RV Weekly

BY DANA NELSEN

The Internal Revenue Service stated in a release dated January 30, 2008 that many employee tool reimbursement plans offered by dealers to technicians may be in violation of tax law. A number of tool reimbursement companies that have solicited dealerships to offer this program to their employees may in actuality unknowingly be encouraging illegal activity. As the saying goes, “Ignorance of the law is no excuse.”
The IRS will be taking a close look at these programs and may be imposing steep fines to dealerships that violate the tax laws addressing tool reimbursement in 2008.

The way many of these tool plans work is the employer reduces an employee’s check by a certain amount that the tech says he will spend on tools (this amount may be spread over several of the employee’s paychecks). The tech then buys the tools needed for his job and the dealer cuts a separate tax-free reimbursement check equal to the amount the employee’s check was originally reduced by.

Tool reimbursement companies tout that the program reduces the amount of tax paid by both the employer (the social security and Medicare tax match) and the employee’s income tax. Listed on the IRS’ website it states:

Many of the tool plans currently being marketed do not meet the requirements to be tax-favored accountable plans despite their claims to the contrary.  In addition to its concerns with the lack of substantiation provided by the technicians to ensure that only expenses incurred for that employer are included in the plan, the Service is focusing on the fact that the majority of the plans being marketed are designed and operated around a structure that recharacterizes a portion of the employee’s existing pay as a “reimbursement” for the employee’s tools merely to generate tax savings for both the employer and the employee.  In other words, the employee continues to receive the same gross pay but what was previously paid as taxable compensation is recharacterized as nontaxable reimbursement until the employee’s alleged tool costs have been recovered, then the employee returns to his original amount of taxable compensation.

I recently spoke with Stephan King, Certified Public Accountant of Moss Adams LLP based in Scottsdale, Ariz., about the issue. King said that while he hasn’t looked at every tool reimbursement program in the country, he has looked at a number of well-known companies offering these plans and has yet to find one that the works under the stipulations defined by the IRS.

King warns that penalties may double the amount of tax that should have been paid to the IRS and they may go back several years to see if previous violations occurred. Interest may also be due for previous year’s violations.

While the IRS report is fairly new, the IRS’ stance on this issue has been unchanged for a number of years. In 2000, the IRS issued a paper titled “Service Technicians’ Tool Reimbursement Plans.” This document stated, “…generally, amounts paid to motor vehicle service technicians as tool reimbursements will not meet the accountable plan requirements.” While this specifically mentions “motor vehicle,” the IRS’ website further explains that this ruling applies to other vehicle industries like RVs.

My question for dealers this week is, how many have implemented or considered implementing a program similar to this for their employees? Are there other programs to help get technicians the tools they need that do not violate what the IRS will be scrutinizing this year? As usual your thoughts are welcome.

Thanks for reading.

By DANA NELSEN

Well, I’ve been the editor of RV Trade Digest for exactly three months, which means I have exactly 10 blogs under my belt now. That’s right; I’ve hit the 10 mile marker. This means exactly 10 times now, I’ve sat and considered bringing the formaldehyde issue up. I have had tons and tons of requests from all of you to discuss formaldehyde. Each time I think about it, it makes me a little queasy.

Here is why. Drawing undo attention to the subject may actually magnify the problem and make consumers less likely to enjoy the RV lifestyle. This blog, like all the other RV trade blog sites, are Internet searchable. Consumers and news organizations can read what is posted on any of these sites by simply using Google or some other Internet search engine. For that reason, we must make sure what is said in this and any other blogs you participate in on other industry Web sites are responsible comments.

That said, after much thought I think we can have an intelligent and responsible conversation about this subject. I remember when I worked at RV PRO magazine and the formaldehyde issue first came up. I went to the publisher to find out what reporting we could and should do on the subject. He informed me that we would not report on it at all. It involved controversy and reporting on it could hurt the magazine with its advertiser customers. Essentially, we stuck our head in the sand and pretended the biggest issue to hit our industry in the last 10 years didn’t exist.

Since that very beginning, I’ve silently watched as numerous national news stories have come out. None of them have been overly positive for our industry. We’ve read in the news that FEMA trailers are being sold at $0.40 on the dollar directly to consumers. We watched as Mike Molino went to our capitol to ask our government to instead sell trailers to dealers so the market would not be flooded with cheap products. We watched RVIA say that formaldehyde isn’t an issue. Then we saw RVIA adopt new formaldehyde standards even though it had already determined “it wasn’t an issue.” We’ve heard from various biased and unbiased sources that this trailer made by “X manufacturer” measured so many parts of formaldehyde per million. Some reports have said the trailers were toxic beyond belief causing all sorts of ailments nobody in their right mind would possibly want. Other reports have shown that high formaldehyde levels in FEMA trailers were hogwash.

After all this time and everyone involved, I still don’t feel I have an answer to a very simple question: Are any of the trailers bad? Nobody seems to want to answer that question. I’ve watched smoke and mirrors for two years now. Some would rather talk about the definition of “bad.” Others want to talk about “bad according to whom.” (Do you mean according to the Sierra Club, the person living in the trailer, the manufacturer, the Center for Disease Control, lawyers?) Who exactly? Others point to other factors like, “Well, if you smoke a cigarette in the trailer…” or, “If you live in the trailer long term…” or all sorts of other ridiculous (in my opinion) unrelated statements to whether the trailers are bad or not.

I’ll bet many in the industry would like this whole issue to just disappear. It seems that much like me, all those months ago at my former magazine, many in the industry have opted for the “Stick your head in the sand approach.” I’ve been reluctant for a long time to discuss this, but many of you who’ve sent me e-mails have convinced me that you really want to talk about this subject. I guess deep down I did too. It almost makes me angry when I think about it. The journalist in me screams, “I want answers dammit!” while another wonders about the wisdom of even bringing it up and how much political fallout may occur for broaching the subject and insisting on a simple answer. If RVDA’s plan to convince FEMA to only sell dealers the FEMA trailers worked, and I was a dealer who had bought and is now in turn selling a FEMA trailer to consumers, I think I would want to know if I was selling a product that was potentially toxic.

The greatest thing about associations is also one of the biggest downfalls of associations. Associations work for their members and therefore always do what is in the best interest of its members. What this means is that since RVIA works for its manufacturer members, it is really their job to protect their manufacturer members. If FEMA trailer manufacturers cut corners to get those FEMA units made quickly, and they did something wrong in the manufacturing process with formaldehyde, it will take an act of God for RVIA to openly and in a straight-forward manner admit it. Why? Because it would hurt their members –that is unless sacrificing the few benefits the many. The public relations department’s job is to minimize the damage, redirect attention until it’s a non-issue and if possible, put a positive spin on it. If none of that can be done, a sacrificial goat must be found. That is the association’s job. Huge amounts of money are wrapped up in this issue, which means that we will probably never learn the truth. Even if the law suits end decisively one way or the other, really the only questions answered will be who gets the money and who has to pay for it. If people really did get sick, I doubt even if they win, they will find the compensation adequate.

Are any of these trailers bad? I don’t know the answer to that. Do you? I’ll tell you one thing though, regardless of price, you won’t see my family in one of those FEMA trailers.

BY DANA NELSEN

Yesterday, as I looked over the information pouring in from the newswire, I came across a release by Statistical Surveys based out of Grand Rapids, Michigan. Because Statistical Surveys, in my humble opinion, is a really great company that provides what many consider invaluable information on tracking consumer buying trends, I immediately opened the release.

The release announced the 2007 calendar year dealership rankings of highest volume RV sales. Dealerships were listed into three categories: motorhomes sales by volume, RV trailer sales by volume and combined RV trailer and motorhome sales by volume. Statistical Surveys gives an award to the leader in each category.

In the motorhome category the top three dealers in order were FreedomRoads, Lazydayz, and Giant RV Center. The top three towable dealers were FreedomRoads, Giant RV, and then Fun Time RV Sales. The combined category of both towable and motorhomes had FreedomRoads, then Giant RV Center, followed by Lazydayz.

Do you see a pattern here?

While I think that Statistical Survey’s information, as always, is really valuable, I mean, after all, isn’t it good to know who is selling the most RVs in the country? I am not sure the data is comparing apples to apples.

It’s kind of like a football game where one team is allowed 70 players on the field, while the other is only allowed 12. Who do you think will win that game? To give an award to an organization with multiple dealership locations just because the whole of its dealerships sold more RVs than single location competitors is kind of silly in my mind — especially when you factor in FreedomRoads, with a gazillion locations.

Journalists love to scoop other news organizations, so here’s my prediction for 2009- “Statistical Surveys will name FreedomRoads top volume RV sales organization in all categories.” There, I’ve beat out all other news organizations by an entire year. Let’s engrave the plaques.

Releasing the information of what company sold the most is great information, but in light of the factors influencing the data, I’m not sure an award is warranted. If Statistical Surveys wants to hand out awards, there might be better ways to determine a winner. “Largest RV sales volume by single location” comes to mind or break out “largest volume by multiple dealership locations” as a category for FreedomRoads. I can think of a number of ways that might make Statistical Surveys awards more coveted. Like all statistics, you can play with the numbers in so many ways that almost anybody could win the award based on what criteria are used. Overall, I guess I’d like to see the competition be fair. What are your thoughts?

BY DANA NELSEN

While at a recent distributor show, I met a dealer from Montana who told me of a really interesting new program he has implemented regarding company uniforms at his dealership.

The dealer contacted a variety of aftermarket companies and asked them to sponsor a particular day of the week by supplying employee shirts for that day. Each day’s shirt features both the aftermarket company’s logo and the dealership’s logo embroidered on the shirt. Each weekday a different colored shirt with a different aftermarket logo is worn by employees. A weekly schedule was given to the employees to explain what shirt should be worn on what day to ensure everyone matches.

Not only do the employees look professional with an ever-changing but matching uniform, but the dealer saves on the expense of providing uniforms. The aftermarket companies that supply the shirts get high-value advertising at a next-to-nothing price. It appears to be a win/win situation for everybody.

I am sure there are a number of companies that may do this with RV manufacturer’s brands, but this is the first time I have heard of this for the aftermarket. Can you image walking up to an RV parts employee to ask a question about hitches and prominently seeing a “Roadmaster,” “Robin Industries” or “Husky” logo on his, and every other employee at the dealership’s, shirt? Would that influence your buying decision? What about the employees? Would they be more apt to steer customers to a particular brand if they were wearing that brand on their clothing? I think so. It would be hard to recommend “Brand A” when “Brand B” is on your left front shirt pocket.

Customers would naturally ask questions about the brand and employees would learn a great deal of product knowledge about that company merely out of necessity.

My question for dealers this week is do you see this as a positive and innovative idea or are there downsides to it? Would wearing the logo of a single company cause problems with distributors that offer competing brands? Would having more than one brand on a single shirt be appropriate? What are the pros and cons of a program like this?