First, let me admit that I am a very high risk person when it comes to these avoidance games, but the Montana LLC one is off the charts for even me. Here's why.

You can find zillions of discussions about these LLCs in other forums. They are very well worth the read. As Howard said, a key point is make sure everything matches. As well as matching license plates. If your RV has different plates than the toad or the truck, the red flags fly and depending on what state you are in (Calif. is particularly aware of and routinely enforcing this game) apparently you will get pulled and fined or worse. According to many reports, the down side of getting caught is huge. It also seems the law (and insurance) is getting very smart about this one. Even Montana apparently has some legislation pending to repeal this loophole.

To help me defer the tax burden here's what I do. Note, I still had to pay a one time state sales tax which the Montana LLC will skirt, but... many municipalities impose annual property or similar taxes that can be significant. But you can find municipalities with no/low personal property tax to reduce the annual bite. For example, I "domicile" in a property tax heavy state but there is one county in my state that specifically exempts only RVs from all of these taxes. Bonanza! So, I "rent" a storage spot in that county and "garage" my RV there. Since our vehicle registration specifically allows for a vehicle to be "garaged" in a different local than the owner's "domicile", I save all the property taxes with no downside risk. It's so straight the attorney's probably can't stand it. And my RV has yet to even see her "garage" spot.

Bottom Line: I'll bet one can find such county/city/town enclaves in most property tax states. But you'll need to ask, ask, ask, and keep asking all around your chosen "domicile" state - dealers, owners, etc. - as these are fairly secret things for obvious "upsetting the boat" reasons.

-- Edited by RVDude at 09:42, 2006-09-11

I don't know anything about the whole LLC thing but another way the state of Michigan gets their pound of flesh is via license plate renewals.

Here in Michigan you are taxed (license plate fees) on the value of the vehicle. Since you had to declare the value at the time of purchase (and you don't want to lie about that because the insurance company will look at this number if you ever have a total loss), they (the state) knows how much your RV costs. License plates here run about $400 on a $50,000 rig.

Here's the loophole. If you allow your plate to expire (obviously don't do this while you are driving it), you can transfer an exsisting plate to the RV for $8.

We simply make sure the rig is parked at the time of plate expiration, renew our toad's plate ($80), and then transfer the plate to the RV ($8). The next day you have to go back into the DMV and request a new plate for the toad ($80). Total cost (other than time in line at the DMV) is $166 instead of the $480.

For those of you that use a fifth wheel or TT, this is a non issue because trailer plates are good forever.

Concerning LLC's. The current laws in Texas concerning vehicle registration involve where the vehicle is located. If a vehicle is in the same county in Texas for more then 30 days it must be registered in that county. I know individuals who have used LLC's with the idea that they would move their rig out of the county once a month to adhere to the law. Unfortunately the counties in Texas may prove to be a tad bigger then these people bargained for.
I really decided to put my two cents worth in because of some considerations that were not previously addressed. In order for an LLC to have any hope of working, the RV must be bought and registered in the name of the corporation. Many funding institutions WILL NOT finance vehicles purchased this way (after all it isn't called a Limited Liability Corporation for nothing). Likewise many insurance companies will not insure them. Some RV club benefits (like Good Sam's Emergency Road Services) are not available for these rigs because, since they are owned by a corporation, they are considered 'commercial vehicles'.

It's always great to get other perspectives.  That's what a Forum is all about. 

There are numerous folks that are using the Montana LLCs to avoid sales taxes on the purchase of motorhomes.  Most will never have a problem because they won't be discovered.

I have considered the Montana LLCs, and they are enticing when one thinks about saving thousands of dollars in sales taxes.  And they are "legal" under Montana law.  HOWEVER, other states don't have to follow Montana law and it may not be legal under their laws.

Here is one quote to back that up.

"Montana lawyers say it's legal and it may be legal in Montana, but in Missouri you're evading taxes, you're evading state sales taxes, local sales tax," says Department of Revenue public information officer Maura Browning.

I've discussed this subject in an earlier post, but I felt the need to hash it out from a few different angles.

First, if this practice is completely legal in all states, we should all be able to call up our state government and say: "I'm going to establish an LLC in Montana with no business purpose.  The sole reason I'm going to do this is so I can purchase a motorhome and avoid paying sales taxes here in this state - my official state of residency.  It's perfectly legal - the Montana RV dealers and attorneys will vouch for me."  

Second, those that stand steadfast behind the "it is perfectly legal" statement are the Montana RV dealers, Montana attorneys, and other Montana companies that profit from this "loophole".  As I said before, the practice IS legal .... according to Montana, the state that benefits.  However, would any of those Montana entities indemnify me from all legal liability imposed by my residence state if I comply with everything the Montana folks tell me and I still get hauled into court?  Fat chance.   

Third, if I were a state attorney, what do I think my rate of success would be in prosecuting those using a Montana LLC to avoid sales taxes?  I think it would be pretty easy to win such a case.  The argument that the LLC owns the motorhome rather than the individual is an easy one to overcome.  This is the area where most people think they have protection and where many on the other RV forums use faulty reasoning.  But the problem is that these Montana LLCs do not have any legitimate business purpose - they are established soley to avoid sales taxes.  Therefore it is really easy to "pierce the corporate veil" which is a legal phrase meaning the entity and the individual are one and the same - the entity is simply a facade.  Furthermore, I don't care what state laws the Montana attorneys quote, there is no state that is going to interpret its own statutes to say "All legal residents of this state can purchase vehicles in other states to avoid state sales and use taxes as long as they establish an LLC in the other state and register the RV in the name of the LLC in the other state.  And there is no reason to limit this to motorhomes; all vehicles may be purchased in this manner."   

Fourth, knowing the working of government minds, I can see the following scenario.  Let's say a young government employee or politician decides to make a name for himself/herself.  As bjoyce said above, the greatest impact would be in Texas or South Dakota.  So how easy would it be for someone looking to generate a lot of revenue or attention to send letters to all those Texas "residents" with Escapees addresses requesting proof of RV registration?  Say they find 1,000 people with Montana LLC registrations and the average motorhome price is $100,000.  Now we are talking about $6.5 Million dollars in revenue using the 6.5% sales tax figure.  Worth pursuing?  You betcha - especially when this is put in front of the massive non-RV owning public that can't believe the government has allowed the "rich" motorhome owners to get away with avoiding the same taxes they all have to pay. 

My intent is not to criticize, judge, or scare those that have opted for the LLCs.  It's really, really hard to pay $13,000 in Texas taxes on a $200,000 motorhome when there is a widely "accepted" method to avoid that.  And the risk of having a problem right now is still fairly low (although that risk is increasing - no doubt about that).  So it certainly is an often-used technique with lots of supporters that have saved lots of money.

But I just can't bring myself to recommend the practice because I'm not convinced it is "perfectly" legal.  Well, I also have my own personal issues with it, but that doesn't mean anything. 

There is an unbelievable amount of discussion in other forums on Montana LLCs.  Much of it is hearsay and there are a lot of folks with major misconceptions about legal issues.

Lots of people are using Montana LLCs.  But if the main argument is "The likliehood of getting caught is low", then that is bothersome.  If you go that route, know the facts and understand the potential consequences - and you didn't get the idea to use a Montana LLC from me.    

-- Edited by Howard at 08:04, 2007-02-10

     Evasion vs Avoidance, that is the issue.  Many, Howard included will never move from left to center if they can't get over the Evasion focus in their thinking.  I would challenge all who are stuck on the issue to question themselves as to thier filing of annual income taxes, both federal and state.  Are you telling me that you do not do your level best, or hire the best accountant to help you "Avoid" paying more tax than is owed, based on law.  Understanding of course that interpretation of the law is the paramount issue.  That being said.
     Many of the possibilities of what could happen as expressed by those posting here I would not challange, however the likelyhood of it happening are extremely remote.  A class action type challange even more unlikely.  The RV crowd with LLC's is miniscule in comparison to huge corperations that have their entire fleet of Trucks or Cars licensed in a particular state because of the "Avoidance" tax advantages gain them even though their entire business entity is in another state.  Forming an LLC to Avoid taxes is so common among Corperate America as to not even raise an eye brow.  I speak from experience as a former trucking company owner prior to retirement I had my LLC in Nevada for my business but lived and worked out of Wisconsin.  Why, to save tax dollars and take advantage of what loop-holes were available to me.  Illegal--no, stupid--no, smart, I think so.
     Lets seek someone to post here who has had any of the negative challanges, previously mentioned, brought to bear on them by any lawful entity.  Lets hope those who heard Aunt Millie, who heard it from Uncle Harry, Who got it from the bar tender last week, will not pipe in.
     I would advise anyone who owns or intends to own property in any state other than the state they are getting the LLC in to not go the LLC route, but if you are a true Full-Timer without realestate, an LLC could work well for you.  Do your research, and don't be scared off with suposition.
     Yes, I do have my motorhome licensed through my LLC., and don't loose any sleep over it at all.
     Please forgive the tone if I sound a bit harsh, but so much negativity on this subject pop's up on other forums and eventually it puts a burr under the saddle of those of us (and there are many) out here who have absolutely no problems.

     Remember, Please be careful about traveling in Mexico, the banditos may get you.
 

I'm with Howard and the others who advise extreme caution on this one.

I haven't followed this discussion on any of the other message boards out there... it may have been suggested already for all I know... but it would seem to me the simplest thing to do would be to consult an attorney in the state where I intend to establish my legal residency to find out if that state considers buying an RV through a Montana LLC legal tax avoidance or illegal tax evasion. That would be a relatively inexpensive way to resolve any doubts about the issue. The argument that "you're not likely to get caught" says, to me at least, that there is at least some degree of awareness of the possibility of being on legally thin ice. Why not find out for sure, one way or the other? We wouldn't even be having this discussion if it wasn't a questionable practice in the first place.

It's easy to understand why states would allow this practice for businesses. They fall all over each other competing to provide incentives and tax breaks to companies in order to attract or retain businesses which provide jobs for their citizens - who then (you guessed it) get to pay the whole gamut of state sales/income/property taxes, which more than offset the business tax breaks. So there are tangible benefits to the states for granting exceptions to businesses. RVers however, for the most part anyway, are not businesses.

Tim Fansler

"Be sure you're right... then go ahead"  - David Crockett