In Lively v. Department of Revenue, Order No. K-24715, File No. K13-R-26 (Ky. Bd. Tax App., Nov. 19, 2014), the Kentucky Board of Tax Appeals (“Board”) found that a Floridian was liable for Kentucky motor vehicle usage tax and motor vehicle property tax on two recreational vehicles (“RVs”) despite his argument that he was a Florida resident with minimal ties to Kentucky.

Charles Lively (“Lively”) purchased a 2007 RV but had to return it to the dealer because it did not operate properly.  He then purchased a 2008 RV and received credit for the 2007 RV.  The 2008 RV was titled and registered in Montana under the name of Sightseeing Travels, LLC; Lively and his wife are the sole members of the LLC.  Lively owns an RV lot in Florida where he keeps the 2008 RV when he is there.  Lively travels “full-time” in the RV but considers himself a resident of Florida, where he has lived since 2003.

Lively claimed that each RV was in Florida for the majority of each year but presented no documentation supporting that claim.  Lively also claimed that he was in Kentucky only 6-8 weeks out of every year.

Lively owns a house in Kentucky for which he pays property tax and maintains homeowner’s insurance.  Since 2008, that house has been occupied by renters and/or Lively’s family members. In addition, Lively paid Kentucky income taxes during the years in question and listed his Kentucky address as his home address.  He also held a Kentucky driver’s license.  He did not obtain a Florida license until 2013.

For both the 2007 and 2008 RVs, Lively listed his name as the purchaser and his Kentucky address on the purchase contracts.  He returned the 2007 RV within 45 days because it needed repair.  That RV was not registered in Kentucky or any other state.  Lively later purchased the 2008 RV and registered it in Montana.  The purchase agreement specified that the LLC was to pay the usage tax.

Under KRS 138.455, the motor vehicle usage tax is a 6% tax levied on the retail price of a motor vehicle.  The tax is collected by the county clerk when the vehicle is titled or registered and is due even if Lively does not title or register the vehicle.  When a purchaser returns a vehicle to the same dealer within 60 days of purchase for a vehicle replacement, the purchaser is entitled to a refund in the amount of the usage tax paid.

The Board reasoned that even though Lively had not paid tax on the 2007 RV before returning it, he would have been entitled to a refund anyway.  Therefore, they found that he was not liable for usage tax on that RV.  However, for the 2008 RV, the Board noted that Lively was the owner until he transferred title to the LLC.  Despite the note on the purchase agreement that the LLC would be responsible for registering the vehicle, the Board found that such an agreement between buyer and seller would not negate any taxes owed by the initial purchaser.  Because he purchased the vehicle in Kentucky, the Board found that Lively had the burden of proving that he did not owe usage tax on the vehicle.  Lively did not meet this burden, and he was thus found liable for usage tax.

As to property tax, the Board first noted that property tax is assessed on January 1 of each tax year.  Although Lively purchased the 2007 RV on December 1 of 2006 and returned it to the dealer within 45 days, there was no proof that the dealer became the owner at that time, given that Lively did not claim his credit until he purchased the 2008 RV on October 15, 2007. Therefore, the Board found that Lively was liable for property tax on the 2007 RV because he was the owner on January 1, 2007.

The 2008 RV was registered in Montana to the LLC in February of 2008. Lively was therefore the owner on January 1 of 2008 and is liable for taxes. The LLC owned the RV for the subsequent tax years of 2009-2012.  However, the Department claimed that the RV had a taxable situs in Kentucky for 2008-2012 and sought to hold Lively personally liable for the taxes on the vehicle.

The Board found that for a person to be liable for Kentucky property taxes, the property must have a taxable situs in Kentucky, and for property to have a taxable situs in the Commonwealth, it must have a more or less permanent location in Kentucky, meaning it must be “used and employed with a constant continuity and not spasmodically and temporarily. The Board looked to Lively’s “significant” ties to Kentucky and also noted that he had provided no supporting documentation regarding the time he spent in Florida each year. The Board therefore found that the RV was not used only temporarily or spasmodically in Kentucky.  Moreover, the Board considered KRS 132.730, which provides that RVs not licensed in the state and not remaining in the state for more than 90 days in any 12 month period are not taxable in Kentucky.  The Board found that Lively had not proven that the RV had been in Kentucky for less than 90 days during the tax years.  However, it found that the LLC was liable for the property taxes for 2009-2012, not Lively, and upheld the assessments as valid against the LLC.