Montana registration crack-down

not quite true. Model S weighs the same as BMW 7 series, little more than A7, less than S Class. Model 3 weighs the same as BMW 3.

 

so many states with 6% sales tax? Many California cities are much higher. Santa Monica is 10.25% !! our fuel is ~50% higher. $4 for 91 vs. $2.60 in Texas (was there last week).

 

Much like the Montana scheme of saving money by opening an LLC and thus registering the car in Montana to save on sales tax and reg/inspections etc, a similar tax evasion tactic has been used here in VT in years past. Any NY, MA or NJ resident would register their car in VT using their own address in their home state to avoid paying excise tax and enjoy much cheaper insurance. But the years went by and insurance companies wised up to the fact that the car was registered in VT but the mailing address was NJ or whatever so the jig was up. And along the way, VT DMV got greedy and started jacking up the registrations and inspection fees, so now it is no longer worth going through all that. So now it is safe to say that it is just easier for everyone to just register their car in their home state.

 

The thing is, if you can afford to live wherever you choose, why would you want to live here...

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When you have the means to live here...
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Ain't me babe. Airfare is cheep. Fly in and out. Life is good. You guys can pay and pay for all I care.

BTW, I know exactly where that pic was taken.

 

The two guys said their lawyers told them the scheme was legal. Would they be able to sue their lawyers for all the back taxes and penalties they have to pay as a result of that advice?

 

Sure anyone can sue, but they won’t win. I’ve seen these legal opinions, nothing but weasel words.


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Most states have laws to collect property taxes on property that is physically in their state (as defined under these laws, the taxation nexus varies based on time in the state, purpose, etc.). It simply does not matter where the legal entity has other operations or is incorporated or where its headquarters is. Its as simple as that. They don't need to write new laws to "close" some "montana loophole". What you call scare tactics is in reality going after folks who are suspected of avoiding taxes and not following the laws of their state.

The vast majority (honestly, its 90%+ I'd venture) of people registering their cars in a "LLC" in Montana are avoiding following the laws of their home state. Yup, there are some who actually do store the vehicle out of their state for the required amount of time and/or actually use the vehicle for the LLC's business purpose...but that is a small number in my experience. And, "yup", there are many people who use the Montana maneuver and have convinced themselves that its legit when it in fact is against the law in their home state(s).

I'm still shocked so many actually get away with it. Fwiw, people with more than 1 home find it easier to get away with it (even if one of the homes is not in Montana) because they can rightfully move the car around and end up with "time in state" for each state that does not meet the nexis period. Some states have very short nexis periods, some have a 6 month rule and so on.

Final point - driving around in many states with any out of state plate is an invitation to get pulled over. Of course some states don't bother much, but others certainly do.

Oh - one more point - the "sales tax" reduction/avoidance is distinct from the "annual property tax and/or registration fees" avoidance/reduction. Meaning the laws and criteria to avoid each of those are different. I've seen situations where an owner can get one or the other only, and of course some get both (and some avoid both, even though they shouldn't).

 

The laws are not missing (in most states) and they are clear. This is not a grey area. Cases (audits) are fought all the time on this matter.

To 09Scuderia's point - it "can" be legal. But in my experience most folks that register their vehicle to an LLC in Montana are not doing the actual/physical things required under the laws of their home state(s) to make it legal. (things like LLC purpose and documentation, and things like physical presence of the vehicle).

 

Not a reasonable comparison IMHO. Quality of life in California, or any other place, is more than the scene from the freeway. For instance, show us the pictures of the mass homeless and detritus on the streets in SF. Or perhaps the over the top PC correctness at work or maybe the lack of English spoken. There are many ex-Californians and for good reason. Great place if you could move all the people out.

 

That CA image he posted...the mobile homes on the beach....are all gone. Cleared out years and years ago. State tossed them out. That beach (part of crystal cove) is now a cash cow for the state. IIRC, $25 to just drive in.

The romantic vision of CA is 100% gone.

Everyone I know who lives there is leaving or wants to.

 

Were you aware that a lot of the CA fuel tax goes into the general fund and has for sometime. If the fuel tax were just used to maintain and upgrade the roads and not the other BS stuff (i.e. the bullet train to just name one boondoggle) the legislature dreams up then it would be more reasonable. But just last year the CA legislature passed an additional dedicated tax to repair the roads. It is now being challenged in the upcoming 11/2018 election. If the current challenge is not successful I would guess this additional road maintenance tax will be re-routed into the general fund in 3 – 5 years the same as similar dedicated road maintenance taxes have been in the past.

 

I understand taxes end up in a general fund and then split up for whatever it's used for, but my point was that ICE cars pay more taxes and that funds (although not the exact ones collected) are used to maintain roadways. The Teslas do not contribute. They actually even get income tax breaks/credits on top of not paying fuel taxes at least prior to them producing 200k or whatever limit was set to get it.

 

I did a quick Google search on the 7's weight and it said it weighed less, but a little more into now it does appear they are similar weights. I should not have compared it to the 7 and left it at the 5 as I listed as well, which is lighter. The 7 is larger in wheelbase and overall length and has a much nicer interior and are not competitors. The same for the S class, which is what owners on this forum have said. They do not want to downgrade to the Tesla's poor interior appointments and finishing level from the S for the same price. I think the Model S needs to be compared to a 5 or E even though prices are not similar.

 

well i may register our new 2018 vehicle in Montana as even tho we bought it in CA ( and live in AZ ) and the CA dealer won't re-write the contract BUT we have paid the state tax now , er, dealer did and yet still owe $1,600 tax to the city , in AZ and the plates will be over $1,000 this year (In AZ) so we can register it in Montana as a LLC save over $1600 ( and register it in AZ later ) the price of the tax and plates is really a rip off in AZ anyway ! .......................................................... Plates for my new to me 2008 F430 will be $600 + for this year ! no tax as it was a private sale! mayhaps someone should find a way to make all sales "private " and so legally avoid sales taxes ??? LOL

 

Topic also discussed here...

https://www.ferrarichat.com/forum/threads/virginia-goes-after-out-of-state-license-plates.529144/

CW

 

How is this different than corporations that register in Delaware even though they have no other business in Delaware? Why is that ok? (Is it still done, is it still ok?)

 

I'm all for avoiding taxes by any legal means necessary, but here's the difference.

Because a corporation does do business and was created for the purpose of doing business.

The MT LLC was created for the sole purpose of avoiding taxes in Georgia, to create a legal barrier between ownership and usage.

There's also a difference between hiring a hooker and giving your wife shopping money.

Of course GA is making a cash grab, but I think a better long-term solution would be to have your state change the property tax law to something less punitive rather than rolling the dice in Montana.

 

Just to clarify, tax avoidance is legal and is not a crime. Only a person with an un-diagnosed mental illness pays more in taxes than they need to. The world of tax avoidance is defined by shelters, loopholes and risks.

Tax evasion, which is a crime, has to be proved by the State or the Federal Government. A number of court cases have held the Montana LLC registrations to be valid. Usually they have some mitigating circumstances such as how the business is held and used. If it solely holds a car and does nothing else it is more likely to ruled against in the lower State courts which places the burden on the owner to appeal. That is the ever increasing and expensive risk.

If you owned 10 exotics and they were set up in a fractional ownership Montana LLC, I believe most States would have a very difficult time proving their case.

 

And guess what...having the company incorporated in Delaware does nothing to save taxes in any other state.

Taxes are owed based on business activity and physical presence in each state, not where the company incorporates. So if the company has assets, employees, or customers in any states, it will have nexus there and have to file tax returns there.

(The reason companies incorporate in Delaware is for “fair” and “professional” security laws and related courts. And yes this is perfectly legal and yes this still goes on)

 

There seems to be a belief (actually a misunderstanding) that where a company is registered is what drives tax nexus.

This is simply totally wrong.

Taxes in any jurisdiction are based on business activity and assets and employees in the jurisdiction.

A US based company, incorporated in Delaware, pays taxes in any and all states it has business activity, employees or assets. Similarly that same company has to pay taxes in any foreign countries where it has business activity, employees or assets.

It’s the same for the so-called Montana “company”...if it’s sole asset (a car) is based in Virginia, then that LLC will have nexus in Virginia. Of course, that is not the “real” issue...no, the “real” issue is that there is no “real” business purpose for the LLC in most instances of people doing this.

 

I know and understand what you are saying about taxes.

Have there been any cases in the courts that ruled in favor of the Montana LLC's or against them or has nobody been willing to spend the money to take it that far?

And let me add that these people with the Montana plates flaunting them on their own Instagram pages are complete morons.

 

yes. The citizens that are willing to spend the money usually have some facts on their side that convince them to fight in the courts and there are cases that came down on both sides. OTOH, there are countless other citizens that pay up after being challenged (and don't pursue the courts because their fact patterns are...umm...let's say "lacking")

 

its all relative...I simply cannot complain about sales tax rates nor car annual fee/tax rates in AZ. In fact, the opposite...AZ laws in this regard are fantastic:

First, both sales tax and annual car fees are lower than CA where I spent the majority of my life.

Second, AZ car fees are even lower than WY where I currently have my cars registered (I've had cars registered in both AZ and WY (and ID and CA and NV) over the past decade or so.)

Third, and most importantly, AZ has two VERY AWESOME sales tax laws (as you know);
- No sales tax on private party purchases (saved me $10,000+ on my Challenge Stradale)
- Full sales tax offset/credit for trade-ins (saved me 50% of the sales tax on my first Maserati purchase)

Many states don't have those two very awesome laws. So I'm grateful for AZ and consider their laws very fair in that regard.

 

I guess it depends on the states and their local laws, but from what you are telling me nobody has ever stood up in court with a straight face and said, this Montana LLC that own owns the car, and the Montana LLC is not a resident here, so the car doesn't need local plates. A pure test case of the Montana side step.