Marci and Craig Peterson expected to make a down payment, pay fees and cover other expenses when they recently bought a mobile home, but one bill blindsided them: They owed $1,200 in sales tax.
That's right, sales tax. It's a line item expense that doesn't show up on the tab for an existing $390,000 custom home. But every buyer of a used manufactured home in Utah shells over sales tax on the new abode."We had bought a home in Springville and we didn't have to come up with that much money when we bought our home," Marci Peterson said. "I don't think it's very fair. It was easier for us to buy a home than a mobile home."
Utah County Assessor Ron Smith and his counterparts across the state don't think it's fair either. The Utah Association of Assessors unanimously supports changing the law, Smith said, and will back yet another bill aimed at correcting the inequity in the 1994 legislative session.
"A regressive tax is more oppressive on lower income than higher income payers," Smith said. "In this case, the Legislature has instituted a regressive tax and requires only the owners of mobile homes to pay. It's a wonder. It really is."
Smith said manufactured homes originally got lumped with other motor vehicles in the days of "house trailers". Actually, most mobile homes are fairly wellrooted; once placed in a mobile home park they stay put.
In fact, Utah no longer classifies mobile or manufactured homes as motor vehicles, but owners still register the titles to their domiciles through the Department of Motor Vehicles.
And that's where buyers of manufactured homes get the sales tax whammy.
Buyers of manufactured homes generally have lower incomes and can ill afford the additional imposition of sales tax, Smith said. For example, the average sales prices of a home in Utah County during the third quarter of 1993 was $108,102, according to the Utah County Board of Realtors.
The average price of a new, double wide manufactured home is $40,000. Older single width used mobile homes range from $6,500 to $20,000, said John De Haas, owner of Luxury Homes in Springville and board member of the Utah Manufactured Housing Association.
"Why the buyers of mobile homes are required to pay sales tax while the buyers of typical homes are not is beyond me," Smith said. "The state is requiring owners of one class of property to pay a tax from which everyone else is exempt. This is a regressive tax that picks only on the buyers of low-income housing. It runs totally counter to common sense tax policy."
The situation creates another nightmare for assessors like Smith, who must track property titles for tax assessment. Mobile home owners pay property tax annually like other real property owners. But in many cases, buyers and sellers don't transfer titles to avoid the sales tax payment, Smith said, creating a tangled web of ownership.
So far, the chorus calling for change in the sales tax law has fallen on mostly deaf ears.
"We have fought this and fought this and spent thousands of dollars to get this changed," De Haas said. "They're all for it, but the minute it goes into committee and they see the negative on it, everybody runs scared, it seems like."
The negative De Haas refers to is the revenue the state will lose if it drops the sales tax. In 1992, Utah collected $1.32 million on sales of manufactured homes.
In 1992, according to De Haas, 550 new and 350 used manufactured homes were sold in Utah.
Two legislators have championed the cause of mobile home buyers in the Utah Legislature: Rep. John Valentine, R-Orem, and Sen. Lyle Hillyard, R-Logan. They've sponsored five different bills aimed at altering the sales tax law as applied to manufactured homes. Valentine plans to try again this year.
The rub comes when legislators realize "you're taking over a fourth of the fiscal note funding of one bill for tax relief."
"They've never been convinced that we're willing to put that much emphasis on this tax relief," Valentine said.
But Valentine is hoping his sixth time at bat for mobile home buyers will be a hit. His bill would require buyers of new manufactured homes to pay sales tax on 40 percent to 45 percent of the cost of the home to cover materials, in line with sales taxes new-home buyers pay on materials used in stick home construction.
Buyers of used manufactured homes would be exempt from sales taxes.
"One of the hopes is that since the state is doing better financially there might be a large pool to fund fiscal notes," Valentine said. "Another hope is that we can convince more legislators of the fairness of the issue this time, particularly since we're in the process of repealing other exemptions in sales taxes."
*****
(Additional information)
Sales-tax treatment in other states
How manufactured homes are treated in other areas:
- In Idaho, a 5 percent sales tax is charged on sales of new mobile homes. No sales tax is charged on resale of the units, however.
- San Diego County provides two options for owners of manufactured homes, according to the San Diego County assessor's office. Since 1980, all new manufactured homes are listed on property tax rolls. No sales tax is charged if the unit is resold.
Buyers of pre-1980 mobile homes have a choice: They can convert to the property tax roll at the time of sale, thus avoiding sales tax. Or they can continue to license and register their units with the Department of Motor Vehicles. If the unit is sold, a 7.75 percent sales tax is due - unless the mobile home is then converted to the property tax rolls.
- In Arizona, sales tax is charged on the purchase of a new mobile home, but units are exempt from sales tax when resold in most cities. An exception: Mesa, which does tax mobile homes on resale. The issue is currently a "subject of controversy" there, said Howard Boice, public information officer for the Arizona Department of Revenue in Phoenix.