One 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.
In Michigan at least, that double dip tax recently away. State lawmakers made a big change in vehicle taxes that Governor Rick Snyder signed into alwe The bills cut the amount of sales tax people pay on cars, boats and recreational vehicles when they trade in another.
Before, as is still law in many states, the full purchase price is taxed. The legislation gradually changes that to eliminate the value of the trade-in from the full purchase price for taxes.
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. Here’s a link to a story I wrote about this a while back.
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 sales. And each state has different rules about cross-state sales. Sales on the trade in differences also varies 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 fulltime? At least a million RVers do fulltime. But for taxation purposes, everyone has to have a legal domicile. But where? Many RVers choose a state with no income taxes and low fees on licensing and registration – like South Dakota. 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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