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Hoosier RV retailers hope that business next year returns to where it was in 2003 after the Indiana General Assembly in March reversed a two-year-old tax law revision that required dealers to collect Indiana’s 6% sales tax from out-of-state buyers.
“The change allows dealers in Indiana to go about their business the way they were doing business before,” said Mark Bowersox, director of recreation vehicles for the Indiana Manufactured Housing Association-Recreation Vehicle Indiana Council (IMHA-RVIC).
The new law, effective July 1, allows an exemption from the Indiana sales tax for out-of-state buyers from approximately 45 states that allow the same exemption for Hoosier residents.
“There will be no tax advantage for the consumer,” said Bowersox, noting that purchasers of RVs in Indiana will still have to pay the sales tax in their home states when they register their vehicles.
But the likely perception will be that Indiana has changed its laws to become more consumer friendly, he said.
That’s important, Bowersox added, because more than 60% of RVs made in the U.S. are manufactured in Indiana. “There is an inherent advantage to buying an RV close to where it is made,” Bowersox said. “We hope they will begin shopping in Indiana again.”
Bowersox said legislators finally realized that the short-term increase in sales tax revenue  was being offset by other factors.
Historically, for whatever reason, Indiana RV dealers substantially outperformed national sales figures until the change in 2004, Bowersox said. In 2005, national sales of Class A and C motorhomes were up 7.2%, but up only 2.1% in Indiana. Through October 2005, Indiana was down 35% compared to 2004 while national sales were down only 11%.
“Our position is and has been that these tax laws have realistically been costing Hoosier jobs and economic development,” Bowersox aid. “We know that some dealers are down employees and others who expected to expand in Indiana went into other states.”
The Indiana Legislative Services Agency estimated that changing things back to the way they were will cost the state treasury between $3.3 and $7.2 million annually.
Bowersox said that estimate is “widely disputed, ” noting, “No one has figured out
what the state is losing – the dealerships are down employees and the state is losing income tax and the state also is losing millions of dollars in business income tax.”
It never was clear whether the change, which showed up in a conference committee report without hearings at the end of the 2003 legislature, was a mistake or if it was a last-minute budget shenanigan to add cash to the state treasury, which at the time was operating at a deficit.
Cosmetic changes were made to the law in 2005 that didn’t appease dealers, who pushed for full repeal of the revisions this year.
The bill restoring the exemption unanimously passed both the House and Senate and was signed by Gov. Mitch Daniels on March 20.