Montana registration crack-down

https://www.nolo.com/legal-encyclopedia/can-i-avoid-state-sales-tax-using-montana-llc.html

https://www.cookingwithsaltlaw.com/2014/08/louisiana-adds-more-salt-to-the-louisiana-legal-gumbo-tax-fraud-and-economic-substance-doctrine-discussed-at-louisianas-highest-court/

This one has a number of legal opinions. Clearly the RV guys are way out in front on this issue as Texas Forever noted.

https://www.sportscarmarket.com/columns/legal-files/other-states-sniping-at-montana-s-magic-bullet

The point is with any tax avoidance scheme is: "what risk are you willing to take?"

 

Doesn’t the law require one must register the vehicle within a certain time period within that state? Had they kept the car in Montana, they would be okay.
It’s not their lawyers’ fault they didn’t follow the rules.

 

Yes we like those AZ laws ! but the price for license plates, on New vehicle in AZ is insane ! over $1 K for our new Range Rover Evoque vert' it's a double tax! based on some formula of 40% of MSRP that decreases only 10% a year ? many years ago when I was a financially struggling college student at U of AZ , the plates for my BMW motorcycle, 77' R100 S were over $400 per anum in AZ! I used a friends address in New Mexico had their plates hence $5 a year! Image Unavailable, Please Login

 

there are - I'm sure - folks that have claimed just that. After all, in most cases (where there is no real business purpose of the LLC) that is all they have to claim!

Those folks don't win.

Also, its not about MT law of course. Its about the law of the state where you are. Most states have laws (that have not been over-turned) that simply require property in their state to be taxed. Such taxation of corporate assets (yes, even corps that are legal domiciled in another state) happens every day and is well trodden legal ground. In fact, the only large area of evolving law in that space is on nexus where the corporation doesn't have property or operations in the state! (think internet sales, the law - even at the SCOTUS - level is swinging around to taxing internet sellers that otherwise might not have met previous nexus requirements).

 

I hear ya, but again, even annual car reg/lic/prop tax are not out of line in AZ. WY is higher. NV is higher. CA is lower (surprisingly). ID (like NM I guess) is dirt cheap.

And - of course - don't even complain to anyone from VA!

AZ taxes are overall comparatively pretty good:

1) Inc Tax - rates from 2.5% to 4.5%. CA is 10%+ for most on this board, 2.5-4.5% range is solidly middle of the road.
2) Car annual "tax/fees" - see above
3) Sales tax - at ~8% range combined state/county/city its more or less middle of the comparative road

Taken together, a sub 4% average inc tax rate, 8% sales tax rate and AZ annual car fees are solidly middle of the road (and that's before the "fair" private party and trade-in sales tax offsets).

So..I not only don't complain about AZ taxes, I don't commit fraud to reduce my AZ taxes.

I don't know if this site is accurate or meaningful, but it ranks AZ 31st in tax burden:

https://wallethub.com/edu/states-with-highest-lowest-tax-burden/20494/

 

as i recall ,For some years AZ reduced it's rates dramatically for registration/ license of vehicles but then reversed it and charged these high, ( IMHO ) fees! This country was founded on tax resistance! we have a strong tradition ! LOL PSA i've done naught wrong .... yet !

 

Thanks. Back when I wrote my article several years ago, I was unable to find any court cases. Everyone should note, this decision is not a taxpayer’s victory on using a LLC to avoid local taxes. It was a state loss. From what I read, the state could still go after this guy, if he kept the vehicle in Louisiana, which he didn’t.


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I know someone who recently registered a car in AZ they bought a few years back in a different state. The annual registration is based on a depreciated amount on some assigned retail price. They assigned a retail price to her car that was a decent amount above what she paid (new) and depreciated off that...ridiculous. She even had proof she bought it new for less than what they used, but they didn't care.

And a friend of mine moved to ATL recently from FL and they calculated fees from the estimated value of his car (currently, not new) and charged the 7% or so sales tax to register even though he owned it for years in FL and paid sales tax there. Crazy.

 

"...California's first rate infrastructure..." (post # 44) ??? That was half-a-century ago. That was back when this state's residents and the politicians they selected were,in general,sane. That was before the car-hating Governor Moonbeam (Jerry Brown) was first elected in November 1974. The roads in the San Francisco Bay Area (where I live) are consistently rated the worst in the country,most recently last August.

We don't build or even maintain anymore,we just consume infrastructure that was provided for us by earlier and wiser generations. And when building something important is attempted,the environmentalists hogtie the project using state and federal laws that pay their legal expenses with my tax dollars. Welcome to (today's) California.

 

Actually, many states do exactly that. And the value is not arbitrary, it’s precisely the base MSRP. (Both AZ and WY currently use the same value amount).

AZ’s formula actually depreciates 16% each and every year. Turns out that is not always the case. For example, in WY the depreciation stops after 6 years and the annual fee/tax stays the same thereafter.

Final point - the annual fee is not related at all to what you paid for the car (as made obvious by your example of a used car sold/purchased later on). That is logical because the annual tax is not a sales tax...it’s an annual use fee aka property tax. It’s designed to be fair in that it charges the same use tax for the same car/same model year regardless of how much someone paid.

Again, AZ’s taxes are logical and fair (once people have the knowledge of what tax type they are paying, and the knowledge of how the rates work and some perspective from other states). I’ve lived in several states and find Arizona’s sales and use/prop tax to among the most fair and logical. Sure, there are some states that have lower pieces of their tax collections, but then there are even more that have higher ones.

 

Well, the point is I COULD register it in Montana new , and then transfer the Title/ registration to AZ and NOT have to pay sales tax ! just the plates so that is an option and would save $ approx $ 1,600 city tax + 1/2 on the $ 1K plates ! but the CA dealer refuses to re-contract and says the car was sold in CA ( it was ) and taxes were paid to CA ! it has not been registered / titled yet I still have not done that it is on a 90 day temp permit in AZ fr a bill of sale dealer says the vehicle would have had to be delivered to Montana which is incorrect as per an atty there ! i'm just amused at this point ! the drama is funny ! have a couple months to decide !

 

how do you transfer from a LLC entity to you personally ?

 

I'm in NYC, not a great place for taxes or insurance. I have always wondered what happens when one of the Montana registered cars gets in a serious accident and there are insurance claims. Insurance companies are not looking to just hand out claims without looking for any potential fraud or inconsistencies in the ownership. Are the Montana cars insured at the address the car is registered or the address it is used. Just seems like a major problem if there is a real issue.

 

Makes a distribution governed by Montana law. I dunno if Montana follows the universal LLC Code, but they probably do.


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I know on the surface it seems ridiculous to assess a higher value than the person paid, but consider the following scenarios. Four identical new cars are on a dealer's floor. One noob comes in and pays the MSRP of $80,000. Then an accomplished negotiator comes in and buys the same car for $70,000. Then the owner's nephew comes in and the car is offered to him for $60,000. And finally the owner's mistress comes in and threatens to tell his wife unless she gets the car for $50,000.

So if the state went by what people paid, all four people here would pay a different tax for the identical car. This why Massachusetts uses established valuation services, e.g. KBB, to determine the value of identical cars rather than using the sales price. And this doesn't even take into account a seller intentionally falsifying a sales price. Or the case of a father simply, and legitimately, selling his $40,000 car to his son or daughter for a $1.

 

I understand what you guys are saying and that it's a property tax and should be assessed somehow. I still don't agree with it being done that way since they are deciding the initial value (rather than the actual transaction), how fast it depreciates (not accurately), and then also the ones that determine how much to tax it (rate). They can literally make it whatever they want and in my mind are and what exactly are you getting in return? 91 octane at best? Crappy roads? It's one of the many reasons I don't care to live in places with too many property taxes. Maybe if they managed their budgets better they wouldn't need to implement ridiculous tax laws.

I prefer a simple sales tax on the purchase price and then a weight based tax/registration fee, which is what I'm used to with Florida. As far as your last example, my father bought a car 15+ years ago and recently gave it to me as a gift and all I had to pay in FL was transfer fees and it wasn't much. It's pretty common. No sales tax was due, which was already paid at purchase and it's staying in the family at the same address anyway.

 

California dealers do not like allowing their customers to register cars in Montana. They go out of their way to make it difficult for people to do so.

Maybe not applicable to you but the California regs require one of two things for people with California drivers licenses and titling/registering out of State.

1) Dealer to get a bill of lading from transporter OR
2) if dealer employee is the transporter then there is a separate form that needs to be completed (notarized - not necessarily in the receiving state) and sent to the State (not kept on file but sent to the State of California).

The dealers try to use procedure #2 even though #1 is all that is needed.

When they do #2 (if you look up the actual form); there is a whole bunch of requirements from the State for the owner of the car to prove in case of an audit (Car has to remain outside of California for one year and can only come back into California for repairs, etc.). Some of the things that you would have to do is to supply is gas receipts, storage receipts, etc.).

Many of the financing/leasing companies will refuse Montana LLC registrations.

 

The Montana sites say call your insurance co and ASK if it has a problem w/ you owning a car titled , registered not at your home address , yet kept/ used there ! My Ferrari is w/ Haggarty and will be registered in AZ as the savings ( no sales tax on a used car , private sale ) would only be a couple hundred over Montana ? ( I think ) now the 2018 Range Rover? different kettle of fish . could save $ 6,000 state tax and $1, 600 local and $600 on plates ! the vehicle in a LLC is owned by the "company" and used by you . I called progressive they have no issue w/ it ! there is no fraud at all if you are up front, honest w/ the insurance co. and they agree ! the rates are partially based on where the car is kept and used they tell me - not who legally "owns " it ! and as far as Montana goes they consider it perfectly legal and it helps the state ( a LOT ) the only ones alleging it is fraud are the states that don't get tax $ ! ironic that affluent folks can come up w/ a plethora of ways to be "legally " avoiding paying taxes yet some have a cow about this !

 

we paid cash for the Range Rover we have a AZ licence and live here AZ we just bought it in CA as they were one of the few dealers that had one left as we wanted , color ( phoenix orange , ) and spec'd as we wanted and a $ 5 K rebate !

 

yea they won't ding you for sales tax on a used car in AZ when it was registered elsewhere first! that's terrible! but yes the value they assign is absurd ! well we do live in a democracy and could theoretically get the laws changed ! the state would squeal like a stuck pig !

 

well noone has been arrested yet ! nor charged ! they may find that they are just blustering , bluffing you know the rich PGA golfers who do it w/ megabuck RV's are untouchable! such hypocrisy! harass some car owners but hands off "pro athletes " !

 

you could ask a Montana Atty ! if you dissolve the LLC doesn't someone have to get the assets? the LLC lists you as I recall , if you do not pay a yearly fee the LLC can be dissolved i recall reading

 

Guess I might fall into this crack maybe. I have a camper that I have registered to a property I have in Oklahoma, but i suppose my saving grace is the camper is at my property in Oklahoma 75% of the time as well as mostly used there. I have no vehicles registered in Oklahoma though. So I asked one of my part time employees that is a full time police officer in the town my main residence is in and he said as far as he is aware I’m not breaking any law since it is registered to a residence I own in Oklahoma, and it’s there 9 months out of The year. It also helps that I live about 45 minutes away from my other house and travel there frequently, at least once a week since I’m right on the border of Oklahoma and Kansas.