Taxes

[Stuart W]

Bottom line in states like California where you pay over $30K in sales tax and license on a $300K coach, California is very motivated to catch individuals that skirt paying their fare share. By the time you pay for legal counsel, fines and penalties on top of the sales tax you could easily be looking at $100K. Not worth the risk for me.
BTW I have a friend that is CHP, he has told me that this is High priority to enforce.

[TXTiger]

OK, so you go full time. You rent out your home in CA. You get a mail forwarding service in SD. You get your drivers liscense in SD. You purchase your RV and registure it and pay the sales tax (4%) in SD. Nobody has a problem with this. In the alternative you start a LLC in MT to registure your RV and pay no sales tax. Why is this considered tax evasion and the other is not? Tax avoidance is not illegal only tax evasion is.

[GaryKD]

This topic is really quite simple. Understand the tax law of the domicile state. If you are willing to follow that law, creating the LLC (in Montana for example) will be to your advantage. Following the domicile state law means you pay taxes owed. And not one penny more. Anybody here believe one should not take advantage of a domicile state's tax law?

Florida is my example as it is my domicile state. Before anyone thinks this is a moral issue, take a look at Florida tax code. The rules are easy to follow. So, in Florida this is not tax evasion, it is tax avoidance. Florida understands how to compete for the most $s it can get from me. Not every $s like some states, but the most $s. So I do not pay sales tax on a motor coach. Having Florida as my domicile I pay enough other taxes and contribute to the local economy with many, many more $s. If I left Florida, Florida would lose all the money (taxes) I currently pay. Florida is too smart for this. Maybe that is why many, many private airplanes and yachts are registered in Florida. Might even make some of you non-Florida residents to consider changing your domicile.

[MRUSA14]

Originally Posted by TXTiger

There is nothing illegal about having a MT LLC.

There is nothing illegal about HAVING an LLC, but it is very illegal to have one for the sole purpose of avoiding otherwise lawfully payable taxes in another state where you are legally domiciled.

[fsudelt]

Originally Posted by GaryKD

This topic is really quite simple. Understand the tax law of the domicile state. If you are willing to follow that law, creating the LLC (in Montana for example) will be to your advantage. Following the domicile state law means you pay taxes owed. And not one penny more. Anybody here believe one should not take advantage of a domicile state's tax law?

Florida is my example as it is my domicile state. Before anyone thinks this is a moral issue, take a look at Florida tax code. The rules are easy to follow. So, in Florida this is not tax evasion, it is tax avoidance. Florida understands how to compete for the most $s it can get from me. Not every $s like some states, but the most $s. So I do not pay sales tax on a motor coach. Having Florida as my domicile I pay enough other taxes and contribute to the local economy with many, many more $s. If I left Florida, Florida would lose all the money (taxes) I currently pay. Florida is too smart for this. Maybe that is why many, many private airplanes and yachts are registered in Florida. Might even make some of you non-Florida residents to consider changing your domicile.

Gary, I live in Florida as well and trying to figure out how you are not paying any sales tax on a motorhome?? Depending on what county you are in sales tax would be either 6 or 7%...maybe you can enlighten me on something I am missing as we are about to build another new coach and will be completing another purchase next spring.

[Pine Stump]

Wow this is a hot topic ...I was told by our dealer not to do this but if I was a full timer I would buy in the best state I could I would think...

[EA37TS]

Originally Posted by TXTiger

OK, so you go full time. You rent out your home in CA. You get a mail forwarding service in SD. You get your drivers liscense in SD. You purchase your RV and registure it and pay the sales tax (4%) in SD. Nobody has a problem with this. In the alternative you start a LLC in MT to registure your RV and pay no sales tax. Why is this considered tax evasion and the other is not? Tax avoidance is not illegal only tax evasion is.

Ah, but after registering the vehicle in the name of an LLC are you following all laws regarding registering and operating the vehicle as a commercial vehicle. Commercial vehicle operation often requires CDL operators permits, commercial plates, going through weight stations etc... Also many insurance companies will not insure an RV registered in the name of an LLC under a personal insurance policy. They require commercial policies.

As a note, there are some states that say if you are there for more that 180 days in the year you are a resident and will pay their tax. They even require RV parks and hotels to file reports on long term residents.

Research, Research, Research and then Research some more.

[wnytaxman]

Let's try to get some clarification here on the Montana LLC and its uses. First off, contrary to the opinions of some an LLC is NOT a business. The first two words are Limited Liability which is what the entity is intended for. It provides the legal protection of a corporation without the expense and requirements of a corporation. If all LLC's were in fact businesses, the IRS would be the first one to crack down on them for self employment taxes, excise taxes, etc. Instead the IRS refers to single member LLC's as disregarded entities. We have had clients place their personal residences, personal vehicles, and vacation properties into LLC's just to protect from the constant threat of law suits. Fairly simple really.

As to the motorhome being owned by the LLC not you, that statement is incorrect in many states, including NY. NY will look through the LLC to see who owns it. If it is owned by a NY resident then the vehicle is subject to NY sales taxes even though it is registered to a Montana LLC. As a further example, let's say an Ohio corporation provides a vehicle to their NY sales rep who resides in NY. That vehicle must be registered in NY because the vehicle resides in NY. One of my clients found this out the hard way about the Montana LLC sales tax issues and it was a very expensive lesson. According to NYS sales tax laws you can be fined up to $50,000 for willful sales tax evasion which owning and utilizing a Montana LLC could qualify for willful evasion.

Next comes the practical issues. If you are in a 6% sales tax state and you have just purchased a $300,000 MSRP motorhome for $200,000. Your sales tax is $12,000. However, Montana now has an additional tax on any motorhome with an MSRP over $300,000 which comes to a total with registration to about $1,000 per year for a period of ten years. I'll do the math for you. The savings is $2,000. Is that really worth the risk? For me the answer would be no.

With all the factors considered, is the Montana LLC legal? Yes, it can be providing you know the sales tax, residency, and licensing laws of your state and you can comply with those laws. If you can comply and document you compliance then you are okay. The 'If' is a big item here. Remember even if you are legal you may have to defend your position and that can be expensive and time consuming.

[USMCRET]

Thanks WNYTaxman. I was hoping to see you in this thread.

We have looked into a few options for ourselves and consulted with both an attorney and a CPA. We have concluded that FOR US, our best option is to physically move to a more retiree-and-MH-friendly state. And we intend to do that sometime in the next 24 months, lord willing.

[wnytaxman]

Originally Posted by USMCRET

Thanks WNYTaxman. I was hoping to see you in this thread.

We have looked into a few options for ourselves and consulted with both an attorney and a CPA. We have concluded that FOR US, our best option is to physically move to a more retiree-and-MH-friendly state. And we intend to do that sometime in the next 24 months, lord willing.

We are looking at the same thing. With NYS running a $6 billion deficit the money has to come from somewhere which leads us to want to be somewhere else!

[R.Wold]

Originally Posted by wnytaxman

. Remember even if you are legal you may have to defend your position and that can be expensive and time consuming.

I went through this with my boat in the USVI in 2002. $354000 and Ca wanted a piece of that. I knew with absolute certainty that I was in the right so it didn't worry me. But nonetheless they tried their scare tactics and intimidation. It would have been very uncomfortable if I had even been in the grey area.

As it was I suggested that the auditor get a free vacation on the state and go down to Tortola and check it out for himself. He wasn't amused, but I did receive a letter stating “no tax due”. But this was because the boat was never even in US waters, much less a Ca port.

The point is that if you can find a bullet proof (entirely legal) way to reduce or eliminate sales tax, I see no reason not to. And if you are in the market for a $300,000+ coach, you are probably already paying so much more than average in other taxes that you meet the moral/ethical “fair share” bench mark.

On the other hand if you are in the grey area (or worse), you’ll always be worried when go to the mailbox. Not worth it IMO.

[GaryKD]

Hi fsudelt,
The scenario can be different depending on where you purchase the coach. What follows is a Florida domiciled person purchasing the coach in Florida.
1. During negotiations tell the dealer you will be registering the coach in another state and request a temporary tag.
2. When taking delivery, one has a certain amount of time to remove the coach from the state. I forget the exact number of days, but 10 seems to stick in my brain.
3. The coach cannot return to Florida for 6 months and one day. This is where some owners mess up. They return to the dealer for service work. The state does review service records.
4. During this time one can complete registering the coach to a Montana LLC (example).
5. After six months and one day and with Montana tags the coach can return to Florida.
6. An optional step is if the owner wants to register the coach in Florida it can be done. The coach is being brought into the state as a used vehicle.

[Bobbafett]

Geeze..... reading this thread is not fun....

My wife and I will be full timing is a few years. We are not at retirement age and she will be working full time and can work remotely anywhere.
I will full time RV host/driver/mechanic/cook etc at that point. (hopefully park host when possible)

I live in Oregon. Where should I start researching which state I should make a resident. Could I use one of my children's houses who live in Oregon? Won't have to worry about mail forwarding because they could mail us or scan anything we need. I would like to keep Oregon as my home state. 8years between new license and 2 for registration which is super easy and no state tax.

Could someone direct me to reading more on this?
The only people I know with rvs use it for fun once in a while. Or people who snow bird then move back home. So I cannot get the info I need from them.

[Tigerfan1]

Originally Posted by wnytaxman

Let's try to get some clarification here on the Montana LLC and its uses. First off, contrary to the opinions of some an LLC is NOT a business. The first two words are Limited Liability which is what the entity is intended for. It provides the legal protection of a corporation without the expense and requirements of a corporation. If all LLC's were in fact businesses, the IRS would be the first one to crack down on them for self employment taxes, excise taxes, etc. Instead the IRS refers to single member LLC's as disregarded entities. We have had clients place their personal residences, personal vehicles, and vacation properties into LLC's just to protect from the constant threat of law suits. Fairly simple really.



As to the motorhome being owned by the LLC not you, that statement is incorrect in many states, including NY. NY will look through the LLC to see who owns it. If it is owned by a NY resident then the vehicle is subject to NY sales taxes even though it is registered to a Montana LLC. As a further example, let's say an Ohio corporation provides a vehicle to their NY sales rep who resides in NY. That vehicle must be registered in NY because the vehicle resides in NY. One of my clients found this out the hard way about the Montana LLC sales tax issues and it was a very expensive lesson. According to NYS sales tax laws you can be fined up to $50,000 for willful sales tax evasion which owning and utilizing a Montana LLC could qualify for willful evasion.



Next comes the practical issues. If you are in a 6% sales tax state and you have just purchased a $300,000 MSRP motorhome for $200,000. Your sales tax is $12,000. However, Montana now has an additional tax on any motorhome with an MSRP over $300,000 which comes to a total with registration to about $1,000 per year for a period of ten years. I'll do the math for you. The savings is $2,000. Is that really worth the risk? For me the answer would be no.



With all the factors considered, is the Montana LLC legal? Yes, it can be providing you know the sales tax, residency, and licensing laws of your state and you can comply with those laws. If you can comply and document you compliance then you are okay. The 'If' is a big item here. Remember even if you are legal you may have to defend your position and that can be expensive and time consuming.

I think the math is a little off.
Savings is more than $2000. I don’t think you figured in the cost of plates in the other state for the ten years. The $1000 a year in Montana includes registration (plates) and the $800 luxury tax. In Michigan my plates are $2200 roughly a year x ten equals $22000. Then add in the sales tax savings of $12000 for a total savings of $34000. Math isn’t my strong suit so have I miscalculated?