One expense that many people don’t consider when buying an RV? RV sales tax. Unfortunately, this, like many other taxes, can be a pretty big expense. In most cases, there’s no good way out of paying sales tax on an RV. The one exception? Registering the rig in one of the few states with no RV sales tax.
What States Have No Sales Tax on RVs
There are currently five states that have no sales tax at all.
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
Meanwhile, the states with the lowest combined state and local sales tax rates are:
- Hawaii
- Wyoming
- Wisconsin
- Maine
Unfortunately though, you do have to pay sales tax where you register the RV, not where you buy it, so unless you are able to register your rig in one of these states, this info isn’t actually a lot of help.
The Best States for Registering RVs
Montana
Four of the states mentioned above don’t let you register your vehicle there if you don’t live in that state. These include:
- Alaska
- Delaware
- New Hampshire
- Oregon
Montana, however, has a loophole when it comes to no sales tax on RVs. If you establish an LLC in Montana, owners can register their vehicle as a business vehicle in the state, thus avoiding paying sales tax. Montana also has very low registration fees, another reason many people register there.
If you’re going to do this, it’s important to go through a law office. Tax matters can be complicated and a good lawyer is usually the best bet.
South Dakota
South Dakota is another popular state for purchasing and registering RVs. Purchasers in South Dakota are charged a 4% excise tax, which is much lower than most states. South Dakota has low registration fees as well. The state also has no state income tax and a low sales tax (4.5%) and it’s easy to establish residency in the state.
A Quick Word of Warning
Although it is legal in Montana to establish your LLC and avoid some taxes and other charges, other states don’t like losing out on that tax revenue. Many of them have been working to close that loophole.
Several states are careful to enforce sales tax on any vehicle that was purchased in another state and brought to theirs within a certain time frame. Other states have legislation to prevent their citizens from registering vehicles in other states as well.
If you’re a full-time RVer without a permanent home in another state, looking at an LLC or residence in Montana could be an option for you. However, if you have an established home in a different state, there are ways those states might ensure you have paid the appropriate sales and registration fees on your vehicle. Be sure to consult a tax expert on all of these matters to be certain you have followed the correct procedure.
FAQ Sales Tax on RVs
Which states do not have sales tax on RVs?
States that do not have a general sales tax, such as Montana, Alaska, Delaware, Oregon, and New Hampshire, generally do not impose sales tax on RV purchases.
Are there any specific requirements to benefit from no sales tax on RVs in these states?
Requirements can vary by state. In some cases, you may need to establish residency, while others may allow for out-of-state purchases. It’s important to research and understand the specific rules of each state.
Can I buy an RV in a tax-free state if I don’t live there?
Some states may allow out-of-state residents to purchase an RV without paying sales tax, but it’s crucial to understand the residency requirements and any potential implications for doing so.
What if I live in a state with sales tax but purchase an RV in a tax-free state?
You may be subject to use tax in your home state, which is similar to sales tax but is imposed on the use, storage, or consumption of taxable items purchased out of state.
Are there time limits or restrictions on how long I must stay in a tax-free state to avoid sales tax on an RV?
Some states may require a minimum residency period to qualify for tax exemptions. Research the specific residency requirements of the state where you plan to make the purchase.
Do I need to register the RV in the state of purchase to avoid sales tax?
Registering the RV in the state of purchase may be a requirement in some cases. It’s essential to understand the registration and titling process, as well as any associated fees.
What documentation do I need to provide to qualify for sales tax exemption on an RV?
States may require various documents, such as proof of residency, a valid ID, or other specific forms. Check with the state’s tax department for a list of required documentation.
Can I finance the RV and still avoid sales tax?
Financing the RV doesn’t necessarily impact the sales tax exemption, but it’s important to understand the financing terms and any potential tax implications.
What penalties could I face if I fail to comply with state tax laws when purchasing an RV?
Penalties for non-compliance can vary and may include fines or other consequences. It’s crucial to fully understand and adhere to the tax laws of the relevant state.
As you can see, there are only a couple of reasonable loopholes when it comes to avoiding paying sales tax on an RV and only a few people can actually make use of those. Therefore, it’s best to budget for sales tax when making your purchase, so you go in prepared for the expense.
