By Russ and Tiña De Maris
According to stories published by rvbusiness.com, attendees at the recent Family Motor Coach Association rally in Georgia were greeted by representatives of a Montana firm that promised significant savings on taxes and registrations when buying an RV. You know the catch, simply use a Montana attorney to set up a Limited Liability Corporation to “own” your new rig, and you won’t have to pay state sales tax, and you can take advantage of low RV registration rates in the Big Sky State, regardless of what you call your own state of residence.
The sales pitch in Georgia came straight from representatives of the Wilson Law Office (Missoula, Montana) through the auspices of Action Services LLC. Quoting the story on the rvbusiness.com website, “We set up LLCs for people to have their vehicle ownership here in Montana,” acknowledged Nancy Damaske, a paralegal for the firm. “It saves them sales tax because Montana does not have sales tax or any personal property tax. Montana requires that a Montana resident is listed on the title and the LLC is then considered a resident of Montana. It depends on what state you are a resident of on how much you are saving.”
How much can you save? Interestingly, Damaske cited Indiana as a specific example, indicating that a Hoosier-stater would save seven percent immediately on state sales tax; more money could be saved with lower insurance rates and financing.
But we now ask: How much can it really cost you?
Shortly after rvbusiness.com released their story, its staff got an email from a representative of Thor Industries – a company who manufactures RVs right in the state of Indiana. “I wanted to make sure you were aware that the State of Indiana has taken the position that forming a Montana LLC and titling a recreational vehicle in the name of a Montana LLC (while perfectly legal under Montana law) is still a taxable event,” wrote Trevor Gasper. Gasper is Thor’s Corporate Counsel. “The Indiana Department of Revenue is on the lookout to assess sales taxes, including penalties, on RV owners who purchase their RV through a Montana LLC.”
OK, Indiana residents should squirm if they think they can sneak around state revenue and licensing agents. But hang on, other states take a dim view of what they consider unlawful tax evasion. Are you a resident of California, Colorado, Iowa, Massachusetts, Minnesota, Washington, or Wyoming? Those states are on the list of those that prohibit such “backdoor” legal moves.
Please don’t send us emails that tell us, “I’ve owned my motorhome through a Montana LLC for years and never had a bit of trouble.” Yes, it’s true, there are plenty of folks who’ve made the same argument before when we’ve penned on this issue. You’ve managed to keep your skate wheels turning, but it may not always be that way. Here are a couple of thoughts from Steve Lehto, a practicing attorney with 23 years experience. Writing on jalopnik.com, Lehto raises a hypothetical that should raise concerns in even the most entrenched “save taxes by whatever means needed” advocate.
“Tell the insurance company the truth (‘I live in Michigan, drive the vehicle almost exclusively in Michigan, store it and park it in Michigan, but have Montana plates on it in the name of a sham LLC’),” suggests Lehto. “If you tell them the truth, will they insure the car? Or you could tell them anything other than the previous parenthetical sentence, which would be a lie.”
He continues the argument: “You might never get in an accident. But if you do, that Montana plate will pop up. Like, in the police report. And an insurance adjuster, scrutinizing your claim might wonder what false statements you made on your insurance application. False statements which form the basis of the denial letter you will receive shortly in the mail.”
And then, there’s another thing to consider. How many dollars saved on tax and registration payments will pay for that constant neck-flipping you may have to make when traveling in your RV? California Motor Vehicles has state troopers keep their eyes open for Montana-plated rigs either being towed, or towing, a vehicle with a different state’s plates. Other states have “report a tax evader” hotlines set up for just such scenarios. And while it may be legal in some states now, the visions of new tax-streams becoming available can quickly turn into realities on the books.
In Washington, we were personally “turned in” by a state park official when we pulled a travel trailer in for an overnight. We’d just bought the trailer from a private party in Arizona, and were taking it to our then-home where we would be registering it. Within 24 hours of leaving the park, we got a phone call from the state DMV, demanding to know what we were up to.
Yeah, Big Brother is watching – and having a bureau, agency or department breathe down your neck can really take a nice RV road trip and turn it into a stress session … even if you don’t get caught.