Montana LLC's, a Heads Up

[wnytaxman]

I'm a self employed CPA and I wanted all of you who have a Montana LLC or are considering the use of a Montana LLC to be aware of what happened to one of my clients. My client is a NY resident who purchased his motor home in Florida and used a Montana LLC to register the RV to avoid the sales tax. He has complied with the NY law on out of state registration. He just got a notice assessing him $29,000 in tax, penalty and interest. His comment to me was that he did comply with the law, but he didn't document how he complied. The bottom line of all that is that he will have to pay to defend his use of the Montana LLC and he may still lose because he can't document that he complied with the law. When he contacted his Montana attorney, the Montana attorney told him that the issue is a NY issue and he couldn't help him.

I'm neither condoning nor condemning the use of a Montana LLC, but if you use one or are thinking of using one, you have to make sure you have documented your compliance with your state's laws on sales tax. The burden of proof for all tax matters is on the taxpayer. Even though you have complied with the law you may have an expensive and time consuming fight on your hands if your state challenges your use of the Montana LLC.

[GaryKD]

Hi wnytaxman,

The burden of proof is on the defendant? Where in NYS tax law is this stated? The burden of proof is on the prosecution.

Gut feel says not all the facts are being told.

[wnytaxman]

Gary, the burden of proof is on the prosecution only in criminal matters. In tax matters the burden of proof is on the taxpayer. It is that way in all 50 states and federally as well as in Canada. If you claimed 60,000 business miles on your tax return, how would the government prove you didn't?

I don't write tax law, nor do I work for any form of government. My job is to save people tax dollars. My post is meant to do just that. If you use the Montana LLC, document that you complied with the law. It could save you a ton of $$$$.

Let me take this a step further. If the state said his intent on not paying the tax was criminal, then they would have to prove he intended to defraud the government. That isn't the case here. That means that he had to prove he complied with the law.

[awarnes]

When it comes to taxes it is your responsibility to retain and show proof. If you can't prove your case you loose.

[GaryKD]

Hi wnytaxman,
This is interesting. I do not agree with the 60K business miles example in your last post. This would imply your client claimed something on his NYS tax return and now he is being asked to prove the claim. This I understand and agree with.

If you are able, can you tell us did your client make some sort of claim on his NYS tax return?

If not, what is the basis NYS is using to come back on him?

I know Florida law on this subject. I own LLCs. I comply with Florida law (with records). Because I comply with Florida law there is no way Florida would ever know I own the assets.

This is why I am puzzled about how NYS found the asset, if NYS law was complied with.

[wa8yxm]

Quote:

Originally Posted by GaryKD Hi wnytaxman, The burden of proof is on the defendant? Where in NYS tax law is this stated? The burden of proof is on the prosecution. Gut feel says not all the facts are being told.

There are two kinds of law, Criminal, and Civil

Though "Tax Evasion" is a criminal offense

Failure to pay, invokes a CIVIL penality

In Civil court it's up to you to prove you did not do it.

Just ask OJ, he's an expert on the differences. (The hard way)



MANY, and I mean MANY have posted simular stories, California, Colorado and some other states have all assesed montana LLC's tax due, Several have had to sell the motor home in order to pay the tax.

[RickO]

Thanks so much for posting Taxman! We've had countless threads debating LLCs and at the end of the day I don't recall a single member... until now... who had first hand knowledge of this type of problem arising.

Can you share if your client was claiming a coach interest deduction on his NYS personal income tax?

Rick

[RJay]

Wnytaxman,
Thanks for the heads up. I think we'll see more of this type of “tax collection” in the future as certain states get more desperate for money. The states know they can out spend the tax payer from a legal stand point and so does the tax payer so the tax payer just gives up and pays it.

[AZgl1500]

I'll be watching this thread with interest.

[swampdog]

at some point and time there will be a REAL judge in a Real court of law that will rule on this matter once and for all.

[Perry White]

A good CPA

[Perry White]

A good CPA should be able to guide his client thru the process. He must of done this before you took him over as a client?

[dajudge]

The Louisiana Department of motorvehicles has notified all rv dealers in the state that they want to be notified anytime a Louisiana resident licenses a rv in the name of a Montana LLc.

[mick]

LOL if you cannot do the time, dont do the crime.