As summer recreation goes full swing, a new state law will begin taxing recreational vehicles with living quarters the same as motor vehicles. That means when a camper is sold in Kentucky, whether motorized or not, the buyer will pay the state’s six percent motor vehicle usage tax.
Under House Bill 360, the definition of a motor vehicle is expanded to include recreational vehicles. The new tax law applies to motor homes, travel and fifth-wheel trailers and pull-behind and pop-up campers as long as they contain living quarters and are required to be licensed for operation on the public highways.
County clerks began collecting the tax on July 1.
Previously, county clerks were required to collect use tax on these vehicles only when they were purchased out-of-state and titled and registered in Kentucky. Buyers of a new camper trailer from a Kentucky dealer paid a six percent sales tax at the time of purchase, but buyers of a used model from an individual did not have to pay the tax.
Now, the same rules for motor vehicle taxation will apply to recreational vehicles, both moving under their own power and pulled by another vehicle.
The change comes as part of an ongoing overhaul of the commonwealth’s tax system, shifting from income-based levies to sales and use tax. This change is expected to bolster the state’s Road Fund by $16.1 million annually. The move from a general sales tax to motor vehicle usage tax, though, will rob the state’s General Fund of about $6.1 million in Fiscal Year 2024.
Little notice of this change enacted by the 2023 General Assembly was released to the public and even to county clerks across the commonwealth prior to enactment. In fact, a presentation from the Department of Revenue at last week’s Kentucky County Clerk’s Association was the first many local officials became aware of the change.
This legislative change does not affect the current tax treatment for sales of regular bumper hitch trailers that are designed for general hauling uses. The sale of these trailers continues to be subject to sales tax, and retailers must report the sales and remit the tax to the Department of Revenue when filing their sales and use tax returns.
On a new recreational vehicle, the tax will be based on affidavit or manufacturer’s suggested retail price, or MSRP. If previously owned, the levy will be based on affidavit or the retail book value. Trade credit will be allowed for trailers against a motor home purchase.
Tax exemptions such as parent-to-child will also be applicable. However, the reclassification of recreational vehicles means Kentucky’s “Occasional Sales” and other sales and use tax exemptions will no longer apply to the registration and titling of these vehicles.
Just like with an automobile, if a customer shows proof that the dealer charged and collected the state’s six percent sales tax at the time of purchase, credit against the motor vehicle usage tax owed will be allowed, preventing the owner from paying double taxes at the time of registration.
The staff in the county clerk’s office will work with customers to navigate and help understand the new law, yet some answers are still unclear at the local level.
Submitted by Charlotte Willis, Grayson County Clerk
