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Old 01-29-2013, 10:17 PM   #85
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amanda h.....You're giving VERY technical information regarding fuel tax, but reality says if you are challenged by a state like California, you would spend a lot of money paying those same attorneys to clear you.

The LLC issue is not so much about fuel taxes, but state sales tax and registration fees. Let's make it simple.....if you live and park your coach in a state, you must pay the state taxes. In the past, they didn't care. Even now, it might be rare to get caught, but if you do....hold on.

Again, to make it simple. If you get stopped by the California Highway Patrol with a vehcle that has out of state plates and you are a resident of California with a California Driver's license, you're going to have issues.

The definitions of tax evasion vs tax avoidance provided above are great. There is also a moral issue of cheating your state of taxes that are used for Fire and Police protection. It's always those who are evading paying their taxes that will be the first to complain the ambulance was slow to respond to their spouse's heart attack. If you don't like the taxes where you live, move, instead of shorting others in the city of services.
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Old 01-30-2013, 08:58 AM   #86
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There is no tax fraud if you are legal in doing a Montana LLC in the first place. This is called "Tax Avoidance" and you do not get prosecuted for it. When you are contacted by the IRS/Department of Equalization and told you owe tax and you make some overt action to avoid that tax then you are into what is called "Tax Evasion" which you can then be prosecuted for.
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Old 01-30-2013, 09:07 AM   #87
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When you are contacted by the IRS/Department of Equalization and told you owe tax and you make some overt action to avoid that tax then you are into what is called "Tax Evasion" which you can then be prosecuted for.
Speaking as an engineer, not an attorney or a CPA, I seriously doubt that tax evasion only begins when one has been personally informed by a taxing authority that taxes are owed. Rather, merely violating tax law (negligently or intentionally) could be viewed by a taxing authority as tax evasion.

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Old 01-30-2013, 09:11 AM   #88
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Speaking as an engineer, not an attorney or a CPA, I seriously doubt that tax evasion only begins when one has been personally informed by a taxing authority that taxes are owed. Rather, merely violating tax law (negligently or intentionally) could be viewed by a taxing authority as tax evasion.

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Ditto.

I'm not sure about how much "evasion" can be done unintentionally... but I'm sure one doesn't have to be contacted by authorities before they can commit tax evasion.

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Old 01-30-2013, 09:14 AM   #89
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Ditto.

I'm not sure about how much "evasion" can be done unintentionally... but I'm sure one doesn't have to be contacted by authorities before they can commit tax evasion.
By "negligently", I was addressing simple ignorance of a governing statute. As we all know, though, when it comes to the law, ignorance is no excuse.

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Old 01-30-2013, 11:06 AM   #90
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Speaking as an engineer, not an attorney or a CPA, I seriously doubt that tax evasion only begins when one has been personally informed by a taxing authority that taxes are owed. Rather, merely violating tax law (negligently or intentionally) could be viewed by a taxing authority as tax evasion.

Rusty

Actually you can not be charged with inadvertent tax evasion. Tax evasion is the concentrated intent to evade taxes. Prime example is not reporting cash income which you know is taxable. We find many of the people who come to our office who had been doing their own taxes for years have way OVERPAID their taxes because they don't understand the law.

Reducing taxes by doing what the law allows is NOT tax evasion. It is just good sense to not pay what you don't owe. Would you look at an RV and offer the dealer more than their asking price? Of course not, so why would someone pay a tax that is not owed?

The keys to the Montana LLC are knowing what the laws in YOUR state regarding registration, sales tax, and residency and then COMPLYING with those laws and being sure you have DOCUMENTED that compliance. That is not tax evasion any more than those who claim the interest paid on their RV's on their taxes are evading taxes.
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Old 01-30-2013, 11:17 AM   #91
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Reducing taxes by doing what the law allows is NOT tax evasion.
Re-reading my quote that you cited, I don't believe I implied that a legal activity constituted tax evasion.

Insofar as inadvertent tax evasion not being subject to prosecution, I guess everyone can just claim that "Gosh, I didn't KNOW that my gambling winnings, etc. were subject to taxation." If a plea of ignorance of the law shields one from tax evasion charges, I guess I don't know what to say....

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Old 01-30-2013, 11:23 AM   #92
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Rusty,

There are always those that claim ignorance on tax evasion, but it becomes one of those things where if they didn't know, they should have known.

Three was a case in our area where a guy who was self-employed was prosecuted for tax evasion because he didn't file a return for, are you ready for this, 32 years. His comment was that he never thought he made enough to file. He was found guilty of tax evasion. His so called ignorance of the law didn't help him at all.

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Old 01-30-2013, 11:25 AM   #93
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Which was exactly the point I was making (or at least attempting to) in posts #87 and #89.

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Old 01-30-2013, 12:06 PM   #94
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Which was exactly the point I was making (or at least attempting to) in posts #87 and #89.

Rusty

Actually the whole Montana LLC as a sales tax dodge is a primary example of tax evasion if it is used in the wrong fashion. If I know the laws of my state and I intentionally ignore those laws and purchase an RV with a Montana LLC then I am guilty of tax evasion. Granted, RV owners don't usually go to jail for a Montana LLC, but they can still be hit with major penalties for violating the law of their home state.

Bottom line is to comply with your state's laws and you'll be okay. Violate the laws and beware of the tax collector.
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Old 01-30-2013, 01:04 PM   #95
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My current campground neighbor, a resident of Minnesota, thought he could form a Montana LLC and buy a motorhome. Seems Minnesota now regularly asks for and obtains information from Montana regarding ANY Minnesotans who have done this. One day, out of the clear blue, he simply received a bill (in no uncertain terms) for the sales tax, with interest and penalties. He had to get rid of the motorhome and buy a fifth wheel, just to pay the piper. As revenues keep falling, I would suspect the other 49 states will follow suit...if they haven't already.
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Old 01-30-2013, 01:43 PM   #96
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As revenues keep falling, I would suspect the other 49 states will follow suit...if they haven't already.
Colorado's been cracking down for a few years now- here's an article on the subject from 2008! Montana registrants caught and fined

And it's not just Rv's, but other vehicles, too. Anyone remember the Boulder City Councilmember that got caught registering an expensive sports car in Montana? Link to news story.

And the State of Nebraska went to war with (among others) its neighbor South Dakota for the same reasons.
Here quoting from South Dakota targets vehicle licensing fraud
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In 2007, Nebraska sent its driver's license database to South Dakota and Iowa, where it was compared with those states' vehicle registration databases. Iowa and South Dakota returned 13,000 matches, and about 8,000 of those came from South Dakota, said Beverly Neth, director of the Nebraska Department of Motor Vehicles.
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Old 01-30-2013, 03:27 PM   #97
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These stories are not unique in today's environment of declining tax revenues and soaring expenses. One of my clients got nailed for the use of Montana LLC and it is not a pretty picture when someone gets caught. Probably the most famous case of someone getting caught doing the sales tax dodge was our new Secretary of State John Kerry who bought a yacht and licensed it in Rhode Island to avoid the MA taxes.

States are hurting for money right now and those that have scoffed at the law are the prime targets. Oh, and just as a side note, you might be surprised when the fertilizer hits the ventilator, to paraphrase the old expression, and you find out that your Montana law firm that set up your LLC is not licensed in your state and can't help you.

Even if you followed the law for your state, you must be sure that you have your compliance totally documented. Even someone who is right may have to defend themselves in court if an agressive auditor comes calling.
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Old 01-31-2013, 09:41 AM   #98
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Evasion vs Avoidance

I am not suggesting you go to a Montana LLC. What I am saying is that it is LEGAL to do so, although by doing so you are avoiding tax and subject to back taxes and fines. (Not worth the attempt. ) When you do something overt to then NOT PAY those back taxes and fines then and ONLY then are you involved in tax EVASION which carries possible JAIL SENTENCES along with the aforementioned back taxes and fines. In my view you are all correct in saying states are hurting and getting more aggresive in going after the folks avoiding taxes and you will eventually get caught and suffer the consequences. The fines alone are not worth the risks.
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