In addition to its wide-open skies, roaming grizzlies and world-class fly fishing, Montana has another lure for Californians: the prospect of a tax dodge.
The Los Angeles Times reports that much to the displeasure of California law enforcement officials, Montana has become a haven for motorhome owners who prefer not to pay the Golden State’s sales tax when they buy their costly coaches. Montana has no sales tax, and recreational vehicle aficionados are taking a break from their road maps and AAA Trip-Tiks to set up shell corporations in the state.
Doing so allows them to take advantage of loose registration laws – without having to set foot in Montana – and shave perhaps $20,000 off the cost of a luxury motorhome. Enough Californians are doing it to support a cottage industry in Missoula, Mont., where a dozen or so people make a living creating tax avoidance plans for RV owners.
Officials at the California attorney general’s office say they believe as many as 10,000 Californians have put Montana plates on their motorhomes over the last few years, most of them illegally. They base their estimate on comparisons of Montana vehicle records with California addresses.
“We estimate that California has lost over $160 million to this particular type of fraud,” said Deputy Attorney General Robert Morgester.
And a new law signed by Gov. Arnold Schwarzenegger on Wednesday (Sept. 20), Morgester said, may make it harder to catch the cheaters.
At one time, buyers had to wait only 90 days before they could legally bring their vehicles home to California. But two years ago, Schwarzenegger signed a law extending that period to one year.
Now, at the behest of California RV dealers who say their service business has suffered, he has signed a law allowing vehicles registered out of state to be brought here at any time for repair or maintenance work.
“This exception,” Morgester told a legislative committee, “is going to swallow any ability we have to investigate.”
Most states make it difficult for nonresidents to get license plates. But Montana lets out-of-staters register vehicles if they own a local limited liability corporation. Setting one up merely requires some simple paperwork and about $1,300 to cover incorporation costs, registration fees and attorney hours.
In Missoula, lawyer John Bennett is a pioneer in the field of helping Californians avoid their home state’s sales tax — as high as 8.75%, depending on where the buyer lives.
The Times reported that not everyone in Montana is happy about that. Dean Roberts, head of the state’s Motor Vehicles Department, has urged legislators there to update the law.
“It is an ethical issue for us,” he said. “We have an obligation to help other states enforce their tax laws just as we would expect them to help us.”
Gull Boats & RV, on the outskirts of Missoula, promotes the tax avoidance plan heavily in its marketing material, and it has paid off handsomely.
“We get lots and lots of calls from California,” said salesman George Waters from behind his desk in a roadside trailer office.
Down the highway from Gull is Bretz RV, a huge dealership that sold half the RVs registered last year in a five-state region including Montana. Wayde Whitmire, manager for out-of-state sales, said Californians routinely account for 40% of his department’s business.
Bennett works with several major dealers in California, whose customers have Montana plates mailed to them. Buyers can’t accept delivery of their coaches in California, but notaries are on call just over the state line, in Las Vegas, Reno and Lake Tahoe.
With paperwork that confirms delivery took place outside California, the notaries meet buyers at parking lots and garages and hand over the new coaches.