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Old 12-11-2009, 12:14 AM   #1
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RV tax question for attorney in AZ

I won a $40,000 5th wheel in a sweepstakes! It is at an RV dealership that was the sweepstake sponsor. I plan to trade it in on a motorhome, without ever taking it off the lot. I know I have to pay income taxes on it, BUT do I have to pay sales tax?
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Old 12-11-2009, 12:43 AM   #2
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It depends on your state and their laws.

You would have to pay sales tax in California..it may be the same in Arizona. I can promise you that if the dealership states you have to pay it - then you probably do.

In California - the "contract" would have it broken out for "sales tax paid" and "DMV paid". We would have a contract showing you-the consumer- were paying the proper amount and that we were collecting it. The State Tax Office will and does audit dealers - so I doubt they would screw this up.

Another way to verify that is to look up the info on your State Tax Board's website.
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Old 12-11-2009, 12:51 AM   #3
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Oh yeah... CONGRATULATIONS!!!!!
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Old 12-11-2009, 11:46 AM   #4
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Do you have to pay income taxes on the $40,000 or just the $28,000 the dealer will give you on trade in price for the MH?
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Old 12-11-2009, 12:42 PM   #5
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TAXES...

Quote:
Originally Posted by Triker56 View Post
Do you have to pay income taxes on the $40,000 or just the $28,000 the dealer will give you on trade in price for the MH?
I use a CPA for taxes, etc and this is what I was told:

The CPA feels that if there was no sale, there can be no sales tax. I asked the State to confirm this part. The sales tax, State and City, comes to 8.05% on the full $40,000 if I have to pay it.

There are no license plates to purchase if it is not taken off of the parking lot and onto the public roadway by me. Plates are expensive in Arizona. I plan to trade it in for a motorhome with the dealer who sponsored the sweepstakes and is obtaining the 5th wheel from the factory.

Income tax is reported in the year the prize is actually given to me and NOT the year when I was notified. The 5th wheel had to be ordered from the manufacturer, so I will most likely be accepting it in 2010 and it will be taxed on the 2010 income tax form rather than 2009. The income tax has to be paid on the entire $40,000 UNLESS I can show that the ARV given by the sweepstakes sponsor is too high. I don't have the model number of the 5th wheel so it is difficult to determine if it is too high, although, I did check with NADA.com for the value of a 2009 Colorado 5th wheel and the smallest unit was valued at $45,000. Since the sweepstakes rules say I have to pay tax on $40,000, they may be correct. I'll watch to see if the NADA value drops in 2010.
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Old 12-11-2009, 08:00 PM   #6
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Regarding how much you pay income tax for an item you won in a contest, you are only responsible for what you were able to get for it and in this case the trade in value. I won on a TV game show once and I had this Sterling Silver Tea & Coffee Service Set as a prize. And I am NOT into this silver stuff so I sold it. The set was valued by the retailer @ $350, I sold it for $75 and that's all I claimed on my income tax form.

To me, regarding sales tax, if you never titled it, then is wasn't sold.

Only my $.02 worth.

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Old 12-11-2009, 09:22 PM   #7
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You MIGHT be able to work a deal with the dealer to pay the $40000 income tax as if he gave you part of a motorhome and leave the 5er completely out of the deal as far as the tax man is concerned. I am certainly no lawyer or accountant and I would HIGHLY recommend you get a good one of both, get with the dealer and see what the 4 of you can come up with as the most advantageous and still stay pretty much legal. Just a suggestion, but NONE of us here can give you reliable answers that will satisy the state and federal tax boys. Good luck and CONGRATULATIONS!!! Gene
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Old 12-11-2009, 09:48 PM   #8
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Quote:
Originally Posted by Ann n Gene View Post
You MIGHT be able to work a deal with the dealer to pay the $40000 income tax as if he gave you part of a motorhome and leave the 5er completely out of the deal as far as the tax man is concerned. I am certainly no lawyer or accountant and I would HIGHLY recommend you get a good one of both, get with the dealer and see what the 4 of you can come up with as the most advantageous and still stay pretty much legal. Just a suggestion, but NONE of us here can give you reliable answers that will satisfy the state and federal tax boys. Good luck and CONGRATULATIONS!!! Gene
When you win something this large you have to sign an affidavit in front of a notary. The affidavit makes it very clear that I will receive a 1099 tax form with the amount of $40,000 on it. If you don't sign you have to pass on the prize. Of course the sweepstakes sponsor has already sent one to the IRS. I never mentioned it before, but I enter online sweepstakes as a hobby. Each and every day I enter anywhere from 12 to 18 sweeps. I have won before, but never a vehicle. I was never involved in a win that had anything to do with sales tax, Just income tax. After this deal I told my wife that I will never again enter for anything except cash. Trips are always way over-priced and I have avoided them. This win was first place. There was also a Grand Prize winner who won a motorhome. I found out that his prize had to be ordered from the manufacturer also. Another interesting thing here was that there were two sponsors, Camping World and Fox Broadcasting. Camping World was willing to do a cash alternative, but Fox said no and they won out because they registered the sweepstake. So, I almost had cash, but the rules were very clear that there was no substitute for the prize. From now on it's cash sweeps only!
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Old 01-06-2010, 10:05 AM   #9
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AZ revenue rule re sales tax...

I did get the ruling from the AZ Department of Revenue. Sales tax must be paid in this situation.
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Old 01-06-2010, 12:57 PM   #10
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Like I used to tell folks long ago when I was working, "ain't no such thing as a free horse". Looks like that applies with RVs as well.
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Old 01-06-2010, 01:13 PM   #11
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Wow!!! People really do win?
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Old 01-06-2010, 02:20 PM   #12
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As a general rule, sales tax will have to be paid if you ask the question. Reason- states have so wildly overspent based on bubble year income receipts and projections, that they need money. So if a rule can be divined to cause tax collected, it will be.
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Old 01-06-2010, 02:20 PM   #13
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Quote:
I won a $40,000 5th wheel in a sweepstakes! It is at an RV dealership that was the sweepstakes sponsor. I plan to trade it in on a motorhome, without ever taking it off the lot.
By the time you pay the 8.05% AZ sales taxes and the 15%-25% Federal income tax on the retail value of $40,000 you'll be forking out about half of what the dealer pays wholesale to buy that trailer. (I estimated the sales tax at $3,220 and the income taxes at the 25% rate $10,000. Hopefully your bracket is lower) The dealer will very likely be buying the trailer from the manufacturer for somewhere around $25,000 and you'll be forking out over $13,000 to get it.

If you use it as a trade for a motorhome without taking the 5th wheel off the lot, the depreciation on that new motorhome on the day you drive it off the lot will be greater than the gains you made by winning the 5th wheel trailer. Since you already have a practically new nice motorhome it might be wiser to walk away from this prize. The only way I see this would be a good deal would be for someone without an RV to have won it and then it'd help if they were in a lower tax bracket.

Maybe you could line up a buyer for the 5th wheel to take it off your hands for close to the wholesale value, then you'd pocket about $12,000 after the taxes are paid.
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Old 01-06-2010, 02:31 PM   #14
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Note to self: Don't fill out the prize drawing forms at the RV show I'll be attending this weekend!

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