Question: Federal Way reader Elbert Field came across an advertisement in Hemmings Motor News that gave him pause. The ad from Deer Creek Corporate Services promises: “Register your next vehicle in Montana & save thousands! Pay NO SALE TAX! Lowest rates in 50 States!”
“Pay no sales tax on a vehicle?!” wrote Field. “Does this ad make sense?”
He does recall a few years back a neighbor with a large motor home had Montana plates, presumably to save money. But he wonders if it’s legitimate.
Answer: A quick Internet search for “Montana Vehicle Registration” reveals a cottage industry of outfits in the Treasure State, promising big savings on vehicle registration. For a fee, they will set up an out-of-state buyer as a limited liability corporation with a Montana address, which allows them to avoid paying sales tax and license fees in their state of residence.
If you believe the sales pitch, it’s a tax loophole big enough to drive your Beaver Marquis Class A luxury coach through.
Don’t believe it, says the Washington State Department of Revenue.
“This is an area over which we have been concerned for some time, and have been pursuing individuals who have registered their motor homes in Montana using LLCs,” says Revenue spokesman Mike Gowrylow. “We have contended that this practice is illegal, and have successfully pursued some individuals who have tried this subterfuge to avoid paying sales tax.”
A new provision in the law passed in the latest legislative session was designed to help crack down on the tax dodge, Gowrylow said.
“This language clarifies the department’s authority to disallow such transactions and impose tax and penalties on anyone who is found forming out-of-state LLCs to avoid paying taxes due on such things as motor homes used in Washington by Washington residents,” he said.
The department’s tax discovery agents pursue tips from law enforcement agencies and the general public about possible tax scofflaws. (You can report a suspected violator online at www.dor.wa.gov/content/ContactUs/email/reportfraud.aspx.
Be warned: The recent legislation also stiffened penalties. “Someone caught using a Montana LLC to avoid paying sales tax could face a total 60% penalty plus interest,” Gowrylow said.