anyway to minimize sales tax when buying toys?

True, the car driver is a resident and the LLC Company is a separate entity in another State
BUT
eventually the goal may be to bring said car into the driver's home State.

Is it true that the only way to avoid those taxes is to have the car titled in the Driver's name or am I missing something? Seems that for large purchases, it might just be smart to move to Montana, Oregon, or ... and live there for a while

 

You can move to Oregon! We don't have any sales tax at all.

 

...which some of us agree is OK since the LLC is located in Montana.

 

Though my political philosophies lie more along the lines of a strictly limited government with, therefore, a more limited need to tax unduly, I say if you want to pay that sort of money for your car, then man up and pay the tax that goes along with it. Are you so special that you, in buying a car basically just for fun-- a toy, as you put it, are above that particular law when you know many people with very limited funds to spend won't be able to avoid paying that same tax on a much more modest car that they're going to have to depend on to get to work and cart the children around? Don't get me wrong, I'm in no way against owning cars of any price range that you buy just for your own enjoyment. I wouldn't be on this forum if that were the case, but, that said, a higher price equals higher sales tax and you really should just pay your way just as someone buying a $5,000 used Camry will have to do. If you disagree with your taxes, work all you can to get those laws changed and/or get people into office who'll try to take steps in that direction, or move to another state whose tax laws are more in line with your own beliefs. The fight may or not prove successful (I know where I'd put my money) but at least you're fighting the battle the right way rather than trying to avoid what your own elected officials (or those appointed by those officials) have deemed to be a legitimate tax.

 

He didn't say anything about not paying tax, all that was added later by others. He said a way to minimize taxes. Buying a $5000 Camry in some cases, is less money than some will pay on sales tax alone. My 360 Spider cost me more than that in taxes, NUTS!

 

I think I understand the Montana LLC as far as it relates to not paying sales tax on a car because it's owned by the LLC. But, doesn't creating the LLC cause one to have to file a tax return for the LLC in Montana every year for as long as the LLC exists or are there no corporate taxes in Montana? And, if one has to file a tax return every year, at some point, doesn't the cost of doing a corporate tax return every year negate some of the tax savings on the vehicle? I presume one would have to pay an accountant some $ to prepare and file the return for the LLC every year.

 

Its covered here.
http://www.mtvehicles.com/pages/vehicle_faq

 

Why is it nuts that a 360 Spider might incur more than $5000 in sales tax given how much the Ferrari costs? If I buy one jacket that costs twice as much as another, I expect to pay twice the tax-- if I buy one that costs 10 times as much as another, I expect to pay 10 times the tax. High dollar sales tax amounts come with the territory of buying expensive toys. As far as I'm concerned, if the tax rate is the same, then it's perfectly fair.

You are correct, though, that the original poster was looking at ways to minimize tax, rather than saying he wanted to totally avoid the tax, but the majority of responses were ways to avoid paying sales tax in the residential state entirely, which is probably the only way to truly reduce the amount paid, barring a trade-in situation with a dealer. It's just one of those costs that comes with enjoying expensive toys such as these, just like having to buy more expensive, premium gasoline, having to buy more gasoline per mile than the average car, paying more for routine service, etc... do we think our states should somehow subsidize these costs, too?

 

Setting up a Montana LLC to own your Ferrari's is perfectly legal. I've done it for both of mine and have had no trouble at all. There are many registered agent companies in Montana offering this service. Do your due diligence and research them [*** spam link deleted ***]. I think the previous poster actually put a link to their faq page for folks in the forum.

As long as the LLC has under $400 in profit a year, you do not have to file taxes in Montana. Rather, you have to file something called the "affidavit of corporate inactivity." [*** spam link deleted ***] takes care of this for me every year in January when then send out the annual renewal information - way easy. You also don't have to file anything on your federal taxes because you aren't earning revenue with the company.

One thing [*** spam link deleted ***] recommended to me was that I set up a bank account for my LLC in Montana. This turned out to be a brilliant idea because I have a verifiable record of my activity with my LLC and cars. Every time I buy gas, tires, get repairs done, pay [*** spam link deleted ***], I put it through my Montana bank account. My billing address for my debit card is also in Montana now so when I order items online, they are sales tax exempt even if I am having them shipped to my home - pretty cool.

My 1957 has a permanent plate as well. It was a one time flat fee and the plate is good forever. This is one of the perks of Montana registration. Any vehicle over 10 years of age gets a permanent plate by default. This has turned out to be a huge savings for me over the last few years.

Oh, if you go to their website, they have a really cool video of a fellow ferrari owner talking about his experience with registering his Ferrari with [*** spam link deleted ***].

Hope to hear more from all of you about the Montana LLC.

 

Just becasue you are finding ways to not get caught does not mean what you are doing is legal. You are committing fraud, you have just not gotten caught.

 

a. you give no legal reasoning as to why this would be considered fraud.

b. The Montana LLC is a legally incorporated entity in the state of Montana. It is not attached to you as an individual. It exists solely as a corporation in the state of Montana. How can a legal business entity become fraudulent?

 

Almost every state treats assets purchased out of state and brought into your home state as being subject to sales tax in your home state. So by registering the car in a Montanna LLC (most likely a single member LLC that is considered a disregarded entity for tax purposes) all you are doing is hiding the fact that the car is actually in your home state by not registering it in your home state DMV.

Most states consider an entity (LLC's, Corps etc...) that have assets in a state to have sufficient nexus to be required to file tax returns and pay all applicable sales, use and income tax on the assets and income in the state. By bringing the car into your home state the LLC will be required to pay the sales tax on the value of the car. Most states will allow you to take a credit for the sales tax paid in the state that you purchased the car. Since Montana has no sales tax there sould be no credit allowed. For instance it is a common practice for boaters to register a boat in Delaware. In NYS, if you are a resident, the moment that you bring the boat into NY waters the boat will be subject to sales tax. They have agents that go around to marinas looking up the owners of boats registered in Delaware. The penalties and interest can be rather large. If you purchased the boat 20 years ago the penalties and interest could possibly run for the entire 20 years. It would make the sales tax look tiny in comparison.

Every state has been EXTREMELY aggressive in going after sales tax and income tax. If you want Google Ohio Commercial Activity Tax or look at Michigan's position on what constitutes nexus in their state. Most states are in dire financial condition and are actively going after tax cheats. In my opinion it is only a matter of time until the state catches up to you. It is a common practice to try and cheat on your taxes. For most cases there is a likely chance that you will get away with it. However if you get caught it can be a really painfull experience. Try explaining to a sales tax auditor who probably makes no more than $60,000 a year why you did not want to pay sales tax on a Ferrari.

 

I think I understand the CA DMV regs re: 20 days of use in state etc., and also the rules on visitors from out of state using cars registered in their names here in CA without triggering "residency" requirements with the DMV.

Let's say my S.O. is an Oregon resident (NOT my spouse.)

Car is bought and registered in her name in Oregon. She drives it to California to visit me. She leaves the car with me and flies home. I use the car while she is back in Oregon.

Not wanting to do anything illegal, but also happy to minimize taxes where possible. What say you legal eagles? Is there an issue with this scenario? (Other than our breaking up and her then owning my F-car. ;-))

 

Check how the state determines domicile. If CA can assert your SO is considered domiciled in CA then they will most likely look for the sales tax.

In a lot of states domicile is considered where your "home" is. What I mean by this is we all have a place that we call home, the rest are vacation houses etc... CA will likely look at this. It is a common misconception that if you have your drivers license, voter registration and bills at a specific address then that is where your home is. Even if you meet the 184 day test (spending 184 days in a state out of 365 days) it does not necessarily mean that is your home for residency issues. States can assert domicile tests over the 184 day test.

NYS has a whole audit department just doing residency audits.

 

Sounds like whining to me! ('Why does he pay no taxes but I still have to???')

The entire process is legal. Make your arguments but it's legal, it's done, and it saves a LOT of money.

 

Hi, would it make sense to have all the household cars, motorcycles/etc. titled in Montana under the LLC? Is it cost-feasible? All these have excise taxes in many states (CA, MA, etc.) so having them under an umbrella LLC would be great.

How do regular insurance companies deal with a vehicle registered in this condition, are they even willing to touch it?

 

Get a dealers license so you don't have to pay sales tax?

 

Wow, what a concept. This actually hints at something called "integrity", which is when you do something because it is the right thing to do, rather than because the law compels you to do so. It's completely out of fashion, just read the newspaper.

 

You'd fall under this section:

"(b) A nonresident owner of a vehicle, otherwise exempt from
registration pursuant to this section or Section 6700.2, may operate
or permit operation of the vehicle in this state without registering
the vehicle in this state if the vehicle is registered in the place
of residence of the owner and displays upon it valid license plates
issued by that place. This exemption does not apply if the
nonresident owner rents, leases, lends, or otherwise furnishes the
vehicle to a California resident for regular use on the highways of
this state, as defined in subdivision (b) of Section 4000.4."

non-resident owner = SO
CA resident = you
car is borrowed to regularly be used on the highway

http://law.onecle.com/california/vehicle/6700.html

And anyone who thinks that setting up a LLC anywhere and registering the car out of state is going to be legal should read section (c) in the above link as well. It doesn't take long to read the whole section and is pretty clear.

 

Between the insurance, legal and moral issues, I just pay the tax.

 

+1

If you can afford the car, you can afford to register it legally. I did it and it didn't
kill me - and we have a 9.4% sales tax.

Jedi

 

Five,

Appreciate the pointer to the appropriate section of the CA vehicle code.

I do note that "regular use" under subdivision (b) of Section 4000.4 is defined as follows:

"a vehicle is deemed to be primarily or regularly used on the highways of this state if the vehicle is located or operated in this state for a greater amount of time than it is located or operated in any other individual state during the registration period in question."

Ergo, if the car in question is in Oregon for 6 months plus one day each year, we would be fine. Since we keep a couple of exotics up there and a couple down here as it is, and we are looking at potential savings of six figures on sales tax on planned purchases in the next couple of years, and six figures on California usage tax each year, that more than justifies the cost of swapping the two pairs of cars every six months. The cost of transporting 4 cars twice a year is a lot less than six figures, and this would be completely legal.

And since we spend a lot of time traveling, making sure each vehicle spent the requisite amount of time in OR every year without being stuck without cars to drive when in CA would not be difficult. Not usually one to jump through hoops to try to save a few bucks, but this is not an insignificant sum on a recurring basis.

 

This really comes down to a states rights issue: no state in the union has jurisdiction over any other state. A Montana LLC is a legal entity in the state of Montana. Ohio, Georgia, etc. do not have jurisdiction over it and its activity. If the vehicle enters these states, it is only subject to the law of the state of its principle place of residency - in this case, Montana. The Montana LLC will never be nor ever intend to be a resident of any other state.

If you as an individual were to register the car in your personal name in Montana and then bring the car into your home state and choose to not register it, then, you yourself would be in violation of your home states residency and registration requirements. This is the scenario as described by the poster about OR vs. CA.

The Montana LLC is a great choice for vehicle registrations.

 

who/what determines the true value of the car?

 

Car registrations in Montana are based on age, make, model, and value. If the car is over 10 years of age, you can buy a permanent plate for it for a flat fee of around $165 and the plate is good forever (no renewals). Motorcycles, boats, ATV's, and trailers receive permanent plates automatically no matter what the age; fees vary between $95 and $275. Insurance companies deal with the LLC in various ways. There are two options:

1. Add a rider to your current policy naming the LLC as an additionally insured

2. Have a policy written in the name of the LLC itself (USAA, Hartford, Progressive all write policies for LLC's)