California officials are cracking down on a popular tax-avoidance strategy used by some RV and luxury vehicle owners.
The California Department of Tax and Fee Administration (CDTFA), working with the Department of Motor Vehicles (DMV), is investigating dealers and buyers tied to the so-called “Montana loophole,” where vehicles are registered out of state to avoid California taxes and fees.
In states with sales tax rates ranging from 6 to 10 percent, the purchase of a luxury RV using the loophole could result in tens of thousands of dollars in tax obligations, hence the appeal.
The state has identified about 500 dealers connected to more than 2,500 such sales since 2023, costing California more than $10 million a year in lost revenue.
The tactic, often used for high-end motorhomes and exotic vehicles, relies on forming out-of-state LLCs, typically in Montana, which has no sales tax. The tactic has been going on for years and has been reported in RVtravel.com for more than a decade with warnings to avoid the tactic.
Officials say enforcement is increasing, with hundreds of investigations underway. Penalties can reach 50% of the unpaid tax.
For RVers, the message is clear: If your rig is primarily used in California or another state, registering it elsewhere could trigger audits, fines and budget-busting back taxes.
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RVT1256b
One man’s tax loophole is another man’s tax exposure mitigation.
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Yep. Everyone takes advantage of every possible “legal” way (loophole) to reduce their taxes as much as possible…liberals and conservatives, rich and not rich. I’ll bet not one single representative, senator, or even the Governor of Cali, or anywhere else, fail to use every “loophole” possible.
Typical people with money allways cheating.
Funny. People like you never look at the waste and fraud of government spending. Things like the high speed rail debacle and 24 billion spent on homeless flushed down the toilet in CA.
Potato – patautoe.
If our politicians didn’t waste our tax dollars. They wouldn’t need to find more ways to tax us to raise money.
I’m pretty sure you would be welcomed as a politician to solve all those waste problems.
Are you implying the politicians are the answer to fraud?
I wonder what the space agency (Us) was charged for the Orion Loo that didn’t?
Ahh, from the lovely state that is taxing their wealth right out of the state to Texas and Florida. Soon, only the street sleepers and bums will be left there. The Wall Street Journal ran a series of articles last week listing the states that are losing the most money, by the Billions, to low-tax or no-tax states led by Florida, with Texas close behind. Of course, California’s kissing cousins, “tax them until they bleed” state, New York, was close behind.
Yep. And Elizabeth Warren trying to do the Annual Asset tax at the Federal level on billionaires. Now, Ms. Warren has net assets of $12M, putting her in the top 1% of wealth in the U.S. Mark Warner…$214M. Why do they want the Asset Tax cutoff higher than their personal wealth even though they are in the vaulted top 1%??? 🤔
Many states have sales AND USE tax.
The Montana LLC may avoid the Sales Tax part, but if you are a resident, you would still owe the same amount as a use tax even though the purchase is by an out-of-state LLC.
…as does ND.
If one lives in a particular state, enjoys the benefits of said state, utilizes said state amenities, state infrastructure, state services, and more, one should pay for these state benefits in the same manner all other state residents pay. Claiming a state wastes money and/or disagreeing with how moneys are spent, should not justify one’s decision to not pay respective fees and taxes to said state. What is most wrong with this picture is, it is most often those with the greatest financial resources, those most able to pay these fees and taxes, who most often utilize these cheats. Many of these persons claim to be religious and follow religious practices, until it comes to paying Caesar.
I agree with your first sentence. But I look at the attempted avoidance as a protest against the waste and over-taxation/fees. You have to get the attention of the tax-setters somehow. Here in Colorado, I see many Oregon license plates on cars. Told by a former Oregon resident that it is much cheaper to keep Oregon plates than to get CO plates when they move here. They eventually have to switch, but keep OR as long as they can.
They’d better be careful or Oregon will be coming for them as “residents” of the state and seek back income taxes, etc. States are becoming very aggressive on collections, especially states losing tax base as residents flee.
Is California going back & auditing past RV purchases or are they looking to stop the practice of using an out of state LLC going forward?
For us it isn’t about the taxes it’s about the CARB compliance. Our 20 year old motor home that I love will need a new engine to be registered in California. Years ago I contacted California Air Resource board and asked about exemptions. I was told there were none when I said that we would need a $25,000 engine for a motor home that is worth $30,000. He said “mam your new engine will be a lot more than your motor home is worth”.
How is throwing away our Motor home and buying a new one good for the environment?