How to Register an RV in Montana
Montana is a great place to register your RV. Why is that so?
It’s because Montana law lets you avoid sales tax. It’s even better if you want to register your vehicle in Flathead County because it doesn’t charge any excise tax either. Almost every other county in the state does.
This article will talk about how to register an RV in Montana.
There’s a fine line between tax evasion and tax avoidance. When it comes to tax avoidance, Montana’s RV titling scheme is quite appealing for a lot of people.
You can purchase an RV for personal use by setting up an LLC (Limited Liability Company) business in Montana. Many legal firms in Montana specialize in this particular area.
Register your RV in Montana
First, you need to set up an LLC ‘business’ in Montana. It costs a total of about $1,000 to hire a Montana law firm to set up your LLC and complete the titling and registration paperwork and receive the Montana license plates.
Since there’s no sales tax, the $1000 is your only expenditure in registering your RV. You typically have to pay about $150 a year to the law firm to renew your LLC charter and registration.
Your LLC is a Montana corporation that you control, and the business technically owns your RV. Forming LLCs and registering RVs is a popular business in Montana, and it’s absolutely legal.
Follow the tax-free process below to register your RV in MT.
- Form an LLC business in Montana.
- Buy the RV in your new LLC’s name and use the address of your registered agent.
- Send the purchase paperwork to your LLC service provider.
- Register your RV in the DMV and get a mail-back of your registration and license plate.
- Your title will arrive sometime later. Have your agent send it to you.
- Maintain your MT-registered agent.
- Every April 15th, file a $20 annual report to the MT SOS.
- To get the renewal registration, pay your LLC service provider to get it done or pay the DMV direct online.
- You can always use the MT LLC to trade your old RV for a new one.
If your home state is Montana, achieving all these will lead to legal tax avoidance. It would greatly disrupt the way LLCs work to restrict people from forming LLCs simply for owning a motorhome and avoid taxes.
However, keep in mind that Montana has introduced a new luxury tax that is charged on RVs and motorhomes with an original MSRP of or more than $300,000.
But what if your main residence is somewhere else?
How to register your RV in Montana when you have a different home state
It’s legal everywhere to form an LLC that actually conducts for-profit business. There are other no-sales-tax states as well to form an LLC and register an RV, such as Oregon, New Hampshire, Delaware, and Alaska.
However, Montana allows the formation of shell LLCs just to avoid paying taxes. You can just Google ‘Montana LLCs’ and find all sorts of websites that talk about avoiding sales tax.
Whether or not shell LLCs would create legal problems depends not on federal law but on the laws of 2 states – Montana and your home state – that may conflict.
In Montana, it’s completely legal for out-of-staters to set up a Montana LLC for the sole purpose of tax avoidance.
However, your home state laws may conflict with Montana regarding this issue, and it has every right to ignore the Montana LLC and make you pay sales tax.
Suppose you are a resident of Georgia who wants to buy an RV. You can form a Montana LLC to avoid sales tax in Georgia, but that would violate Georgia’s law about registering RVs and paying sales tax.
In such a case, your residency state’s law would consider it tax evasion and not tax avoidance.
Moreover, there might also be problems with getting insurance for your RV if you register it in Montana. The RV insurance rates partly depend on where you register, store, park, and drive your RV in your residency state.
This is an example of a ‘conflict of laws’ legal matter, and your home state, the state with primary jurisdiction, would probably control.
The risk of getting caught is less for full-timers and other RV owners who seldom or never drive their MT-registered RV into their home state.
This is especially true for full-timers who establish residency in low-tax states like Florida. But it would still be tax evasion.
The promotion of loophole in Montana LLC RV registration
The previous section points out that sales-tax states take legal actions against RV owners who form Montana LLCs for the sole purpose of tax avoidance.
Montana LLC RV titling companies typically advertise the Montana loophole. Just a quick Google search will reveal multiple companies who promote the purchase of no-sales-tax or tax-free motorhomes.
This tends to instigate high tax states to close the loophole firmly.
California, Colorado, Michigan, and many other states aggressively hunt down RVs with Montana license plates and sue the RV owners for penalties and taxes.
Some states have formed a tip-line with rewards for people who discover RVs with Montana license plates that have been parked in driveways or storage yards for a long time.
In other states, inspectors actively search RV storage facilities to look for the ones with Montana plates.
You can find a thorough review of such crackdowns on RV Dreams.
As states struggle with budget deficits, tax states pursuing RV owners with MT license plates are most likely to increase rather than decrease. If you’re sued, the legal costs of winning the case would greatly exceed the amount you saved by evading tax. This is made worse when insurance companies refuse to cover an RV registered in Montana under an owner who lives in another state.
The Louisiana Supreme Court ruled that a Montana LLC can be set up to register an RV only to avoid sales tax. You can check out the Montana RV LLC Louisiana ruling here.
It’s an obvious case of tax evasion.
Since you’ll be the legal owner of the Montana LLC, in effect, you’ll own the RV with MT license plates. If you reside in a state that charges sales tax, it’s safe to not evade taxes and risk being sued for much more than what you save.
Always having to look over your shoulder isn’t really worth it.
If you need to avoid sales taxes, you can become a resident of a no-sales-tax state before purchasing your RV. You might face other issues like property tax, income tax, and high insurance rates. Yet, it might be worth it if you buy a high-end RV.
To further clarify, you can’t obtain residency in a no-sales-tax state, buy a registered RV, and then immediately switch your residency to a sales-tax state.
This is because the sales-tax state will charge a use tax, i.e., the difference between the tax they would’ve charged and what you paid in your previous residency state.
All sales-tax states will make you pay sales tax if you switch residency states too fast. The difference among these states is the time it takes to register the RV in the no-sales-tax state before your new residency state asks you to pay use tax.
For some states, it may be 6 months, while for other states, it may be never.
It depends on the specific state you wish to establish a permanent full-timer residency and its time requirements. For example, if the time requirement is 6 months, you can successfully avoid use tax by permanently shifting to your new residency state after 6 months.
Another legal option is to form an LLC in a no-sales-tax state like Montana, register your RV under your LLC, and conduct business with your RV.
As long as you run a legitimate business, you can benefit from no sales tax, and your residency state won’t consider it a sham. Make sure you perform recordkeeping properly so that neither state can question the legitimacy of your business.
Want to buy an RV?
Investing in an RV is perhaps the second most expensive after purchasing a home. So, it’s sensible to ensure that you maximize your savings.
This RV Buying Secrets Guide contains practical solutions that will help save thousands of dollars, all legally. There are even tips on negotiating with an RV dealer.
If you still want to use a Montana LLC RV in your tax-charging residency state, you can go on with it by taking all the necessary precautions.
You may not have any ethical issues for justifiable reasons, and that’s fine. But it’s still advisable to stay safe by avoiding taxes instead of evading them.
