anyway to minimize sales tax when buying toys?

Section (c) of the CA statute states as follows: (c) Any resident who operates upon a highway of this state a
vehicle owned by a nonresident who furnished the vehicle to the
resident operator for his or her regular use within this state, as
defined in subdivision (b) of Section 4000.4, shall cause the vehicle
to be registered in California within 20 days after its first
operation within this state by the resident.

The Montana LLC is not a resident of the state of CA - it never will be. In addition, the vehicle has not been "furnished" to a "resident operator." The LLC is a company. The resident is driving the company car. The car remains the legal property of the Montana LLC. It's primary place of residency is in the state of Montana.

 

Good luck with that argument in court!

 

I'll try and do some research and find the court rulings. This has been decided on several times. It's the laws of corporate personhood.

 

An LLC cannot operate a vehicle. Only persons can operate vehicles. If the resident is driving the company car, it has been furnished to him.

Of course in Montana it's perfectly legal. In GA it may be legal. In CA it's not.

Registration in CA is about where the car is operated, not about residency. If a non-resident owns and operates a car solely in CA, it must be registered in CA. Other states have different rules (laws), for example NC does not allow non-resident registration.

 

In your state or in the OP's state? Every state has different laws. In CA (as well as some others) you don't get a tax credit on trade-ins at all.

 

Strongly disagree. The company I work for is based on Georgia. We have company cars used in California. They run Georgia license plates, because the company is based in Georgia and that's where the insurance is held, titles are held, etc. Same deal with the Montana LLC.

 

Strange that no one else has mentioned this in a two-year long thread, but there's a simpler way for buying "toys" -

1) Buy out-of-state
2) Drive to your local track on the temporary tag
3) Keep the car at the track; keep the old title/MSO on file

No title fee, no sales tax, no registration fee, no privilege tax, no insurance premiums, no nuthin'

 

Your company is violating CA law. CA doesn't care where the car is owned, insured, etc.

 

That's right. CA cannot enforce its statutes on a company from any other state. The GA or MT company would have to register themselves in the state of CA in order for that statute to become legally binding.

 

Mousecatcher, out of curiosity, can you give us a ruling from a Federal District court upholding your reading of the CA law?

 

Just move to Oregon. Nothing nicer than spending $70k on a car and paying $182 to register it for 2 years and not pay any sales tax.

 

And give up Montana skies? No way

 

The issue with a company owned car in any state is that the state will look to collect sales tax on the car - to be paid by the company. By having the car in CA it will be required to be included on the local's property tax return. That will provide a trail to the sales tax department of CA. The reality is that virtually no one does this. However it does not make it right.

Regarding hiding the car in a Montana LLC - tell me how you avoid state nexus for the LLC when the car is in another state, for example CA. When an entity has tangible property (car) or employees or pays rent in a state it is deemed to have nexus to that state and will be required to file all appropriate state tax returns (income, sales and property tax returns).

Montana does not care what happens outside their state. All anyone is doing is hiding the car from the state where the car is residing. It does not preclude you from following the state laws. It is like saying if I cheat on my tax returns and do not get caught is it not considered a crime?

 

Call John H. Kerry, US senator. Washington DC. He just did it with a $7 Mil yacht.

 

Nexus is avoided, if I understand this correctly, because the Montana LLC will never incorporate in another state, nor will it have paid employees of the corporation in another state, nor pay rent in the state. I would compare it to have a contractor working for the MT LLC who drives the MT companies car.

"It is like saying if I cheat on my tax returns and do not get caught is it not considered a crime?" I don't think this is an accurate comparison at all. It's not like cheating on your taxes. That is breaking the law. This is not breaking the law. The law allows for these structures.

 

except that there is one big problem with Number 3 if you purchased the car preowned...

If you never title the car and keep it open from the previous title, the previous owner can file for a duplicate title which then leaves your title invalid. It could be a big problem in the future.


To me the ultimate resolution if you don't want to pay tax... become a dealer... get dealer plates... when you sell it... you charge sales tax if it sells in state... out of state let them know that it is possible they will have to pay sales tax.

Done and done.

 

What does it take to become a dealer, are there yearly fees/etc.?

 

The LLC does not need to be incorporated in another state to have nexus in other states. All it needs to have nexus in a state is any of the following:

Tangible Assets
Payroll
Rent

Since the car would be in the other state that would be all that is needed to have nexus in the other state.

My point about cheating on your taxes is that most people have the attitude that it is ok to cheat a little or even a lot. The chance of getting caught is very small however that does not change the fact that it is still wrong to do.

If you want to really confuse yourself Google the Son of Boss transactions. The attempt was to eliminate personal income tax through a series of foreign currency swap transactions run through partnerships and then through GRATS in effect offsetting the income with the loss. The IRS has disallowed all of these transactions. Hiding the car in an LLC will have the same result if caught.

 

Your assessment is a little to grand I think. You are not "hiding the asset in the LLC." The LLC is active in Montana, it files all required annual documentation with the Dept. of Revenue of Montana, the Secretary of State of Montana, and the Department of Motor Vehicles of Montana. It really boils down to a states rights issue, viz., does the state of CA have jurisdiction over a business entity legally incorporated and doing it is primary business in the state of Montana. The answer, simply, is no. I really don't think there is any other way to look at this.

Registering your Ferrari in Montana is not wrong.

 

Mousecatcher: Were you ever able to find anything?

 

That is state specific.

 

I didn't know I was supposed to look. It's an interesting question though. Just hypothetically, the type of LLC that you would set up to own a car out of state would clearly not hold up in court wrt asset protection / liability. So likewise, I don't see how a state that had laws requiring registration would also not "see through" the LLC.

 

correct.

Its not cheap in many states... federal background check... post a bond, dealer insurance, inspection... thats for wholesale... retail is an entire different can of worms.

 

That's a great plan... if you never intend to drive the car on the road. Why not just trailer it instead of bothering with a temporary tag?

 

So you are saying California laws don't apply to the car because it's registered in Montana? Does that work for speed limits as well?

I'll have to try that argument next time I get stopped out of state!