Think Twice About Registering RV in a Montana LLC

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.

Buyer Beware! Think twice before registering your RV in a Montana LLC to avoid sales taxes

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.

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?

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.

When Montana Registration 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.

Use Caution When Registering Your RV in Montana

Buyer Beware! Don't use a Montana LLC to avoid paying sales taxes at home - states are busting RV and car owners with Montana tagsRegistering 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.


Kimberly

Kimberly is the owner of a Tiffin 34PA and the former owner of Starter RV, a 1990 Winnebago Chieftan.Kimberly is based out of Atlanta, Georgia, and frequently travels to football and baseball games, NASCAR events, music festivals, and RV campgrounds all across the southeast and beyond!She can be found cheering for Georgia Tech, traveling the world, or working on the RV (because there's always something to do on the RV). Don't ever underestimate what she can whip up in the kitchen or accomplish on no sleep.Find out the latest from Kimberly by signing up here.

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4 Responses

  1. Gaius Gracchus says:

    To be clear, if you do not take the vehicle into the state of residence, it is not illegal.

    • Kimberly says:

      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.

  2. William says:

    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.

    • Kimberly says:

      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.

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