How is a recreational vehicle or a cargo trailer defined, for purposes of this exemption from sales tax?
The definitions of a recreational vehicle or a cargo trailer that must be met to utilize an exemption from sales tax is defined under Indiana Code 6-2.5-5-39(a) and (b).
According to this code:
- A cargo trailer is defined as a vehicle:
(1) without motive power;
(2) designed for carrying property;
(3) designed for being drawn by a motor vehicle; and
(4) having a gross vehicle weight rating of at least 2,200 pounds.
- A recreational vehicle (RV) is defined by as a vehicle with or without motive power equipped exclusively for living quarters for persons traveling upon the highways. The term includes a travel trailer, a motor home, a truck camper with a floor and facilities enabling it to be used as a dwelling, and a fifth-wheel trailer.
I am a RV and/or cargo trailer dealer. I have a customer who is a nonresident of Indiana. Must I collect the Indiana 7% sales tax if the nonresident is going to immediately take the purchase back to their home state to be registered and titled?
Yes, nonresidents are subject to Indiana’s 7 percent sales tax unless they register/title their purchase in a “reciprocal” state within 30 days of purchase. A state is reciprocal with Indiana if the other state would allow an Indiana resident to purchase a recreational vehicle or cargo trailer exempt from that state’s sales tax to be registered or titled in Indiana. No exemption exists for a customer who is registering or titling in a non-reciprocal state or any foreign country.
A purchaser claiming an exemption must complete a ST-137RV affidavit of exemption form. The selling dealer must keep this form at their place of business. A legible copy of the exemption form must be forwarded to the Indiana Department of Revenue for review. Tax must be charged for the non-reciprocal states and all foreign countries, as shown in the below chart.
Residents of the below jurisdictions must pay the Indiana sales tax of 7%.
Why are some nonresidents exempt, but others are taxable?
The statute that allows for an exemption for a sale to a nonresident was written to only allow an exemption if the nonresident purchaser’s state would allow an Indiana resident to purchase a RV or cargo trailer exempt in that state or country. Many states, but not all, allow an Indiana resident to purchase these type vehicles exempt. A few states do not allow this type exemption, as shown in the chart above, thus the Indiana statute mandates the tax must be collected.
I am a resident of a state with either no sales tax, or a lower tax rate than the Indiana tax rate. I plan to purchase a recreational vehicle or cargo trailer from an Indiana dealer. I will be registering and titling in my home state. Will I be entitled to a refund for the higher tax paid to Indiana?
If you reside in a state listed on the ST-137RV exemption form or a foreign country you must pay Indiana sales tax to the dealer. No refund shall be paid by Indiana or the state where you will title the vehicle. The Indiana tax rate, by statute, is applicable to both instate residents as well as nonresidents.
I am a resident of a state that has the same tax rate or a higher tax rate then Indiana. I want to purchase a recreational vehicle or cargo trailer from an Indiana dealer and plan to take it back to my state of residence to be registered and titled. Which tax do I have to pay?
If you reside in a state listed on the ST-137RV exemption form or reside in any foreign country you will be required to pay the Indiana sales tax of 7%. Your state will compute how much state tax is due in your state, and then allow a credit for the amount of state sales tax paid to Indiana. Any additional state tax due, if any, will be collected by your state. In addition, your state may collect a local sales tax which is not related to the Indiana state tax. You will have to pay any additional state sales or local tax due upon registration and/or titling in your state.
The ST-137RV affidavit of exemption form contains the requirement for the purchaser to provide an identification number (Social Security number or federal identification number). I do not want to divulge my SSN and I do not possess a FID. What happens if I do not provide the seller with one of these numbers or any other information requested on the exemption form?
If all of the information requested on the ST-137RV form is not obtained, your exemption will be invalidated and your dealer (and ultimately the purchaser) will be liable for the sales tax not collected at the time of purchase. A legible copy of the purchaser’s state driver’s license will suffice in place of a SSN if attached to the ST-137RV form.
The dealer will be billed for any exemption that is not allowed due to missing information. The dealer will in turn bill you for the amount of tax exemption you had requested when you signed the ST-137RV form.
I was charged additional sales tax by my home state upon registration and/or titling. I already paid a sales tax to Indiana. Why was I charged additional taxes by my home state?
- Your home state may have a higher state tax rate than Indiana.
- Your home state may impose a local sales or excise tax in addition to their state sales tax. Indiana only imposes a state sales tax. Your state should allow a credit for the state tax paid to Indiana against your state sales tax; however, you will have to pay any additional local taxes that may be due in your home state.
- You live in a state that does not allow credit for a sales tax legally imposed by another state. Of the 45 states that have a state sales tax, the Indiana Department of Revenue is only aware of five states where credit is not given to their residents for sales tax paid on vehicles in other states. These states that do not allow a tax credit are:
- Arkansas
- Maryland
- Mississippi
- Oklahoma
- West Virginia
- To avoid double taxation, Indiana statute does allow a tax credit for a state sales tax paid to another state.