According to the latest industry statistics, there are a little over 11 million households in the U.S. that own some recreational vehicles. This is up over 60% from the sub-7 million in 2001, and over 25% the 9 million from a decade ago. Along with the growing popularity is an ever-increasing rise in the retail price of RVs.
With some prices upwards of nearly 40% in the past year, it is more important now than ever to take your wins when you can and register your RV in a state with low taxes and no inspection requirement. But first, let's take a detailed look at the state of the RV industry and where it appears to be going.
Show Me the Money
Money nearly always illuminates the truth in most situations. But, unfortunately, in the case of the RV industry, there is a lot of money to be had. According to MarketWatch, the North America RV market is poised to grow by nearly $9.5 billion in the 2020-2024 forecast period. Yes, that is just the amount they indicate to grow by in the four years.
According to the Motley Fool, "demand is epic." What exactly does epic demand look like to the people who know? Thor Industries indicated that their sales were up 54% at the end of July, with CEO Bob Martin saying that demand exceeds production output. That's a pretty good problem to have.
However, industry stalwart Winnebago may have something to say about that. In the fiscal third quarter, Winnebago’s sales exploded 139%. With an estimated 10 million families camping for the first time in 2020, there should be a solid uptick for many years to come as at least some of these new campers will stick with the lifestyle for the foreseeable future.
Taxes on RVs by State
Now that we have a better feel for who is spending big money on RVs let's take a detailed look at the fees associated. Of course, this will all be assuming a new RV with a fixed MSRP regardless of location.
For this exercise, let's take a very nicely equipped Class A motorhome, a 2022 Forest River Berkshire XLT 45A. On RV Trader, the going rate is $383,028, so we will see how that stacks up in a couple of the states, as mentioned above.
California
In colorful California, it is hard to pin down precisely what the tax rate is going to be because each city and county has the opportunity to tag on their little leech tax. With that being said, the base tax rate in California is 6 percent, but the lowest sales tax in the state is 7.25 percent. The average California sales tax rate is 8.5 percent, so your bill on the XLT 45A will come out to $32,557.38. On average. Of course, if you live in Los Angeles County, where the total tax rate is 10.5 percent, get ready to fork over $40,217.94. Ouch.
Texas
Texas is a fair piece better on taxation than California (it's hard to imagine it being much worse), with a fixed tax rate of 6.25 percent. It is not hard to understand why Texas is poaching so many Californians; it affords them the ability to survive and maybe thrive.
At 6.25 percent, the XLT 45A will require a tax payment of $23,939.25. Far from cheap, but still a lot less than the average tax bill in California, and nearly half of the highest tax bill in California.
New York
New York has a similar tax structure to California; the base rate is only four percent, but local municipalities can tack on up to 4.5 percent! As a result, the average total tax burden in New York is 7.915 percent, making the total tax bill for the $383,028 rig $30,316.66.
Florida
Florida does have a lot going for it, but the auto sales tax rate of 6 percent is not exactly great. For a state with many RVs, the tax burdens are unpleasant. Again, our sweet example rig with a sticker price of $383,028 will cost you $22,981.68 in sales tax before you even get to registration!
The South Dakota Advantage
South Dakota is a beautiful state, filled with probably more cattle and wildlife than people. It is a rugged state, with relics of the Wild West. It is a state that values individual liberties and freedoms and avoids excessive taxation and regulation as much as possible.
If you and one of the 40 million or so people who go RV camping (yes, roughly one-eighth of the country), you may have noticed a significant amount of RVers from South Dakota, or at least their RVs are wearing South Dakota plates. It isn't that South Dakotans don't get out and travel; per capita, South Dakota spends a ton on RVing, over double that of California or Texas! But for a state with just over 800,000 residents, it seems that they get around a lot.
Or maybe, just maybe, it has more to do with the favorable tax environment of South Dakota. South Dakota imposes a simple four percent tax rate for all counties and cities. So there are no hidden taxes from your city, just four percent.
On top of the low tax rates, there is also the benefit of no state-required inspections, a factor that you will deal with in California, Texas, and New York. This might be nothing more than a nuisance with a new rig, but it is still certainly a nuisance and an added expense. Since over one-quarter of the nation lives in these three states, it is likely a nuisance that you are dealing with.
What Does the Savings Look Like?
Okay, let’s break this down again and see how registering your RV in South Dakota at four percent stacks up against the states we’ve mentioned. The total sales tax burden of registering in South Dakota is $15,321.12. Far from cheap, but far less than the others.
At the average tax rate of 7.25 percent in California, your savings by registering in South Dakota will be $17,236.26. So, yes, you will end up saving more than you spend. However, if you happen to live in Los Angeles county with the egregious 10.5 percent tax rate, your savings will be $24,896.82.
How about the Lonestar State, with its 6.25 percent tax rate? Well, you will still save $8,618.13.
New York and their average tax rate of 7.915 percent? Your savings amounts to $14,995.54.
And now to Florida with the lowest sales tax rate of the bunch at six percent. So that two percent adds up, especially in the six-figures range because your savings will still be $7,660.56.
Isn’t It Hard to Register My RV Out-of-State?
It is understandable why this question comes up, but here at Dirt Legal, we specialize in taking the hassle out of your out-of-state registration questions. There is a lot of information to ensure the process goes without a hitch, which is our specialty. It allows you to sit back and relax while we take care of the rest. With all of the money you will save, you can treat yourself to something nice.
The Montana LLC Option
For higher-end RVs, there is another option that makes a tremendous amount of sense: registering it under an LLC from Montana. “Why Montana”? I’m glad you asked.
Montana is a state with an incredibly favorable tax code for high-ticket items, in this case being RVs. How favorable? To the tune of zero percent if you can believe that.
Well, that is a simplified version of the whole story. Montana has long been a refuge for registering high-end sports cars and supercars, mainly because they have had no state sales tax for many years. The catch is that you must prove residence in Montana in one manner or another. Thankfully, they allow an asset-holding LLC as an acceptable form of residency.
However, the Montana State government decided some time ago that they were tired of just being known as the biggest shelter of supercars in America and not cashing in on any of the royalties. So about five years ago, Montana decided to impose a luxury tax on all items that exceed $150,000. The initial surtax is 1.0%, and with each year on the particular items it reduces 0.1%; i.e., at year one, it is 0.9%, year two 0.8%, and so on.
How Big is the Montana LLC Advantage?
It is huge, to be blunt. But without dollar signs attached, who cares?
Advantage Over California
California invariably makes it on the naughty list every single time. In this instance it is two-fold: first, they have the highest concentration of RVs in America. Again, not a big surprise since they have nearly 40 million residents in the state. Also, it is largely due to the awful tax structure that leads them to be prime contenders for a Montana LLC.
In California, the average that you will be taxed is 7.25%, although it is generally higher depending on the area. A quick search of mine found parts of Los Angeles country having tax rates in excess of 10%! But let’s say that you are at the low end.
Actual image of the California registration process, colorized.
At 7.25%, a $150,000 RV is going to run you $10,875. However, if you register the same $150,000 RV under a Montana LLC, even with the 1.0% surtax, you will only pay $1,500. So with our Montanan LLC service and the 1.0% surtax, you will still come out almost $7,000 ahead! Do I have your attention now?
If we up the ante to a really expensive rig, it will look a little more like this:
$350,000 RV in California will owe a minimum of $25,375, whereas taxes owed to Montana would be a scant $3,500. When you take that into account with our package, your overall savings will be about $19,475.
South Dakota is a staunch advantage over many states, but the Montana LLC is poised to save you a lot over it as well. For the $350,000 RV, the tax bill is going to run about $14,000. This is a great saving over California, but the Montana LLC package will still end up saving you $8,100.
Our South Dakota registration package is one of the simplest ways to save a lot on your registration, and who doesn’t want that? Our Montana LLC program is also equally simple, and it provides you with a readily accessible tax shelter for future investments and assets. No matter which direction you go in registering your RV, we are here to help you make the best decision for your individual situation.
Moving to South Dakota? Want to get a jump start on the paperwork? Great idea! And we can help. We have worked with South Dakota for year to provide title and registration options, so we can get your vehicles registered and tagged for South Dakota ahead of time.