Indiana RV dealers have long benefited from their close proximity to manufacturers.
But since a change in Indiana’s sales tax took effect almost seven months ago, those dealers say they have seen their sales plummet, according to a report in the South Bend Tribune.
The change eliminated a sales tax exemption for out-of-state residents purchasing big-ticket items such as cars, watercraft, airplanes and recreational vehicles.
Industry officials, however, believe lawmakers didn’t consider the damaging impact the exemption’s removal would have on Indiana’s RV dealers.
Now, they’re working feverishly to pass new legislation that, if signed into law, would be adopted in July – one year after the exemption was eliminated.
“We have statistics that show sales have dropped,” said Mark Bowersox, the director of RVs for the Indiana Manufactured Housing Association-Recreation Vehicle Indiana Council. “And we believe they will continue to drop as more talk persists that (Indiana) is not an RV-friendly buying state.”
Before the tax laws were changed, Indiana in general – and Elkhart County in particular – had a reputation for being one of the best areas to purchase an RV.
Out-of-state residents would come to Indiana to purchase an RV to avoid paying transportation costs associated with shipping the RV from an Elkhart manufacturer to a far-away dealership – costs that can add anywhere from hundreds to thousands of dollars to the sticker price of an RV.
Local dealers also benefited from being at the center of the RV manufacturing sector. If a dealer didn’t have something in stock, it was just a short drive to the manufacturer’s plant to pick out a product.
The Tribune reported that Indiana dealers say as much as 80 percent of their sales were made to out-of-state residents.
“They come to Elkhart to buy because that’s where they are made,” said Dale Kiefer, the sales manager at Elkhart’s Michiana RV.
But when Indiana’s 6 percent sales tax became effective for out-of-state sales on July 1, Indiana RV dealers immediately felt the impact.
Because of differences in tax laws between the states, some customers had to pay sales tax both in Indiana and in their home state. Others could only have a portion of their Indiana sales tax reimbursed.
In all, Bowersox said the new rules penalized residents from 31 states.
“Now we are to the point where customers said they wouldn’t even give us a chance as a result of that tax law,” said Mike Spencer, the general sales manager at Hart City RV in Elkhart. “Our competitors are using that against us. Don’t buy in Indiana, they say, buy in our state.”
The drop-off was immediate, Bowersox said. From April to June of 2004, when national sales figures were 11 percent higher than 2003 levels, Indiana dealers reported sales 58 percent higher than the previous year.
But in July, when the national figure rose 1.1 percent compared to 2003, Indiana’s sales dropped 11 percent. The next month, when the national average shrunk 12 percent, Indiana dropped 41 percent.
The impact is most significant on larger, more expensive motorhomes. For a $100,000 RV, a customer would have to pay $6,000 in Indiana sales tax. That’s more than enough to offset any benefit gained by buying an RV in Indiana and saving on transportation costs.
Both Bowersox and Indiana Sen. Joseph Zakas, R-Granger, who is co-authoring legislation to reinstate the exemption, say they believe the sales tax on RVs was enacted unintentionally.
“It was a laundry list of a few large ticket items that had been exempted,” Zakas said, “and I don’t think the implication was seen with regard to RVs.”
The state, which is facing a projected budget deficit of $600 million, hasn’t determined how much money it collects in sales tax on RVs because the tax has been in place for less than a year.
However, Bowersox believes that any sales tax generated is offset by the loss in RV sales.