As attractive as the offer may sound, a Montana firm’s ongoing offer to provide prospective RV buyers with a means of avoiding state taxes and lowering the initial cost of RV ownership by setting up an LLC in Montana, as reported in Monday’s (May 21) RVBUSINESS.com news feed, does not pass muster in the Hoosier State, reports Trevor Gasper, corporate counsel for Elkhart, Ind.-based Thor Industries Inc.
RV enthusiasts attending the recent FMCA rally in Georgia were offered promotional literature by a firm called Action Services LLC, an affiliate of the Wilson Law Office, Missoula, Mont., informing them of the continued availability of this unusual – and longstanding – tax-related maneuver, according to RVBUSINESS.com.
Since the state of Montana has no sales tax on vehicle purchases and charges affordable RV registration and licensing fees, Action Services maintains forming an LLC in the state essentially makes the buyer a Montana resident – technically speaking — and eligible for these lower costs. In fact, a resident of Indiana would save 7% in state taxes on the purchase of an RV, an Action Services spokesman claimed, adding that additional savings are available through low insurance and finance rates for LLCs.
But buyer beware, writes Gasper in a late Monday email.
“I wanted to make sure you were aware that the State of Indiana has taken the position that forming a Montana LLC and titling a recreational vehicle in the name of a Montana LLC (while perfectly legal under Montana law) is still a taxable event and the Indiana Department of Revenue is on the lookout to assess sales taxes, including penalties, on RV owners who purchase their RV through a Montana LLC,” said Gasper in an email to RVBUSINESS.com, referring readers to Letter of Findings Number 04-20110618 as one example.
“A number of other states have banned the practice,” Gasper added. “See Nebraska Revised Statutes 60-366. There are similar statutes in California, Iowa, Massachusetts, Minnesota, Wyoming and similar tax holdings by other states such as Colorado and Washington. People have no obligation to maximize their taxes to state and federal authorities but this practice is risky for people trying to minimize taxes.
“Not to mention many manufacturers limit or void warranties for RVs titled in the name of a business entity or association or used for commercial purposes,” said Gasper. Before titling your RV in the name of a Montana LLC, Gasper cautions to seek appropriate local professional guidance.