Montana LLC's

[Just Plain Jeff]

In the last couple of months, we've helped here and there on bus deals as a POG service.

What we are finding is there are a limited number of banks who are willing to participate in Montana LLC financing, as compared to just a year ago. There are a number of factors, it seems, behind the scenes.

Several states, notably California, are beginning to crack down on California residents who have Montana registrations. This follows a case in Oregon where someone fraudulently registered a coach there and they got smacked down hard (I believe the fine was $100K including the tax, penalties and interest).

Due to a number of foreclosures on coaches, lenders have been loathe to write extended paper with Montana registration as their recourse is to the LLC, not to the individual...albeit many of these deals have personal guarantees.

Some insurors are starting to rumble about the Montana registrations as well.

So, this is really just a report from the trenches at this point. It is too early to figure out if this is the beginning of a trend or a blip on the screen.

It may have all started when truck4u sold his Marathon and MM and truck went plastic as well. Tough to track these things completely. Try to keep all informed as we hear stuff.

[Ray Davis]

Interesting info, Jeff. I purchased a 93 coach in Seattle, and it ended up costing me $15k in licensing fees in CA. At the one year point I was shocked to get another bill for over $1k for renewal (a 14 year old vehicle?). BUT, I was too concerned/scared to try to do the Montana LLC thing.

I had been considering it for my next renewal (December), but this again gives me pause, since I live in CA.

I am sure I'll be jumped on for this next remark, but part of me feels that if I live in CA, AND I drive the roads with a vehicle, I should pay vehicle tax in CA. Agreed, I think the cost is WAY too high, but I guess that's a different argument. Granted, I don't use the vehicle a lot, it would be easy to justify a Montana LLC. But something inside tells me that's just wrong ...

Ray

[jonnie]

Boys,
Please just remember this: Tax evasion is illegal and wrong. Tax avoidance is not and is your God given duty and right as a tax paying American.

[jello_jeep]

Jonnie, you are right on!

In CA, you have to keep your rig in another state more than CA., which is why I garage mine in out of state.

Ray, the lion's share of your 15K was not licensing fees at all. It was sales tax. I think the state charging you sales tax on a used machine that you bought out of state is wrong. Just plain wrong.

And you can for sure legally register it via MT or other tax friendly places, as long as you comply with the laws of YOUR state. As stated, you can't primarily keep it here to comply with the law.

After 1 year, you can bring it in state and register it here, paying the way too high reg fees, but if you have owned it a year, you don't have to pay sales tax on it. I do agree that if you primarily keep it here, you should register it here, and as I researched it, it will be about 1400 (+or-) a year but thats the current cost of doing business here.

In MT, if your coach is 10 yrs old or more, you can get lifetime tags for 360 bucks or so. So when my reg comes up next year, I will get the lifetime MT tags, and probably also register it in CA. Once I register it here, I will bring it back in state. I will keep up with the CA registration until I retire/move out, then the MT tags will be good for the rest of time !

The problems start when you register out of state, and then park it out in front of the house for months on end, clearly in violation of the law. And if you do that, you don't have much room to bitch if you get caught and fined. Dems da rules.

As Jonnie points out, this is tax avoidance, just like writing off your mortgage interest. You don't HAVE to write it off, but its a legal way of avoiding that portioin of your tax (a deduction). Tax avoidance is just strategic planning, looking at the tax consequences of various purchases, sales & transactions. Regardless if its registration, or estate planning, retirement planning or whatever, and in and of itself is clearly legal.

If you violate the law, then you are EVADING the tax, and the state and or federal authorities will likely pay you a visit, and you will find sympathy hard to come by.

Those are my .02 worth~!~

[Just Plain Jeff]

A few more observations on what we are seeing:

In my young and wild days, I worked for the Commissioner of Internal Revenue in Washington, DC (you'll find this out later on anyway, so I may as well say it now). I can remember Commissioner Johnnie Walters, a true Southern Gentleman, wagging his finger saying, "There is sometimes a thin line between Tax Avoidance and Tax Evasion. And that's when we call in the Criminal Division." As a former Fed, I have always paid the price of the sales tax and gone down the road without regrets.

Many LLC owners echo the earlier comments about having the 'queasy feeling' going down the road later on about having 'saved' the money by doing the LLC.

Now we had a guy who owned a minining company in Montana, born and lived in Montana and he had the toughest time getting approved there as well. So it seems as if times are changing. It is of course easier to buy with cash for the registration but there may come a day when the gates open.

The motto, "If it seems too good to be true, it probably is,' may be at work here.

The purpose of this posting is to keep POG members aware of trends and updates of information so you can make your best informed decisions and the consequences thereof. We're watching this trend and keeping it here on POG which is likely much more private than on Prevost-stuff for now.

Another benefit of POG.

[Jon Wehrenberg]

The premise of a MT LLC is excellent. You own a company that is "headquartered" in MT, that company owns a Prevost, and that company allows you to drive its bus.

That is a very clever way to avoid the sales taxes or licensing fees your home state imposes.

This approach to tax or fee avoidance begins to fall apart in the eyes of the tax collector when the tax collector is able to prove the LLC has no business purpose and its creation was solely to EVADE the payment of taxes or fees.

I would bet that as the states which are losing the most revenues to this scheme start adding up the numbers they will find it cost effective to start cross checking the address of LLC owners with MT registrations, and when that occurs they will be able to do computer searches and start sending out bills for taxes, fees, and penalties. It may take some wrangling in the courts but after a while they will penetrate the wall that currently keeps them out of access to the data and then all hell will break loose.

I'm a chicken like JPJ.

[Just Plain Jeff]

Cluck, cluck, cluck...

What is at issue here is the official state of residence. In legal circles, this is determined by what is called, 'the nexus of contact.' (Hey, that's worth somethin' right there, a $50 word at least!).

The nexus of contact is not where you are, but where you consider your home to be: Voting, mailing address, the place where you nest. Different for full-timers than real property owners.

All this was developed as the first state sales taxes were imposed. The Wrigley family of chewing gum fame was responsible for all of this. They'd had houses all over the place and used each one to avoid/evade taxes. Finally the states got together and parsed out the residences and defined them for the family. Darned nice of them to do that?

The problem here is that 1) the path to litigation is that mutiple states make claims on the taxpayer not between each other, putting the taxpayer at odds with multiple states and 2) some states are beginning to share data via computer (oh good). This has already been done in Homestead Exemption states to insure that multiple Homestead Exemptions are not being claimed.

It's my guess, that since this is really all about money, and governments like to have as much of that as possible, we'll see more states clamping down on the Oregon, South Dakota and Montana LLC deals as they are used more broadly. Remember that many of the litigations can go back several years, so the effect of any enforcement is cumulative.

Have a nice day.

[truk4u]

Mango,

Did you notice the former IRS Nazi/Tree Hugger called your million dollar, beautiful bus "plastic".:eek: I thought he was your buddy....

[Jon Wehrenberg]

Truk......

It IS plastic. And on top of that it is glued together. But so is my new car.

[jello_jeep]

Fact of the matter is, California could make the MT or SD deals illegal, (like I understand it is in Mass.) but they don't.

Comply with the law, and you are ok. In our case don't keep it in CA 6 months or more per year, and be able to doucment it, Simple as that.

In my case, I don't keep it in CA at all, and can clearly document it, because its true. So there ya go. I actually hope to have a place in MT soon :) then I can dump my upcoming CA tags.

You guys are muddying up a very simple issue. (IMHO).

No clucking here!

[win42]

It's amazing how those that missed the boat cry sour grapes to those that made the journey. Don't worry we'll be hit hard enough to sooth our concience when the Demo's finally get full power and start taking our retirement money for those that never worked or ever intend to.
There is a story on LLC's in the latest FMCA eddition. Contrary to what John stated if you do not use your LLC as a for business entity and use it solely for the owners individual use you are in the clear. The whole article was obviously written by a TAX NATZI and adds more confusion then letter of the law.
Oh my god you have that big thingie the rest of us don't have and were going to take it away from you. Those thingieies use a lot of Diesel fuel and should be taxed out of existance. It's amazing how the dog not in the fight keeps barking the loudest.

[Toy Box]

Welcome to the vette set, Jon. Does this mean the Hummer will go into retirement ?

[Jon Wehrenberg]

The new car was a replacement for my black 1990 C4. Tomorrow I head for the Owner's Tour of the factory and museum. It will give me a chance to enjoy the car a little. All I can say about the car so far is that it is awesome. Notice in the background the new car's stablemate.

[truk4u]

Wow, Jon boy you are the master of toys!;)

Harry - Now that deserves an AMEN!

[lewpopp]

What is the stablemate...A John Deere firetruck?

[dalej]

Lew, it looks like a gator to me!

[mikedee]

Jon,
Those look like Corsa exhausts. I just put them on my 2001 C-5. Went with the pace car sound. I looked at hundreds of cars, sport cars, rods, vintage, and end up with the vette and next to the Prevost it is my favorite vehicle.

[jello_jeep]

Ditto Harry,,, AMEN!!

[lewpopp]

Harry, What are you driving. Now come on, don't hold back. The hot sh$ts aren't. I'll bet it is an old rusty pic-em-up. good for you.

[JIM CHALOUPKA]

Jon, How was the owners factory tour? Did you get to see how the engines are assembled, or is that in Michigan and or off limits any way.

How did they treat you in Kentucky or didn't they know you were from Tennessee?

By what means did you travel to the tour? You have so many options!

Give us a rundown! :cool:

[Jon Wehrenberg]

The tour was fantastic. There were three of us and one flew in from the Cinncinnatti area, and my other friend rode with me in the new car. (260 miles, 4.25 hours including rest stops, 27.1 mpg going, 26.2 return).

We had a personalized tour given by a retired man that had worked in every area of the facility and was able and willing to answer every question. He knew the car and the production techniques.

Our tour took 5 plus hours, and we finished with a tour of the National Corvette Museum. I know the Corvette owners among us that have had these cars over the years can appreciate the strides made in performance and quality. and after seeing the efforts made in the production facility to produce the car it is no wonder.

We did not see the engines produced since they are assembled, by hand at an other facility and shipped to Bowling Green, but we saw the frames being produced and the entire assembly process. With the exceptions of the frames, virtually everything is produced outside the facility, but is delivered to the factory for assembly into the final product.

I am starting another thread to see if there is interest in having a two or three day mini rally to include tours of the factory and museum. We were treated as well as anybody could be treated and everyone, including the production people truly appreciate having visitors. They are rightfully proud of their efforts.

[rickdesilva]

FYI
this is off a Dealer site that I monitor daily.....the Tomato Can who responded under the "comments" section is not me.
--------------------------------------------------------------------------------

Some car buyers beat sales tax through Montana “LLC” loophole



A legal loophole allows adventurous car buyers to skip local sales taxes
(1/28/2008)


DealersEdge Daily Headlines

At the Flagg RV Center near Boston, Mass., salespeople sometimes meet customers who are different from the others eyeing the scores of motor homes in the dealer's lot.



As the Framingham MetroWest Daily News reports, these buyers stand out because, unlike their fellow state residents, they can purchase vehicles costing $100,000 or more without paying a dime in sales tax.



The buyers avoid the tax by taking advantage of Montana's laws governing corporations and motor vehicles. Using those laws, individuals can buy a vehicle through a Montana-based limited liability company - or LLC - and registering it in that state.



The process works because, unlike other states, Montana will register vehicles not garaged within its borders.



Montana-registered vehicles don't need annual inspections, and buying a vehicle through a Montana company avoids sales tax because the state has none, according to Deer Creek Corporate Services in Helena, Mont.



The company offers out-of-state customers the chance to set up their own Montana-based companies in order to save money when buying a vehicle. They've helped customers register RVs, cars, helicopters, planes and other vehicles.



For a fee, the company handles the paperwork for establishing a limited liability company with the Montana secretary of state. Deer Creek will also act as the physical Montana address for the LLC and forward mail to their out-of-state customers.


Once the LLC is established, a customer can purchase a vehicle on behalf of that organization in their home state. Because the LLC is bound by Montana law, and the vehicle legally belongs to that LLC, a customer's home state can't charge sales tax on the purchase. Deer Creek can also file the paperwork for a Montana registration and plates.



Deer Creek handles about 700 to 1,000 customers a year.



But the scheme might not be available much longer. It has earned the ire of some Montana officials, including Dean Roberts, administrator for Montana's motor vehicle division.



"This is upsetting the laws of the other states. We don't like the practice," Mr. Roberts said. "I don't like it from an ethics point of view."



Montana public records for LLCs are left with only a company's official address, which can be as simple as an attorney's office.

Comments:
Monday, January 28, 2008 12:39:32 PM by Anonymous

Another example to point out the ridiculous inequity of our taxation system. If you see an RV costing 100k or more..many 1M and more, chances are good it's registered in Florida, Montana or someplace without sales tax. Or the owner is an idiot. If Taxachusetts and other big sales tax states are losing this revenue anyway, wouldnt it be wise for them to change the way they tax? The State can turn around and come after instate residents with a use tax, but a more fair system would be a lot easier.

[merle&louise]

Karen & I just returned from a Newell rally in Austin, TX. We met a fellow who lives in Colorado and had his coach registered and licensed in a Montana LLC. He received a certified letter from the state of Colorado informing him that they were assessing sales tax on his coach at a rate of 7.76% on $500,000 plus penalty plus interest and HE MIGHT BE LOOKING AT JAIL TIME!

He contacted the DMV and cleared the matter up by paying the taxes and the penalty and interest. He now has Colorado plates and is very happy to have the ordeal resolved!

His advice to me was: These states are serious about sales tax evasion:eek:

Just thought I would pass it on.

[0533]

It is interesting to see states chase citizens for a few thousand bucks, while their largest businesses have their corporate headquarters in the Caymans Bermuda, offshore saving in some cases 100's of Millions of real dollars. the difference is those businesses have bought and paid for state legislators.

If you can legally have an LLC in MT or any other state do it. Make certain that you are legal, get an opinion letter from your Montana attorney before making a commitment. The MT attorney will need to in most cases get an attorney from your home state to sign off. Check list of legal requirements will be generated and must be followed.

If the LLC in MT has at least 2 members, one being your attorney in MT. you operate the LLC as business, keep it out of your home state for the required time, and follow all other rules then you might well meet the legal test.

Lots of people own businesses out of state, pay whatever the state tax they are registered in and this has been going on for ever.

Florida used to chase down boats that were purchased in Florida and spent much of their time there after the purchase. Dealers started to move offices out of state taking the business away to places like the Bahamas. Now Florida has relaxed the rules understanding how much business is generated by the boating public in Florida.

If state governments would concentrate on cleaning up their own house they would not have to worry about shaking down good citizens for excessive fees.

[truk4u]

The States can now buy the data base of Montana LLC's. This has been going on for some time and many states are doing exactly that. You can have all the Attorney's in the world representing your LLC, but in the end, the State is going to win and it's going to be painful.

Just think about how strapped the States are for Revenue and if they can pick up the data base for 3 grand and in return collect thousands of dollars from people trying to beat their sales tax, it's a no brainer.

[jelmore]

As I recall in conversations with our Montana attorney, currently there are some issues with time spent in other states in your motorhome and each state has different requirements for establishing rights to taxation. For us, since we're on the move all the time, seemed there were special circumstances that applied, though complicated.

[0533]

There will always be risks associated with any venture, any business. Governments always want a piece of the pie and will chase down anyone who is willing to keep the world's economy in motion, especially those who do.

Make sure that your LLC actually conducts business with others, conduct the LLC as a business, pay all bills as a business, use the bus as part of an ongoing LLC activity and have an active LLC member living in the state the LLC is registered in.

I cannot with 100% assurance say one will not encounter issues downstream but if you have operated as a business conforming with good business practice, this is about all anyone can do.

I run all business activity through both my accountant and his attorney who is a tax attorney for their blessing. If they hesitate or are unwilling to provide a letter of opinion, then it does not fly.

I purchased a motor vessel from a broker in Maine a few years ago. took it to a well known Maine shipyard for repairs and upgrades.

The state of Maine got wind of this and sent me a bill for 7% sales tax on the purchase. It took 2 years to straighten out, but I did and Maine (who is always thinking of new ways to drive visitors away) rescinded the demand. I was days away from court, if your right your right, if your not you will pay, bottom line.

[Ray Davis]

California is also coming down hard on out of state plates. If you get seen by a highway patrol with out-of-state plates, they will quite often stop you and ask a series of questions

1. where do you live?
2. where do you work?
3. where are your cars registered?
4. where is you coach registered?
5. which state do you pay state income tax to?

You get the drift. If everything is CA, and the bus is MT, you're in for trouble.

I'm not an expert, but evidently it's certainly legal to have out-of-state plates, however, there are certain requirements, one of which I beleive is that the vehicle is out of state for more than 6 months per year.

That's where a lot of people have made the mistake. Simply licensing it in MT, and then keeping it in CA is a problem waiting to happen.

I'm sure that other states have different rules, so tread carefully.

Ray

[0533]

I remember hearing that another place use to ask the same questions to their citizens, I believe it was Nazi Germany. I would not live in a state that treated it's citizens as though they are breaking the law all the time. California seems to be rather tax happy and broke at the same time, sounds like the dream has run its course in Ca. I lived in Ca years ago and found the state to be wonderful, what happened?

[Ray Davis]

Out of most everyone I know that has MT plates, they created an LLC for the sole purpose of not paying taxes. And, now when they get caught, it's not pretty for sure.

CA has rules about out-of-state purchases, and it's possible (although not easy) to get CA plates, and to not pay sales tax. It requires out-of-state purchase, and usage for some predetermined period of time. It also requires that you use your vehicle out of state (when I purchased my bus) for more than 50% of it's use. If you qualify, you can get CA plates, and not pay sales tax.

I will agree, I do not like paying sales tax. Especially because of a fire that caused me to pay sales tax twice in 6 months. That hurts.

Others may chose to disagree, but in CA there is a legal way to not pay sales tax, and then there are "other" ways, which may or may not get you in trouble.

Ray