Colorado expects to collect nearly $3 million from residents who registered their RVs out of state to avoid paying sales taxes and registration fees.
The Colorado Department of Revenue and the state attorney general’s office investigated 12 individuals, all of whom pled guilty to misdemeanor tax evasion charges in the spring. The court ordered them to register their RVs in Colorado, pay restitution totaling $93,450 and perform community service.
Colorado also ordered 122 other residents to pay $2.7 million in unpaid sales taxes and penalties after illegally registering their RVs out of state.
“This issue has been an ongoing concern and we have been pursuing such cases for several years,” said Mark Couch, public information officer and legislative liaison for the state revenue department.
The dozen individuals who pled guilty bought motorhomes in Colorado but registered them in Montana, Couch said. Montana has low motor vehicle registration fees and is one of five U.S. states that have no general sales tax.
Consumers who buy an RV in Colorado can sign a motor vehicle sales tax exemption form at the time of purchase. The form contains a sworn statement affirming that the vehicle will be removed from Colorado within 30 days and will be licensed, registered and used outside of Colorado or in interstate commerce.
“The 12 individuals affirmed — either by the form or verbally — that they would not be housing their vehicles in Colorado,” Couch said. State officials’ investigation concluded that the motorhome owners weren’t keeping their promises.
Details of each case vary. Ten of the cases were prosecuted in Denver County Court, and two in Boulder County Court. But news outlets in Colorado have reported cases where residents formed limited liability companies (LLCs) in Montana and then registered their vehicles there, under those company names.
This practice is legal in Montana, where the vehicles are being registered, but not in Colorado.
Big tax savings
Montana license and registration fees for motorhomes range from $97.50 to $282.50 per year, according to the Montana Motor Vehicle Division. Meanwhile, a Denver resident who buys a $150,000 motorhome could pay nearly $15,000 in sales tax, ownership tax and registration fees for the first year of ownership.
Colorado’s state sales tax rate is 2.9 percent, but cities and counties may collect more. For example, the total combined sales tax for Denver residents is 7.72 percent of the purchase price.
The ownership tax
In addition to the sales tax, Colorado has an annual ownership tax, in lieu of a personal property tax. The ownership tax is based on the original taxable value of the RV, year of manufacture and date of purchase. For RVs, the taxable value is 85 percent of the manufacturer’s suggested retail price.
The taxable value, which is determined when the vehicle is new, does not change during the life of the vehicle. For the first year of vehicle ownership, the tax rate is 2.10 percent of the taxable value; second year, 1.5 percent; third year, 1.2 percent; fourth year, .9 percent; five to nine years, .45 percent; 10 years or more, $3.
Colorado officials say residents who do not register their RVs in their home state are cheating residents out of much needed tax dollars.
In an investigative report released in 2007, Denver TV station KUSA-TV calculated the fees that just nine motorhome owners would have paid to Colorado had they not registered their vehicles in Montana. The total: $227,400.