percent of vehicles registered in the state in 2014.

The analysis revealed that many cars and trucks were overvalued or undervalued. Some people paid absurdly small property tax bills due to errors or quirks in state law.

There were car-pricing mistakes such as two Dodge Caravan minivans valued at more than a quarter-million dollars each. A car-rental company received a more-than-$6,000 tax bill for one of those, and neither the county nor the state could explain how that happened.

The newspaper also found new cars whose owners received tax bills for $10 or less because the model year was incorrectly recorded, and high-end luxury cars taxed on a tiny fraction of their value. A pair of Bentleys, a Maserati and an Aston Martin were among the grossly under-taxed, saving the owners as much as $1,300 yearly.

Some vehicle owners all but escaped taxation for years.

“Somehow they got coded incorrectly,” Charleston County Auditor Peter Tecklenburg said. “They (the owners) just got lucky.”

At stake is not only the accuracy of individuals' tax bills but an important revenue source for local governments and school districts. In some counties, vehicles account for more than 20 percent of property tax revenue for education.

The newspaper's analysis raises questions about the taxation of motor vehicles throughout the state, such as:

Fairness: Taxes are supposed to be based on what vehicles are worth, but South Carolina's auto values often conflict with those in well-known pricing guides, and can be substantially higher than dealership prices actually paid by car buyers.

In addition, state law caps property taxes on cars at least 15 years old, regardless of value. As a result, owning a 2005 Dodge PT Cruiser brings a larger tax bill than a 1953 Mercedes-Benz 220A Cabriolet that Baker Motor Co. advertised in January for $145,900.

Redress: Those who challenge the value placed on their car or truck often find an onerous appeals process. Some counties require written appraisals from particular auto dealers. In others, appeals are valid for only one year, which means taxpayers must repeatedly appeal if the state's values are too high. And counties use different standards to consider appeals, leading to taxpayers being treated unequally.

Transparency: Some states, including Georgia and Michigan, post the vehicle pricing used for taxes online. In South Carolina, the price guide used for taxing vehicles is seen only by public officials, reducing scrutiny of a system that's had serious problems in the past.

Even the size of discounts that state law allows for vehicles with unusually high mileage are a secret. “The data used is provided by the vendor, and that information is copyrighted in their publication,” said Bonnie Swingle, spokeswoman for the Department of Revenue.

The hidden data used to determine people's tax bills is reminiscent of the “black box” computer models used by the insurance industry to calculate hurricane risk and set premiums in South Carolina.

South Carolina's taxation of cars, trucks, motorcycles and motor homes is an issue that's become increasingly important as reform efforts shifted the tax burden from residents' homes to vehicles in their driveways.

The state collects sales tax on a vehicle purchase, up to $300, but the owners also must pay property tax each year based on the vehicle's full value.

“We're pretty fortunate to be in a state where the sales tax is capped at $300, but at the same time, the property tax can be substantial,” Palmetto Ford President Graham Eubank said.

The property tax on a $35,000 car can be about $500, depending on local rates. That's roughly equal to the tax on a $100,000 owner-occupied home.

The tax shift toward vehicles followed the state's decision to slash the property tax on residences, in response to an outcry over rising assessments during the real estate bubble in the mid-2000s. South Carolina public school districts were barred from taxing owner-occupied homes to pay for school operating costs starting in 2007, but vehicles are still fair game.

The Department of Revenue says the system has improved greatly since 2000, when a state audit concluded that 41 percent of cars and more than half of all light trucks had been given incorrect values.

“It's all electronic, and there's no room for human error,” Swingle said.

The year after the scathing audit report, South Carolina started buying a database of auto values known as the Red Book. Penton Media, headquartered in New York, has a $53,000 yearly contract through 2017 to provide the information.

Swingle said rival auto pricing guides may not always agree on what a vehicle is worth, but South Carolina is able to provide all counties with consistent motor vehicle values that reflect taxpayer-friendly, below-wholesale pricing.

Still, Dorchester County Auditor James Messervy Jr. said he regularly sees residents who bought vehicles from dealerships and paid less than the state says they are worth.

“People will buy a new vehicle, and their total invoice is lower than the state's number,” he said.

Tax records are rife with vehicles that appear mispriced. One example is America's best-selling full-size sedan in 2011, the Chevy Impala.

Most pricing guides — Kelley Blue Book, NADA (affiliated with the National Auto Dealers Association), and Black Book — agreed a 2011 Chevy Impala LS was worth about $8,000 less than a 2011 Jeep Wrangler Sport last year. South Carolina valued both vehicles at $15,000, however, overtaxing the less valuable Chevys and undertaxing the Jeeps.

The auto sales website cars.com in January showed that the majority of the 2011 Chevy Impala LS's were listed for sale for $11,000 or less, while the majority of 2011 Jeep Wrangler Sports were offered for $21,900 or more. Scot Hall, executive vice president of Swapalease.com, said he has no doubt the Jeep in that example is worth more than the Impala.

Dale Boc of Charleston saw this problem firsthand in 2013 when he went to register a 2012 Chevy Impala LT he purchased at a dealership for $15,000.

“I go down to register the vehicle, and they had the value of the car at more than $20,000,” Boc said.

Armed with a bill of sale from the dealership and a CarFax report, Boc was able to challenge the state's estimate and persuaded Charleston County to knock $5,700 off the taxable value of his car, saving him about $80 in taxes that year, and more in years ahead.

Another example of South Carolina's curious car values involves a 2005 Honda minivan and a 2004 Lexus convertible coupe.

The state said the two vehicles were worth the same amount of money last year — $10,400. Other pricing guides, and actual for-sale prices, suggest the sporty Lexus was worth as much as two Honda minivans.

Repeated efforts to question Penton Media about the company's Red Book values were unsuccessful. Eliane Kauck, Penton's corporate communications manager, did not respond to repeated emails and phone messages that began in late November and continued through January, although in a brief conversation she acknowledged receiving them, and said she would respond.

Even if the state's system were to work perfectly, large numbers of South Carolina residents would pay too much tax, and many would pay too little. That's because taxes are based on average vehicle values.

For example, all Ford Mustangs of the same year and style would be priced the same, whether they are in showroom condition or have dents and sun-scorched paint.

The system also tends to overtax people who bought cars or trucks late in the year. Counties get one set of Red Book values from the state each year, in December, and every vehicle is taxed the following year based on those numbers. So, someone who gets a tax bill in January is taxed on a recent estimate of her vehicle's worth, but someone who gets a bill in December is being taxed on what her car was worth a year earlier.

In addition to questionable car values, the newspaper's analysis found some glaring errors at the county level, where tax bills are issued. Both the state Department of Revenue and Charleston County say they didn't price the Dodge Caravans at $228,000 each. But there they were, listed among the most valuable vehicles in the county.

“It would be different if it were some sort of Ferrari Caravan, but it's a Dodge Caravan,” Tecklenburg said. “It's completely possible that during the data import process there was a hiccup.”

In contrast, some car and truck owners in Charleston County received tax bills for about $10, instead of the hundreds of dollars they should have owed, because the model years were recorded incorrectly. Tecklenburg said those mistakes came from Division of Motor Vehicles records provided to the county.

“They told us the owner had a 1983 when they had a 2013,” he said, referring to one car the newspaper asked about. In most cases, vehicles were undertaxed for two years or more.

South Carolina Division of Motor Vehicles spokeswoman Beth Parks blamed the gaffe on human error, saying someone, perhaps an auto dealer, likely typed in the wrong vehicle identification number during registration. The DMV's computer system is supposed to identify such mistakes, she said.

“Any time you have a human working on something, your chances of an error increases,” said Parks. “In most cases, we catch them.

In January, Lancaster County Auditor Cheryl Morgan spotted a similar problem in DMV records sent to her county — brand-new vehicles listed with old model years.

“It was only five (vehicles), so it looks like it was a typographical error,” she said. Morgan was concerned enough, however, to send an email to all the county auditors in the state.

Tecklenburg acknowledged that some errors in the tax records were Charleston County's fault, such as the high-end luxury cars whose owners escaped thousands of dollars in taxes over several years. Those mistakes date to 2011 and stemmed from a mix-up in a spreadsheet of car values, said Tecklenburg, who took office in 2013.

The most expensive of those errors involved a 2007 Bentley Continental convertible owned by Kiawah Island resident Wayne Juchatz. The tax bill for that car dropped from $1,399 in 2010 to an average of $59 for each of the next three years.

Juchatz declined to comment.

Tecklenburg said the car owners will not be asked to pay what they should have because the errors were the county's mistake. He said the bills will be correct going forward.

“There are thousands of rows of data, and I suppose it's easy to see why there can be flaws in the process,” Tecklenburg said. “We really try hard to keep it all straight.”

Correctly taxing expensive vehicles is particularly important because there are relatively few of them, but they account for a large share of the property taxes that go to schools and local governments. In Charleston County the top 10 percent of vehicles, worth $21,666 or more, accounted for more than 40 percent of the vehicle property taxes billed in 2014.

The largest tax bill for a personal car in Charleston County last year, for $5,739, went to John Goyak, a Kiawah resident who owned a rare 2009 Mercedes McLaren 722 S Roadster worth nearly a half-million dollars. It would take nearly 600 vehicles valued at the state minimum to generate that much tax revenue.

Goyak's wife, Dana, said they sold the more-than-640-horsepower coupe because on Kiawah Island “we couldn't take it out of first gear.”

South Carolina is not the only state that uses Penton's Red Book to value cars — Alabama does as well — and it's not the only state that won't let the public see the auto price lists used to calculate property tax bills. Alabama and North Carolina also prevent public access to such information.

Georgia, in contrast, spends less than half of what South Carolina pays for pricing data, buying the Black Book guides annually from Hearst Business Media for $25,000. And Georgia puts all the pricing data online, where anyone can see it.

“I can't imagine if you are trying to register your car and have no idea of what the tax would be,” said Nick Genesi, spokesman for Georgia's Department of Revenue.

In Georgia, as in South Carolina, people who register vehicles pay tax based on the value.

Ricky Beggs, a senior vice president at Black Book, said auto dealers, financial institutions, and states including Georgia and Texas use Black Book auto values. The data has to be very accurate, he said, “because dealers who are buying and selling vehicles have to have a really accurate, current market value.”

The Post and Courier compared some of South Carolina's pricing to Georgia's. In cases where there were wide differences in value for the same car, Georgia's price guide tended to agree with other sources, such as Kelley Blue Book.

Among major price guides, only South Carolina's, for example, says 1999 Honda Accords are worth more than 2001 Honda Accords. The Honda Accord is the most popular car in Charleston County.

Kelley Blue Book, edmunds.com, NADAguides, and Black Book agree that a 1999 Honda Accord LX sedan is worth hundreds less than a similarly-equipped 2001 model. South Carolina's guide says the older model is worth $833 more.

Swingle said the Department of Revenue does not decide what cars are worth. The department's only role in the car-taxing system “is to provide a nationally recognized guide to South Carolina counties.”

Once a vehicle is a certain age, South Carolina doesn't bother with figuring out the value. Instead, state law requires every vehicle to be assessed at just $50 if they are at least 15 years old at the start of the tax year.

That works out to a tax bill of about ten bucks.

In Charleston County, roughly one car in five has that minimum tax assessment. Most are well-worn personal vehicles, but others are collectors' items and restored classics.

For Dwight Hagwood, owner of Vintage Limousine in Charleston, the 15-year rule is a nice tax break, saving him thousands of dollars each year. His company vehicles include a 1950 Bentley Mark VI and a 1961 Rolls Royce Phantom V.

“It was a great pleasure to learn that classic cars have that tax benefit in South Carolina,” said Hagwood, who moved to the state in 1996.

The minimum assessment rule means county governments spend lots of time processing $10 tax bills. In Charleston County, for example, roughly 64,000 vehicles are taxed at the state minimum.

“I don't like the vehicle tax system,” said Messervy, Dorchester County's auditor. “But, I don't know the answer to fixing it.”

Reach David Slade at 937-5552