Montana LLC question

[jbowlby]

Ok, so I have totaly confused my long time tax prepairer with a question on a Montana LLC.

We are weeks away from purchacing our first motorhome and wish to do so thru a Montana LLC.....9.25% OUCH tax in wonderful Tennessee.
My question is how do we enjoy the best of both worlds, no state sales tax and an annual federal second mortgage interest tax deduction.

[Ray,IN]

Welcome to irv2.com and our extended RVing family!
This is a much discussed topic on the escapees.com forums. Several states are now tracking these LLC's, and actual residency. CO, CA, and other states now compare IRS records, tax records, and MT LLC's recorded there. MT attorneys know how to legally set-up a LLC per MT state law, they do not know the laws of your state. You should obtain legal advice from an attorney licensed in your home state prior to proceeding with a MT LLC, if you wish to stay out of legal problems in the future.

[RVThere]

Last summer, we looked into the Montana LLC and actually set one up.

However we found that the interest rate was higher and the insurance was higher. After 5 years, the sales tax and registration savings were breakeven with the lower interest rate we could get by just registering the coach in NJ.

Also my accountant, who has no love for the IRS and will look for any loophole possible, was concerned that the Montana LLC would come back to bite us in the end. So do your homework because this seems to be a 'pay me now or pay me later' situation.

[BigSkyBob]

Just move here it's less hassle . The license tabs for my coach were $245 this year, $110 less than my pickup.

[tncruiser]

Originally Posted by jbowlby

Ok, so I have totaly confused my long time tax prepairer with a question on a Montana LLC.

We are weeks away from purchacing our first motorhome and wish to do so thru a Montana LLC.....9.25% OUCH tax in wonderful Tennessee.
My question is how do we enjoy the best of both worlds, no state sales tax and an annual federal second mortgage interest tax deduction.

dont forget the 9.25 is only on the first 1300 then its 7
and this year you can the the sales tax off your income tax with out itemizing
im in kingston if your in east tn take a look at boatnrv in rockwood
they have treated me very well email me if you would like more info
brianj

[skipwil]

The way the govt. is now i'd rather pay the tax and not worry down the road. You can be sure they will get it sooner or later. plus all the hassle.
tncruiser- Any recommendation on Caney Creek rv in your area? We plan on a trip there in late sept.

[tncruiser]

skipwil


caney creek is about 5 miles from where we live .very nice cc swiming pool ,some lakefront lots,your rig must be 10 years or less controlled entrance,close to wally world,kroger ,restaurants and antique shops . about $45.00 a night very nice and very clean.
brianj

[azloafer]

Originally Posted by jbowlby

Ok, so I have totaly confused my long time tax prepairer with a question on a Montana LLC.

We are weeks away from purchacing our first motorhome and wish to do so thru a Montana LLC.....9.25% OUCH tax in wonderful Tennessee.
My question is how do we enjoy the best of both worlds, no state sales tax and an annual federal second mortgage interest tax deduction.

Motorhome owner pleads guilty to tax evasion




Tuesday, 24 June 2008 00:00
Hilary Pruitt of Evergreen, Colo., has a cautionary tale about sales taxes and vehicle registration.
In 2004 he formed a limited liability company (LLC) in Montana to avoid paying sales tax and higher license fees on his $275,000 Alpine Coach, which he purchased at a Colorado dealership. In May 2008 he pleaded guilty to tax evasion charges stemming from this purchase.
It’s illegal for Colorado residents to register their vehicles out of state, but the tax savings can be enticing ….
Looking into LLCs
Before buying the Alpine Coach, Pruitt started exploring the possibility of forming a Montana LLC. He learned that attorneys or registered agents can prepare and file LLC documents for you, based on information you provide via telephone or the Internet. They’ll register the motorhome under your LLC’s name, and mail the license plates and documentation to you. A Montana LLC is considered a Montana resident and, like the residents of Montana, does not pay sales tax. Pruitt contacted an attorney in Montana who regularly advertised LLC services. “I was told that the practice had been working for many years for thousands of people in multiple states, he said. “I even checked with my local attorney and he said there had never been any cases tried. Of course, they both threw in their disclaimers.”
Forming the LLC
On the same day Pruitt arranged to purchase the Alpine Coach, he set up the Montana LLC by telephone. Using a credit card, he paid $1,280 for license plates, LLC filing fees and attorney fees. He received his Montana license plates via postal mail a few weeks later. If Pruitt had registered the coach in Colorado, he would have paid a 4.1-percent sales tax on the $275,000 coach at the time of purchase. That’s the rate the state was collecting in 2004 for unincorporated Jefferson County, where Pruitt lives. In addition, licensing the motorhome in Colorado would have cost $3,200, he said. Three months after buying the Alpine Coach, the Pruitts bought a towed vehicle, a Jeep Cherokee, and registered it under their Montana LLC, as well.
Exposed
Everything went along fine until spring 2007, Pruitt said. "One of the local TV channels did an expose on how much money the state of Colorado was losing due to people illegally registering their RVs out of state. One of my neighbors saw fit to turn me in.” The Revenue Department and Attorney General’s Office launched an investigation, and in summer 2007, agents from the Colorado Bureau of Investigation showed up at this doorstep. In May 2008 Pruitt was one of 12 individuals to plead guilty to charges of failure to pay tax. The court said he must register his motorhome in Colorado and pay $9,720 in unpaid taxes and fees to the state. He wants to make others aware of the implications of forming a Montana LLC to avoid sales tax and higher license fees in their home states.
Trial 'not worth the risk'
Pruitt and his wife, Joy, work for a mortgage company that has branches in 17 states, including Colorado and Arizona, where they are licensed brokers. Although they own a home in Evergreen, the Pruitts actually kept the motorhome out of Colorado for most of the first six months of ownership. “We were looking at conducting the mortgage business from Arizona in the winter and Colorado and other places in the summer.” Pruitt figured the fact that they kept the motorhome out of state for an extended period, on business-related travel, could be used to argue the case in their favor. But things didn’t work out that way. According to Colorado law, a Colorado resident is “any person who owns or operates any business in this state or any person who has resided within this state continuously for a period of 90 days or has obtained gainful employment within this state, whichever shall occur first.” “The way state officials put the case together," Pruitt said, "you just can’t take the risk of going to trial based on the plea offer. The penalties, if you get convicted in court … compared with the deal they offer, it’s just not worth the risk.” Pruitt received a deferred sentence. After two years, if he has made restitution and met all conditions of deferment (e.g., no criminal violations), the tax evasion charges will be dismissed without a conviction being entered. I spent thousands on an attorney and still had to plead guilty to failure to pay tax.”

[Norm4015]

I think your cut and paste answer to jblowby is a little late. He asked the question nearly a year ago.

[azloafer]

Well, you read it, so maybe it will help someone else. I realized the post was old, but someone is pushing these LLC's and they should know the whole story. I hope it helps someone or at least provides information for them. Joe

[Luv2go]

Thanks, Joe, for posting the article. We looked into an LLC, and found our home state (NC) also has some pretty iron-clad rules regarding residency and registering motor vehicles that make it not worth it registering as a MT LLC, especially since we keep the MH in NC most of the year.

Stewart

[Shomeyankee]

Does anyone have any experience in the great state of Missouri? I recently created a Montana LLC when purchasing new RV. 90 days later I received notice from Missouri Dept of Revenue acknowledging my purchase and requesting sales tax.

[wa8yxm]

Originally Posted by jbowlby

Ok, so I have totaly confused my long time tax prepairer with a question on a Montana LLC.

We are weeks away from purchacing our first motorhome and wish to do so thru a Montana LLC.....9.25% OUCH tax in wonderful Tennessee.
My question is how do we enjoy the best of both worlds, no state sales tax and an annual federal second mortgage interest tax deduction.

I would think very carefully about doing that.. A few states, California, Colorado to name but two, Michigan was considering it and I do not know what they decided.

Have gone to checking out those Montana LLC motor homes and fining the owners big time for tax evasion.

When this happens the state decides how much you owe and it is always.. ALWAYS more than you saved.. ALWAYS.

MUCH MORE in most cases.

[Gary RVRoamer]

If you intend to keep the RV in your home state, chances are the Montana LLC is not going to avoid taxes there. Most states have laws covering this sort of thing, to make sure they get their pound of flesh regardless of where the vehicle is titled and registered. If you keep it in the state and drive it there, they will probably come after you for the taxes and fees sooner or later.