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Taxes and Fees for RVs Can Be Very Confusing

Roadtrekingmike

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blog-0663898001382714846.jpgOne of the most confusing aspects of buying an RV is the vast differences paid in sales tax and various licensing fees.

And many states do what is called “double dipping,” charging full sales tax when you buy the vehicle, and then again charging you tax on the full purchase price of a new one when you you trade it in, ignoring the trade-in price.

It doesn’t take a genius to know that it is patently unfair.

In Michigan at least, that double dip tax is about to go away. State lawmakers are getting ready to send a big change in vehicle taxes to Governor Rick Snyder’s desk. The bills would cut the amount of sales tax people pay on cars, boats and recreational vehicles when they trade in another.

Right now, the full purchase price is taxed. The legislation would gradually change that to eliminate the value of the trade-in from the full purchase price for taxes.

But the taxing differences and inequities still abound, state-to-state.

Montana, for example, is a state with no sales tax. And Montana law allows for a Montana corporation to register vehicles in the state. Thus, a whole cottage industry has built up that allows RV owners to avoid sales and use tax and often stiff registration fees in the owner’s home state. Thousands of RV owners around the country do this and dozens of Montana legal firms specialize in making it happen.

Some states have sales taxes, others don’t. So what if you live in a state that does have an RV sales tax, but buy in one that doesn’t? That’s called a cross-state sale. And each state has different rules about cross-state sales. Sales on the trade-in differences also vary from place to place. Some states charge on the difference between the trade-in value and the original purchase price. Some on the full trade-in.

But what if you full-time? At least a million RVers do full-time. But for taxation purposes, everyone has to have a legal domicile. But where? Many RVers choose a state with no income taxes and low taxes and fees on licensing and registration like South Dakota. Alas, that state has recently stated scrutinizing those who are RV full-timers – they call them “nomads” – but the process is still available. Here’s a site with some detailed info.

All this is to say that given the cost of today’s RVs and the wide discrepancies on taxation and licensing fees, there’s a lot to consider when investing in an RV and the RV lifestyle.

I’d love to hear how you have handled the domicile, tax and fee issues in your RVing life. Use comments below.

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I would like nothing more than to not have to pay sales tax and high registration fees. However, I do drive and live in the state I register my Motor Home in, and my civic pride takes over. Everyone complains about the condition of the roads. Maybe it's because the state doesn't receive enough tax dollars. When Montana and South Dakota start issuing a Jury Duty summons to the ones that elect to do this with an LLC it will change.

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We sold our house and went full time in June. We spend most of our time on the lot we bought in the Hilton Head Island Motorcoach Resort in South Carolina. We were going to register the coach here until we found out they wanted $3000.00 to register.....EVERY YEAR!!! We looked into all of the states where registration is cheaper and settled on South Dakota because of cheap registration, no state income tax and not having to lie and say it was my permanent residence, we just had to fill out an affidavit that says we're "nomads". They don't call nomads for jury duty either. And about the condition of roads, I just drove from one side of South Dakota to the other and the roads were in great condition. I pay a lot of taxes, if the morons in government can't get their act together and reign in their ridiculous spending habits, it's not just roads you'll be complaining about. It's hard for me to have "civic pride" the way these idiots spend our money.

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Like robbieb, We just changed our residency to SD from AZ. AZ wanted $5000 per year for Reg and Plates. In SD it is $500. NO BRAINER. We bought out New Coach a year ago and had to pay AZ $21k in taxes (I was still working at the time) so I could not claim it in another state with lower sales taxes.

Les

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Prior to buying our used 2011 Itasca Sunova 33C motorhome from a New Jersey RV dealer, we explored the possibility of establishing a Montana LLC. The dealer told us that the NJ state sales tax division audited such evasion tactics and prosecuted them. We, therefore, paid the full 7% NJ sales tax on the vehicle which was thousands of dollars despite the fact that New York sales tax had already been paid when the vehicle was sold new in Syracuse. New Jersey allows a vehicle trade-in to be deducted from the sales tax charged, but every time the same vehicle is sold without a trade-in, New Jersey wants another 7% tax on the total sale price. If a new vehicle is resold and registered in New Jersey three times before it is scrapped the final value of the vehicle will have been taxed 28% (4 X 7%), which I feel is grossly unfair. At some point, states should stop charging sales tax on vehicles that have already been taxed. Fortunately New Jersey's vehicle registration and license plate fees are not thousands of dollars as "lesmorrow" encountered in AZ.

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