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In recent years, the state of Colorado really began cracking down on people who have RV's titled w/a Montana LLC, just to avoid taxes. The state went after quite a few people & collected money from them. Can't speak to what other states might be doing.
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A Montana LLC is not something you will ever see me recommend UNLESS one has a legitimate business for profit that owns an RV.
Most that set up Montana LLCs are using them simply to avoid sales taxes on RV purchases. That is "legal" in Montana, but almost all other states with sales taxes consider it to be tax fraud rather than legal tax avoidance. The law of the state of residency rules.
I have spoken to a few departments of revenue about this, and I have links to multiple newspaper articles from several states showing crackdowns on the practice. Some states even have whistleblower rewards for turning in neighbors with Montana plates on their RVs. Some states are searching storage units for Montana plates. And with states hurting for revenue, I only see more aggressiveness in the future.
A member of this forum that resides in Colorado, was charged with a felony (this is an interstate issue).
Now, with that said, many, many RVers have used Montana LLCs without a problem and they feel secure in the fact that Montana law firms set them up in the LLC. FAQ from prominent Montana law firm on their website:
Is this legal? This process is legal as long as you meet and follow your state’s laws and regulations. The conditions and law vary from state to state. Virtually every state has statutes that can make this available to you. Please contact our office for more information regarding your state.
It is correct that there are state statutes that can be used to make the practice legal under the strict letter of the law. So I can't go as far as to say the practice is "illegal", but there are certainly risks involved and some states do consider it illegal.
Most of the time, to make it "legal" the statures require the RV being kept outside of the state of residency for certain periods of time. The specific requirements are easier for full-timers to comply with because they don't have to bring their RVs into their state of residence (or only rarely), they are much less conspicuous, and they rarely park in places for a long period where they might be questioned or turned in.
However, there is still risk and I wouldn't want to bet on a non-Montana court giving much weight to a Montana attorney's interpretation of the law in a non-Montana state. Courts are political entities as well as legal entities, and I doubt many of them would say the applicable statutes were intended to create loopholes to avoid significant state sales taxes.
I have seen one court case where the RV owner won. He did the LLC in Montana while he was a resident of Florida. He then changed his residence to Michigan where he was originally from and he was taken to court in Michigan. The reason he won was because his purchase was at the time he was a Florida resident. The court said Florida is who should have sued him. They didn't rule in his favor because they determined the avoidance of sales tax was "legal", but rather because he wasn't a Michigan resident at time of purchase. He won, but he still had to go to court because he lived in Michigan and had Montana plates on his motorhome.
Of course there are other issues. Sometimes the LLC creation and annual filing fees to keep it going eventually add up to the sales tax saved so there is no net savings. It can be difficult to insure or finance an RV titled in the name of a Montana LLC.
There is no doubt that it is appealing to save $18,000 on a $300,000 diesel pusher purchase. But I don't like use of the Montana LLC solely for that purpose due to the cons above. That's just me - hundreds of RVers that have used the Montana LLC to avoid sales taxes and never had an issue will vehemently disagree. But you posted in the "Ask Howard" forum, so there's my answer.