Montana is known as Big Sky Country, but it’s getting a national reputation as big tax-loophole country as well, according to The Enterprise, Brockton, Mass.
Run “Montana LLC” through an Internet search engine. You’ll find a cottage industry of companies willing to help you create a limited liability corporation in Montana for the purpose of buying and registering a new motorized RV under the LLC’s name.
By registering the RV in Montana, the buyer avoids Massachusetts sales and excise taxes, which Montana does not charge.
There’s nothing illegal about the practice on the Montana end.
And everything is fine on the Massachusetts end until the RV is garaged here for 30 days. At that point it’s considered a Massachusetts vehicle and is subject to state taxes, which, for a $200,000 luxury RV, total about $17,500.
In contrast, the cost of doing an LLC is about $1,500.
Massachusetts officials have caught onto the practice – finding such vehicles in Bridgewater and Middleboro, among other communities – and are starting to crack down.
The state inspector general issued an initial report last month detailing 32 RVs that had been purchased by 23 different Montana LLCs, had Montana license plates, but were garaged in the Bay State.
The Department of Revenue has been following up and sending out state sales-tax bills to offending parties. By last week, the department had collected approximately $138,000 of the $250,000 in bills it had sent to 30 Massachusetts residents. The department had another $150,000 worth of bills it had not yet sent out.
“It’s discouraging to see a state set up something like this, which is basically a way to shelter tax evasion,” said Bob Bliss, spokesman for the Massachusetts Department of Revenue.
Tracking down the illegitimate registrations is not easy. Montana law shields the members of an LLC from public disclosure.
In Massachusetts, both the members of an LLC and their agent, or bookkeeper, are matters of public record. In Montana, however, only the name of the agent is public. So out-of-state residents can hire a Montana business to be their agent and shield themselves from scrutiny.
The Registry of Motor Vehicles is supposed to start notifying local communities to begin assessing local excise taxes on the offending RVs.
The inspector general’s report included images of scofflaw RVs parked in Bridgewater and Middleboro, but neither town had been contacted as of last week, officials said.
Middleboro’s assessor-appraiser, Barbara Erickson, said that RVs don’t make a big portion of the town’s excise tax revenue. But even one $200,000 luxury RV would end up paying almost $11,000 over five years.
“That is very significant, … especially in a time when communities are trying to struggle to get every bit of revenue they can,” she said.
Marty Hanoud, owner of Marty’s USRV Inc. in Berkley, said he’s seen some people register using a Montana RV, but only rarely.
Most RVs that Hanoud handles are not the motorized $200,000-to-$300,000 variety, however. They are the the pull-behind type that run $20,000 to $50,000.
“A dealer licensed in Massachusetts should not encourage a person to do an LLC and avoid their taxes. But we can’t be the policeman,” he said.
Hanoud also said the major banks that his dealership uses won’t finance a purchase made by an LLC, and most people don’t have the money to pay cash.
“It’s not that easy. I think the state is blowing it out of proportion,” he said.
Just how big the problem is isn’t actually known. Because of the difficulty in tracking the paperwork, it’s hard for the inspector general’s office to get a good estimate of how many illegal registrations there are.
And their advice for local officials is to simply keep their eyes open. If police see an RV with Montana plates parked in their town for more than 30 days, chances are it’s not Uncle Hank coming to visit.