Fact or Fiction: Registering RV in a Montana LLC to Avoid Sales Tax
It’s quite popular to look for ways to avoid taxes. We all hate paying taxes and there are many legitimate ways to arrange your affairs to minimize your tax burden.
But one popular tax scheme can be more trouble than the taxes you might be saving.
Buyer beware: a Montana LLC may not be the best way to register your RV just to avoid sales taxes in your home state.
First, let’s get a little legal stuff out of the way: RV Tailgate Life does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors.
Sales Taxes on RVs
Depending on the state that you live in, sales tax on your new (or new to you) RV could be thousands or tens of thousands of dollars.
In Georgia, for example, the sales tax equivalent, the one-time title ad valorem tax, is 7% of the value of the RV for 2019 (PDF Link).
On a $300,000 RV, that is $21,000 that you will be paying in sales taxes. Going even nicer? The sales tax bill just keeps going up.
Montana RV Sales Taxes
But in Montana, there are no sales taxes or ad valorem taxes on RVs or other motor vehicles. And some counties don’t charge local vehicle taxes either. Montana doesn’t even have vehicle inspections, so no need to take your RV to the state.
You just have to pay the registration fees.
The current Montana annual registration fee for for motor homes is $282.50 for RVs less than 2 years old.
As your RV ages, the annual registration fee decreases to the point that at year 11, you can get a permanent tag and stop paying annual fees. If your RV is valued at more than $300,000, you get to add another $800 annually until the RV is 11 years old.
So which would you rather pay on a $300,001 RV? A one-time ad valorem tax of $21,000.07 to Georgia plus additional tag fees or $9,941 over the course of 11 years to Montana?
Starting to get an idea of why many high end RVs and exotic cars are registered in Montana?
According to Montana officials, there are an estimated 1,300 cars valued at more than $150,000 registered in Montana.
That’s a whole lot of high end cars for a state with an estimated 2017 population of 1,050,493 and a state with cold winters not ideal for exotic cars.
See Also: Does an RV Qualify for Tax Deductions?
Why the Montana LLC May Be A Problem
So Georgia residents would setup an LLC under Montana law that would be a “resident” of the state. Then the RV or high end vehicle is registered in the state by the LLC. No sales tax is paid. Tags are issued. And everyone, but your home state, is happy.
But just because it is legal under Montana law to register your RV in Montana through an LLC and not pay sales taxes does not mean that it is legal where you live.
See, states have rules about registering vehicles where you live.
Georgia requires Georgia residents to immediately register upon purchasing a vehicle or register within 30 days of moving to the state. Failure to do so is a crime. This is a common requirement in all states, so that they don’t miss out on tax revenue.
So let’s say that you are a Georgia resident that wants to buy a really expensive RV. You can setup an LLC in Montana and avoid Georgia sales taxes. But then you are in violation of Georgia law about registering your RV and paying the ad valorem tax. And Georgia won’t be happy about missing out on their $21,000 in ad valorem taxes.
Georgia Criminal Investigations of Car Owners
In fact, Georgia has been so displeased with this Montana LLC scheme that they have been conducting criminal investigations.
On October 19, 2018, investigators from the Georgia Department of Revenue raided homes of Atlanta area residents who the state believed were in violation of state tax and registration laws.
Want to explain to your neighbors why you are being raided by the tax man?
In most cases, the investigators aren’t going to hit you with criminal charges. But they will send you a nice tax bill for all the taxes you missed out on paying. With penalties and interest added on top.
See Also: Survive Atlanta Traffic Driving an RV
Insurance Issues
You might also have a problem with insuring your RV if you register it in Montana.
See, your RV insurance rates are based, in part, on where you register, drive, store, and park the RV.
Want to explain to your insurance company why your RV is registered in Montana but everything else is Georgia? Will they even insure it?
And if you lie, and get in an accident or need to file a claim on your insurance for any reason (think weather damage), an insurance adjuster may scrutinize your prior application. And deny your claim.
Now was the tax savings really worth getting denied when you total your RV?
See Also: RV Insurance Explained Before You Shop
It’s Not Just Georgia
Think just because you are not a Georgia resident that you can avoid sales taxes in your home state?
Montana officials apparently shared with Georgia investigators details about the LLCs, including officers. Georgia investigators then cross-checked this against their own records, including toll passes.
Montana also shared details like specialty tags – one of the dead giveaways that brought attention to certain owners was apparently the fact that the car owners had specialty Georgia Bulldog tags on a Montana registration.
If Montana officials shared this information with Georgia investigators, don’t you think they will share with other state investigators?
Massachusetts officials went after RV owners in 2010 that used Montana LLCs to register their RVs.
Minnesota went after a St. Paul man on tax evasion charges, along with 81 other people and collected more than $1.1 million in 2015.
I would expect more states will at some point have similar broad investigations, not to mention one-off investigations based on tips or other information.
Tennessee Men Plead Guilty/No Contest in Montana LLC Scheme
In 2022, a Tennessee man pleaded guilty to tax evasion for failing to pay sales tax on a car he purchased in Tennessee but registered in Montana.
He signed an affidavit saying he would be removing the car within three days, but while he registered it in Montana, the car never left the state.
Meanwhile, in 2021, Tennessee prosecuted a similar case against a Shelby County resident. This time, the individual pleaded no contest to one count of tax evasion.
When Montana LLC Registrations May Work
The Montana vehicle (and RV) registration is really a nice benefit for Montana residents. Obviously, if you are living in Montana, then you can take advantage of this perk of state law without fear of repercussions.
Montana may also be beneficial if you are a full-time traveler and are looking for a state to call home (or domicile). However, Montana makes up for the lack of sales tax with an income tax.
But your RV ownership LLC can “live” in Montana and your personal domicile can be elsewhere, like Florida, South Dakota, or Texas, popular states for full-time RVers.
See Also: Can You Take a Home Office Deduction in your RV?
Use Caution When Registering Your RV in Montana LLC
Registering your RV or car in Montana may be perfectly legal in your circumstances. But definitely consult with a lawyer before you do so. Because it may not be worth the risk just to avoid sales taxes.
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RV Tailgate Life does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors.
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To be clear, if you do not take the vehicle into the state of residence, it is not illegal.
Hi Gaius. I would be very hesitant to make any definitive statements like that. It is likely that the tax authorities will not come to know about an RV registered in Montana if you don’t bring it to your state of residence. However, we do know that Georgia compared specialty (college) license plates as one way to find potential targets of investigation – thinking that there probably aren’t many University of Georgia fans up in Montana and particularly if they are also filing Georgia income tax returns, it is cause for concern. Knowing that they will or can compare registrations to income and other tax records, you could still get into trouble even if you never bring the RV to the state.
The state taxing authorities can be quite resourceful when it comes to finding more tax money. I’m sure other states have done or could do similar comparisons to find you, even if the RV doesn’t make it to the state. And often, it isn’t whether they find you in violation of the law. But going through the investigation and paying accountants and lawyers to get you through a tax audit and potentially criminal tax evasion charge is going to be very trying and expensive. Probably way more than you saved in the registration fees.
I’m not saying that there aren’t reasons to register your RV in Montana, but it is definitely buyer beware if you don’t live in Montana. You’ll want to speak with a tax attorney about your situation to see if it is the right thing to do.
Sure, if you own the vehicle, then you must register YOUR vehicle in the state where you live and keep the vehicle. So in that sense, this article is correct. However, with the LLC method, the LLC owns the vehcile, so YOU don’t. This misinformation has been defeated in Georgia more than a few times. It’s a problem if you own the vehicle that has an out of state registration.
The real issue seems to be insuring the vehicle properly.
William, do you have examples where it has been defeated in Georgia? I was not able to find any for LLCs that were able to defeat the enforcement efforts when the cars were ultimately owned by Georgia residents. Thanks.
Are you blind these cars AREN’T OWNED by Georgia residents they are owned by Montana LLC’s. and therefore aren’t subject to have fines/Taxes imposed to the LLC leaders just like the LLC leaders can’t be sued directly for any one looking to sue the LLC.
John,
In Georgia, there is a requirement that when you move a vehicle into the state, you have to register it within 30 days. So the state is arguing that it is a tax evasion to setup the Montana LLC, when it is really owned by you individually and you have all intentions of using it as a Georgia vehicle. Courts can “pierce the corporate veil” to disregard the corporate entity when it is done for fraudulent purposes and in certain other circumstances.
Whether you agree with it or not, you should be aware of the position that the state is taking before you proceed with your plan to register an RV in a Montana LLC. If nothing else, you should factor into your budget potential costs to hire attorneys to defend you in your state of residency and potentially the taxes and fines from not doing it before. There are definitely situations where it is advisable to proceed. But there are many other situations where it is not and it is “buyer beware” if you do proceed.
A Montana LLC is not going to save you money if you end up having to pay lawyers to fight your state of residency. Even if you win.
Kimberly
If you work for a company from another state and they give you a company car registered in that state would Georgia be able to say you violated a tax law? no! It’s exactly the same you are driving a vehicle owned by a company that “lives” in Montana.
Gary, there are a variety of factors that go into whether you violated a tax law. One of the reasons that states like Georgia are going after those that register high end luxury RVs and sports cars in Montana is that it is purely to avoid tax and registration requirements. If a company has more substantial ties to a state, then that argument goes away. So if a company gives you a company car registered in their HQ state, then the company has ties to that state beyond a mere registration. That’s substantial enough to avoid prosecution under Georgia tax laws. Moreover, it is common practice for companies to register the vehicle in the state where it will spend most of the time – so where the employee is based. And the tax revenue for a mid-priced SUV or sedan is quite different than the tax revenue on a half a million to million dollar RV or sports car. State tax authorities will often only go after those that will have a good return on investment for their efforts.
In any case, it is worth knowing the risks before you register in Montana, even if you eventually do so. It is buyer beware for RV owners that are pursuing this strategy. Because even if you are ultimately proven correct and that you are not violating a state law, you still have to defend it to the authorities and even a court. That takes time and money, which would eat up any savings you may have had by registering in Montana.
Kimberly
A state going for frivolous lawsuits can be sued for defense costs.
John,
In some cases, yes, an individual can recover defense costs. But it is very unlikely in a tax evasion case. I would not count on that in this type of situation due to sovereign immunity.
Kimberly
I am a tax attorney. I’ve had clients that provide company owned vehicles for executives and employees in several states, all the vehicles were registered where the corporation is headquartered. We have never had any pushback on the Ford SUVs given to regional managers or even the Mercedes E-classes and Cadillacs given to division VPs, but give a Mercedes-Maybach or a Bentley to a division President and an assessment notice is coming about half the time. Or worse, an officer pulls them over. Sales taxes and property taxes are based on the use of the vehicle in the state, not the ownership of the vehicle. And the assessment notice doesn’t come to the corporation, it comes to owner of the home where the car is garaged. Since the driver’s name isn’t on any paperwork, it isn’t some high tech records matching, the cases where I’ve learned the source it’s either been a local cop intrigued by seeing the high end car with out of state plates every day or (and I think this is most cases) a neighbor (or the maid) who’s ticked off about something unrelated. The definition of criminal tax evasion in all states that I’m aware of requires knowingly filing a false return or otherwise making a false statement under oath not the failure to file a return, so it’s not a crime but the civil penalties for failure to make a timely return and timely pay can be significant dollars.
There are so many ways to try to scam the tax man. The tax man is getting smarter and for the difference of $10K against a half million investment, just pay the tax and register the RV where you live. Once you tell that first lie to save a few thousand, you may end up spending much more, and you would be a CROOK! Just do what you are supposed to do, or move to Montana. Fishing is great there and some pretty good skiing nearby.
Karl,
Wise advice. It is easy and attractive to try to minimize taxes. But the tax authorities read the same stuff that we do in finding out about schemes. The schemes don’t last too long before people get caught, especially if they are not legitimate minimization strategies. And there are times that using a Montana LLC could be a legitimate strategy. But most people have not been using it as such.
Kimberly
The way to defend your Montana registration is to rent your RV out for a few days a year so your rental income and depreciation flow through to your personal tax return. Obviously, this makes your tax return harder to complete, but a big loss due to depreciation and low income is certainly worth it. In addition, store it in Montana when you are not using it. Problem solved.
I will recommend that if you think you may be able to benefit in this manner, please take the time to talk to a tax or legal adviser.
My question is this…if you purchase an RV through an LLC in Montana and are a resident of another state what are the consequences when you go to sell the RV after a handful of years? Is there a gain on sale or do you subject yourself to Montana’s state income tax?
Christie, that’s a good question as well. I can’t give you tax or legal advice here, so this is all very high level what-ifs and hypotheticals. But generally RVs are going to depreciate heavily so that it is difficult to have a gain on the sale of an RV. There are some exceptions of course, like collectible or high demand RVs. Another case could be if you were using the RV in a business and took depreciation on it while you owned it, leaving you a smaller basis. In those cases (and potentially others), you will definitely want to talk to a tax adviser, because you are definitely opening yourself up to Montana’s tax system. There are other situations where you open yourself up to Montana’s legal system by having your RV in a Montana LLC. Definitely something to consider.
Kimberly
My opinion about this whole Montana LLC vs another state is that these other States should consider lowering the high taxes and more folks would comply rather than try to avoid them. Let people enjoy life rather than holding them hostage for tax dollars. If the government were more frugal with our money this would be a better world to live in.
Tommy, I don’t disagree. Just got to deal with the hand we are dealt though. Call Congress and the state legislators to make some changes.
Kimberly
I am a retired German and do not have an US residence. I am already for a while looking for an RV to buy. Would it be an option for, me as a foreigner, to register an RV under the Montana LLC?
Ted, I can’t give you legal advice here. You’ll need to check with a lawyer to find out what the best setup would be for you.
Kimberly
Register as a MT LLC for one year. After a year or so, transfer the title from MT to your home state, closed LLC in MT-business failed, sold the condo, kids moved back to your home state. Would this work to avoid some of the potential issues/concerns in this post?
Randy – it is doubtful. At least in my state, you’ll have to pay a transfer tax that will close to the value that would have been the sales or ad valeorem tax mentioned above. And the state has some weird valuation thing it does, calling it fair market value or something similar. But it isn’t what you’d see in Kelly Blue Book or on any of the RV sale sites. I swear, I think they just make the values up sometimes – and it is never in your favor.
Kimberly
I register my travel trailers in Alaska. No sales tax and it costs $90 for title, license plate and permanent registration. That’s it. No annual vehicle or property taxes of any sort. $90 and I’m done paying the State of Alaska or any local entity for the life of the trailer.