Originally Posted by timjet
The state of FL charges 6% tax on the full purchase price of a new or used RV. Some folks have partially avoided these high taxes by creating a LLC and registering in Montana.
Can anyone shed some light on this, pros and cons??
Here is a letter I received from the Bennett Law Office re/ the Montana LLC. You can decide for yourself if it is for you. Since I still have a brick and mortar in Kentucky, I decided it wasn't for me, even though it appears to be perfectly legal. If I were full timing it, I would do it in a heartbeat!
: Purchase and registration of Motor Home
Bennett Law Office, P.C is a full-service law firm dedicated to providing a wide range of legal services to owners of recreational vehicles. Since 1998, we have helped thousands of clients minimize sales and use taxes on the purchase and registration of recreational vehicles and other vehicles. In addition, we have helped clients minimize their state income tax burden.
At Bennett Law Office, P.C., we have three Montana licensed attorneys, who will advise you regarding the legality of forming the Montana LLC and the laws you must follow to comply with your home state's taxes. Each of the attorneys is experienced in this type of law, and each one has helped over one thousand clients form Montana business entities. Bennett Law Office P.C. establishes an attorney-client relationship with each of our clients. The attorneys represent the clients of the firm. We believe our clients should be able to speak directly to an attorney.
There are several benefits to working directly with attorneys that represent you rather than working with a business that is represented by an attorney. First, any communications between an attorney and client are protected as privileged conversation, which are not subject to disclosure or deposition. This allows our clients to speak freely to discuss the legality of different options. Second, our clients speak directly to an attorney who has researched these issues and is available to discuss our clients' options. Third, we are Montana licensed attorneys and are not able to represent our clients in litigation in other states, however, we are able to assist clients in tax audits and provide guidance when clients are questioned by law enforcement or state tax departments. Finally, the law firm is covered by legal malpractice insurance.
Montana business entity for ownership of vehicles
Forming a Montana business entity (usually a Limited Liability Company) may help you eliminate all sales taxes and minimize license fees upon the purchase and registration of a recreational vehicle or any other vehicles.
A Montana business entity can take ownership of a new vehicle, or a vehicle you currently own, and register the motor vehicle in Montana, which has no sales tax and low registration fees.
By following these steps, a non-resident of Montana may enjoy the benefits mentioned above:
1. Have an attorney establish a Montana business entity for you;
2. Purchase (or transfer the ownership of) the motor vehicle in the name of the business entity - such that the name of the business entity and Montana address of the business entity (the address of your attorney and registered agent in Montana), and not your personal name and home address
, appear on the reverse of the “Manufacturer’s Certificate of Origin” (the pre-title document given to you by the dealership from whom you purchased the motor vehicle) or the title, if the vehicle was purchased used or already owned by you; and
3. Operate the motor vehicle in a manner that complies with the laws of the state where the vehicle is located and operated. We help you do so by researching the laws of all states, such that we can provide you with the legal guidance you need to avoid violating the laws of those states.
The key step is the third, and is discussed in detail below.
This can be done quickly and easily. Upon filing, via facsimile, the Articles for the business entity with the Montana Secretary of State, the business entity will be in existence within twenty-four business hours. We will then receive the approved Articles from the Secretary of State within 2-3 days. We can then title, register, and license your business entity’s vehicle or vehicles the same day as we have the Articles from the Secretary of State, the Manufacturer’s Certificate of Origin or Title, and the funds to pay the Montana DMV.
Please note that if you purchase the vehicle before forming the business entity, or the title work is not completed correctly, this process can take longer. If the vehicle is financed, the financing should be in the name of the business entity. If you purchase and finance a vehicle in your own name, the bank must grant permission to change ownership to the Montana business entity, or you will be required to refinance the loan in the name of the business entity.
The purpose of forming a business entity for the holding of a motor vehicle is to take advantage of Montana’s low licensing fees and lack of a sales tax; as mentioned above. A Montana business entity can do so due to Montana’s registration statute, which is found at Montana Code Annotated § 61-3-303, entitled “Original registration -- process – fees,” and which provides, in subsection (1), the following:
Except as provided in 61-3-324, a Montana resident who owns a motor vehicle, trailer, semitrailer, or pole trailer operated or driven upon the public highways of this state shall register the motor vehicle, trailer, semitrailer, or pole trailer in the office of the county treasurer in the county where the owner is domiciled.
Montana defines “domiciled” in 61-1-101(17).
“’Domiciled’ means a place where:
(a) an individual establishes residence;
(b) a business entity maintains its principal place of business;
(c) the business entity's registered agent maintains an address; or
(d) a business entity most frequently uses, dispatches, or controls a motor vehicle, trailer, semitrailer, or pole trailer that it owns or leases.”
Based on these statutes, it is clear that a Montana business entity can register a vehicle in Montana in the county where the business maintains its principal place of business or the county where the business’s registered agent is located.
In addition, vehicles registered in Montana, with a few exceptions, require no inspection, and never need come to Montana. With Montana’s scenery being so breathtaking, most of our clients do travel through Montana, and we enjoy the opportunity to meet our clients in person and assist them with their legal needs in person.
Please note that if you plan to use the LLC's vehicle(s) in interstate commerce for profit, then you must register with the Federal Motor Carrier Safety Administration and pay any applicable fuel taxes and registration fees to the states you are traveling through. Recreational vehicles are exempt from these requirements, but not if the vehicles are used commercially.
The regulations are vague in defining “commerce,” but they provide the example that transportation of a race-car or boat for races or other competitions would be considered “commerce” if the activities are undertaken for profit or corporate sponsorship is involved, i.e., (a) prize money is declared as ordinary income and (b) the cost of the activities is deducted as business expense for tax purposes. If you think you may be using your vehicle in interstate commerce, you should discuss this issue with your attorney.
In Montana motor homes are registered for a twelve month period from the month registered (a motor home registered in February will have plates that show the registration expires at the end of February of the following year).
The registration fees will be as follows:
$314.00 for motor homes less than two years old.
$254.00 for motor homes two years old and less than five years old.
$161.00 for motor homes five years old and less than eight years old.
$125.50 for motor homes eight years old and older.
In addition to the above fees, if there is a lien to be file against the vehicle, there is an additional $8.00 fee.
The age of the motor home is determined by subtracting the manufacturer’s designated model year from the current calendar year.
If the motor home is eleven years old or older, it may be permanently registered for a fee of $268.00 and, if applicable, five times the personalized license plate fees.
Fee Schedule for Automobiles, Vans, Sport Utility Vehicles, and Light Trucks
The registration fee for an automobile, van, sport utility vehicle or a light truck is good for 12 months from the month of registration. Montana has a registration fee based on the vehicle’s age. In addition, there is also a property tax of 0.5% of the vehicles depreciated value.
An automobile, van, sport utility vehicle, or a new light truck, that is four years old or less, can be registered for a flat fee of $250.00 plus 0.5% of the depreciated value of the vehicle. If there is a lien against the vehicle, there is an additional fee of $8.00.
If an automobile, van, sport utility vehicle, or light truck is five to 10 years old,
it can be registered for $129.00, plus $8.00 if there is a lien, plus 0.5% of the depreciated value of the vehicle.
If an automobile, van, sport utility vehicle, or light truck is 11 years old or older,
it can be registered for $67.00, plus $8.00 if there is a lien, plus 0.5% of the depreciated value of the vehicle.
In addition, an automobile, van, sport utility vehicle or light truck can be registered for 24 months, upon payment of two years fees, and vehicles 11 years old or older can be permanently registered.
Trucks rated at one ton or greater expire at the end of December each year, and have a different registration fee schedule based on the rated capacity of the vehicle. Other vehicles, including 5th Wheel/Travel Trailers, snowmobiles, ATV’s, boats, motorcycles, and utility trailers will be permanently registered and need not be renewed for as long as the LLC owns the vehicle.
The Laws of Other States
Some states restrict one’s right to avoid registering a motor vehicle in the state of one’s residence even if one is operating a motor vehicle owned by a non-resident (in this case the non-resident is the Montana business entity). We research the laws of the states of residence of our clients and inform them of the results of our research. Please note that we are licensed attorneys in Montana and our interpretation of other state’s laws may differ from attorneys in those jurisdictions.
It is a good idea to consider purchasing your vehicles in a state other than your state of residence.
While this does not change the legal standards regarding your state’s vehicle registration and sales and use tax laws, it may reduce the likelihood of your being audited or scrutinized regarding your vehicle’s registration and use. States have different regulations and procedures regarding collecting or not collecting sales and use tax, which includes out-of-state delivery, affidavits, and time restrictions in which the purchased vehicle must be removed from the state. If you have questions regarding these issues, our attorneys will happily discuss them with you. We recommend you keep a log with receipts to show where the vehicles are located and operated. If you are ever audited or questioned, your log and receipts will provide evidence that you complied with the laws. If you purchase vehicles in your home state, this is even more important since your likelihood of getting audited increases.
You indicated that you are currently a resident of Kentucky
The general rule for vehicle registration is found in the Kentucky Revised Statutes Annotated section 186.020, which states:
§ 186.020. Registration requirement -- Application for registration -- Application and other documents to be sent to Transportation Cabinet -- Renewal by mail
(1) Before the owner of a motor vehicle
, other than a motor vehicle engaged in the transportation of passengers for hire operating under a certificate of convenience and necessity, may operate it or permit its operation upon a highway, the owner shall apply for registration in accordance with administrative regulations promulgated by the cabinet
, except that a person who purchases a motor vehicle, or brings a motor vehicle into the Commonwealth from another state shall make application for registration within fifteen (15) days. The bill of sale or assigned title must be in the motor vehicle during this fifteen (15) day period. If the owner of a motor vehicle is an individual and resides in the Commonwealth, the motor vehicle shall be registered with the county clerk of the county in which he resides. If the owner of a motor vehicle does not reside in the Commonwealth, the motor vehicle shall be registered with the county clerk of the county in which the motor vehicle is principally operated
. If the owner of a motor vehicle is other than an individual and resides in the Commonwealth, the motor vehicle shall be registered with the county clerk of either county. (emphasis added)
It is the owner of a motor vehicle’s responsibility to ensure proper vehicle registration before it may be operated on the highways of Kentucky. A Montana LLC would be deemed owner of the vehicle and as such, Kentucky’s reciprocity statute for nonresidents applies:
§ 186.140. Reciprocity for nonresidents
Except as provided in KRS 281.835 and 281.836, a nonresident owner, from a state not requiring registration of nonresidents temporarily in it, who has complied with the laws of the state of his residence relating to registration of motor vehicles, and who displays the requisite plates and holds the requisite receipt or certificate of registration as required by his resident state, shall be exempt from registration in this state for the same period of time as is granted to nonresident owners by the laws and regulations of his state. Registration in any other state shall not relieve any owner resident in this state from the penalties provided in KRS 186.990.
Montana is also a “reciprocity state.” Montana’s statute, MCA §61-3-719, “Automatic reciprocity,” provides the following:
61-3-719 Automatic reciprocity.
Automatic reciprocity. If an agreement, arrangement, or declaration is not in effect with respect to another jurisdiction as authorized by 61-3-711 through 61-3-733, any motor vehicle,
trailer, semitrailer, or pole trailer properly registered or licensed in another jurisdiction, and for which evidence of compliance is supplied must receive, when operated in this state, the same exemptions, benefits, and privileges granted by the other jurisdictions to motor vehicles,
trailers, semitrailers, or pole trailers properly registered in this state. Reciprocity extended under this section applies to commercial motor vehicles,
trailers, semitrailers, or pole trailers only when engaged exclusively in interstate commerce.
Reading the Kentucky and Montana reciprocity statutes suggest that reciprocity is given to nonresidents of both states. Thus, a Montana LLC should be able to operate a vehicle in Kentucky as long as it is properly licensed in Montana.
However, Kentucky does address reciprocity and that the laws are intended for vehicles that temporarily visit Kentucky in case law. An older case, Reeves, Com'r of Revenue, v. Deisenroth et al
., 288 Ky. 724, 157 S.W.2d 331 (App. Kent. 1941), is still good law and the leading Kentucky authority on the issue of reciprocity. The court concludes:
Our conclusion is that the reciprocity provision of Section 2739g-5 of the Statutes embraces the registration, licensing and granting of permits and certificates of convenience and necessity of all motor cars of non-residents, whether used for private or personal purposes, or in a commercial enterprise. Giving the phrase "temporarily therein" the common meaning when associated with the subject matter of temporary use of the highways of Kentucky, when such motor cars are operated on occasional or casual or infrequent or transitory trips into or through Kentucky, and the owner's home state allows similar exemptions, then they do not have to register or license them in Kentucky or procure permits or certificates required under other conditions. The provision does not exempt from any regulation or tax a motor car operated regularly or continuously or more than occasionally in Kentucky.
They are subject to the same laws to which residents of Kentucky are subjected. (emphasis added)
, 157 S.W.2d at 336.
It appears that a vehicle owned by a Montana LLC and registered in Montana would be permitted to be operated in Kentucky as long as it was not operated regularly or continuously or more than occasionally in Kentucky. Extended use on Kentucky roadways could be determined that such vehicle is subject to registration in Kentucky and all taxes and fees that accompany such registration.
Kentucky Revised Statutes Annotated section 186.020 states that before the owner of a motor vehicle may operate it or permit its operation upon a highway, the owner shall apply for registration in accordance with administrative regulations promulgated by the cabinet. If the owner of a motor vehicle is an individual and resides in the Commonwealth, the motor vehicle shall be registered with the county clerk of the county in which he resides. If the owner of a motor vehicle does not reside in the Commonwealth, the motor vehicle shall be registered with the county clerk of the county in which the motor vehicle is principally operated.
A Montana LLC owner would be a nonresident and the reciprocity statute would apply. Reading the Kentucky and Montana reciprocity statutes suggest that reciprocity is given to nonresidents of both states. Thus, a Montana LLC should be able to operate a vehicle in Kentucky as long as it is properly licensed in Montana.
However, it does appear that a vehicle owned by a Montana LLC and registered in Montana would be permitted to be operated in Kentucky only as long as it was not operated regularly or continuously or more than occasionally in Kentucky. Extended use on Kentucky roadways could be determined that such vehicle is subject to registration in Kentucky and all taxes and fees that accompany such registration.
Kentucky Personal Property Tax
Kentucky does not assess the ad valorem tax against recreational vehicles that are in the state less than 90 days in a 12 month period, if an occupant of the recreational vehicle is not employed in Kentucky.
132.730 Mobile homes and recreational vehicles subject to ad valorem taxation; exception
All mobile homes and recreational vehicles which are within this state on January 1 each year
shall be subject to all ad valorem tax levies applicable to other property subject to full state and local rates, except
that any mobile home and recreational vehicle not licensed in this state and not remaining within this state for a period of more than ninety (90) days in any twelve (12) month period
shall not have a taxable situs in this state unless an occupant is employed in this state.
Make sure your insurance carrier is aware the vehicle will be owned by the LLC. Each insurer treats the LLC differently, so discuss this with your provider to determine how the insurance contract should be completed.
If you are a “full-timer,” which may be defined as residing in your motor home or trailer full-time or part-time during the calendar year, it is in your interest to request insurance written specifically for “full-timers.”
If you are not a “full-timer,” it is in your interest to specify to the insurance company which locations the vehicle or vehicles will be operated and stored. It has come to our attention that if you insure your vehicle within the state of your residence, the likelihood of you and your business entity being audited or scrutinized may increase, and therefore it is imperative that you keep records, such as receipts, illustrating that the use of the vehicle complies with all state laws and regulations.
The following insurance agency, located in Montana, is familiar with insuring through a Montana business entity:
at (toll-free) 877.553.3400
If you are interested in using a Montana business entity to take title of the motor vehicle you plan to purchase, I will do the legal work necessary to do so, and register the vehicle in Montana.
My fee is $950.00,
which includes the following: 1. All attorney’s fees; 2. Completing all paperwork necessary to license the vehicle (does not include actual registration fees and includes only the first 2 vehicles. There will be an additional one time charge per vehicle for additional vehicles added to the company; 3. forwarding the license plates, registration documents, and legal documents to you, via overnight service, as soon as possible; 4. drafting and making all necessary filings with the Secretary of State’s office; 5. acting as the registered agent of the business entity during the year of filing; and finally 6. the law firm can act as the manager of your LLC to provide privacy and to speed up the process.
In addition, we will assist you in renewing the vehicle in your state of residence if you choose to do so in the future, and we will “wind-up” the company for you should you at some point no longer need the company. Additional Attorney fees & filing fees paid to the State will be charged. Tax liabilities upon renewing the vehicle in your state of residence are regulated by each individual state. In many states we can assist you with the renewing the registration of the vehicle with no or minimum tax liabilities. We will be glad to discuss the research we have on these liabilities regarding your specific state of residence.
In addition to the registration fee and the attorneys' fee, there is a $100.00
fee that must accompany the articles to be filed with the Secretary of State of Montana. This fee includes the base filing fee, an additional fee for priority filing, which results in the articles being filed within 1 business day of their receipt by the Secretary of State, and a fee for a certified copy of the articles, which the Montana DMV requires at the time of the registration of the company’s first vehicle. We will have the documents back from the Montana Secretary of State in 2 to 3 business days.
Although it is possible to set up a company for $80.00 by not paying the $20.00 priority-filing fee, we do not recommend it. Failing to pay the $20.00 filing fee can result in a delay of up to a month in the Articles being filed, and in that time the company name you chose may become unavailable.
If you need Articles sooner than 2 to 3 days, you have the option of an “expedited” filing with the Secretary of State. For an extra $85, the Secretary of State will process the Articles filed by our office and return them to us via fax. This is not necessary for most of our clients, but it is useful if you plan to take delivery right away and are financing the vehicle.
Thus, the total fees and costs are as follows:
1. Registration fee;
2. My attorneys fee (a flat fee based on the amount of work estimated); and
3. The filing fee to establish the company (no more than $100).
The fee following the first year for my acting as the registered agent for the business entity is $150.00
per year. You’ll receive an invoice for this fee during the early part of the calendar year following the establishment of your business entity.
Out of that fee, I will pay the annual fees the State of Montana requires to keep your business entity active and in good standing. In addition to acting as your registered agent, I will forward all of your business entity’s mail to you.
Please be aware that, while I am licensed to practice law in Montana, I am not licensed to practice in any other state. Consequently, if you have a personal attorney and/or accountant, I strongly suggest that you discuss the above proposal; the legal and tax consequences; and the implication of the above laws with them. I find that working with a clients’ attorney and/or accountant generally results in a better legal product.
Additionally, if there is more than one owner of the business entity we form for you, such as a husband and wife owning in joint tenancy with right of survivorship, there is a potential for a conflict of interest if the owners become involved in a dispute. Bennett Law Office, P.C. represents the business entity, and cannot take sides and represent any individual in such a dispute. If there is a dispute, we cannot keep information confidential from the owners of the business. If such a dispute arises, we urge each party to seek independent counsel to protect their interests and advise them.
If you finance any part of a vehicle purchase, and you desire to use as a tax deduction the interest paid on the loan, you should discuss with your accountant whether to do so. Our clients receive differing advice from their accountants on this particular matter. In general, if we establish a single member Limited Liability Company, the tax deduction will “pass through” to the member, and you will be able to fully deduct the interest. This is also true when the single member (owner) of the LLC is a Living (or Revocable or Family) Trust.
In addition, because your accountant may be able to characterize our services as being for asset preservation and/or protection, our legal fees may be tax deductible by you.
There are no forms for you to complete in order to establish the business entity. The staff of Bennett Law Office, PC drafts and files all the necessary documents. You only need to call our office and provide information including your contact information, what you are purchasing, and what you would like to name your business entity to one of our attorneys.
Any of the attorneys in the office will gladly discuss this letter with you, answer any questions you may have, and establish a business entity that meets your needs. We will look forward to your contacting us.
Thanks and regards,
JOHN M. BENNETT
Mail to: email@example.com
BENNETT LAW OFFICE P.C.
124 W. Pine St., Missoula, MT 59802
P.O. Box 7967, Missoula, MT 59807
Tel: 866.543.5803 Fax: 888.543.5804