Indiana lawmakers expressed cautious support Tuesday (March 15) for partially restoring a tax incentive that helped make Indiana a leading center for retail sales of recreational vehicles, according to a report in the South Bend Tribune.
The lawmakers, however, expressed little interest in fully restoring the sales-tax exemption for out-of-state sales, which Indiana dealers have been promoting.
The proposed bill would provide RV dealers with a level playing field with the tax rates of other states, but not the advantage they once enjoyed.
“What it will do is, it won’t punish people for buying in Indiana,” said Dennis Harney, executive director of the Indiana Manufactured Housing Association-Recreation Vehicle Industry Council. “But it won’t restore the incentive they had (before).”
Until last July, the Hoosier State collected no sales tax on RVs that were sold in Indiana but registered in other states. That, combined with the state’s position as the leading site for RV production, made Indiana a retail RV mecca.
Out-of-state buyers of aircraft and automobiles also got the exemption, which ended last year as part of Indiana’s search for new revenues.
According to the industry, the change has hurt high-end RV sales, especially at large dealerships with extensive out-of-state markets.
Chris Huffer, of Hart City RV in Elkhart, testified Tuesday that first-quarter sales are off 50% this year compared to the same period last year.
Other dealers have reported similar effects on new-unit sales, with ripple effects on the sale of parts, service and accessories.
“It’s a disaster,” said Tom Stinnett, of Tom Stinnett RV Freedom Center in Clarksville.
The industry proposed a complete restoration of the tax exemption, but Senate legislation called instead for partial relief. That bill is now before the House Ways and Means Committee, which took testimony Tuesday and will vote on Thursday.
The proposed fix would require out-of-state buyers to pay sales tax in Indiana equal to their home state’s tax, up to a maximum rate of 6 percent.
Although the change would confer no tax advantage to an out-of-state buyer, Harney and others say it will at least erase the current disincentive for buyers whose home-state tax rate is lower than Indiana’s.
“If I were king,” Harney said, “we would go back to where we were.”
Ways and Means Chairman Jeffrey Espich, R-Uniondale, all but said that wouldn’t happen.
But several amendments are expected Thursday.
One likely amendment will soften a financial penalty on Indiana dealers if out-of-state buyers don’t verify within 60 days that they have registered their RV somewhere else and paid the necessary taxes.
Dealers would have to pay the full sale tax on the vehicle in such cases, which Huffer said is both a financial and logistical nightmare.
“How do we police that in 60 days?” he asked.