I was working a garage for a car collector here on the east coast and noticed that several of his cars had Montana license plates. If you Google “Montana LLC”, you’ll see a booming business with Montana attorney’s is setting up LLC’s for out of state residents and handling the registration of their expensive vehicles. They even handle the periodic inspections and renewals. Car owners never have to set foot in the state…it’s all handled by the attorneys and their staff for a fee.
So if you’re buying or leasing a 6-figure car, this could save you quite a bit up front. Some guy even put together a video on this loophole…see https://www.youtube.com/watch?v=hDxoHdqnfRU
Run this scenario in your head…you pull off this scam. Then one day you’re driving your shiny new car (sales tax free) and BAM!! You t-bone someone else. They sue you for $500K. Your insurance company takes 10 minutes, figures out you’ve committed fraud by registering in Montana (even though you couldn’t even point out Montana on a map). Insurance doesn’t pay the claim. You go bankrupt.
If you think taking that risk in exchange for saving $20/mo in sales tax is worth it…go for it.
And why not go a step further? Pretend you live in Texas or Nevada where there is no state income tax. If you’re going to commit tax fraud, go all the way man!!
It’s all very legal. It’s a business car, registered and insured in Montana. A lot off these cars just sit in corners of the garage and occasionally get driven (or trailered) to car shows. To these guys, the car is simply another asset. To us, its an appliance that we’re renting for a few years to get from Point A to B.
@vhooloo Do you support this hack too? Might as well just lease for the minimum mileage allowable, drive however much you want, then roll back the miles. Heck, this could save you money on insurance and possibly help create positive equity at lease turn-in too.
Tell that to your insurance company when you go to make a claim for a car that is registered in a state you’ve never set foot in. When you apply for an insurance policy, ever insurance company asks what is your address and will the car be garaged at your address. And if you answer yes and then register it in Montana, you are committing fraud and you have voided your insurance policy. If you answer “No”, I will be partaking in the Montana Sales Tax Two Step program, the insurance company will deny your policy application.
So in either case you will effectively have no insurance.
And this has nothing to do with the IRS. It’s state sales tax, avoidance.
Well yeah because if they are not at fault, then insurance doesn’t have to pay out. No eyes need batting.
My point above was that it’s a big risk to take with insurance in order to save the cost of sales tax. Maybe you could get away with it. But you might not. Or even if you could, it will cause a lot of headaches for you. Insurance companies will do everything the can to avoid paying out a claim. Something like registering a car in Montana, when you live in California and the car has never been to Montana is the kind of thing an insurance company would jump all over and use as a tool to deny paying a claim.
Personally, that risk is not worth taking to save paying sales tax. But as always everyone’s mileage may vary on their risk/reward meter.
Buddy got busted doing this in CA. State interpretations are very important, some view it harsher than others. While it is a loophole, it can still be classified under “tax evasion”. If you get a state/tax audited for whatever reason, you better have a lot of money set aside to hire the best team of lawyers to explain how this “LLC” was created in form of a legitimate company rather than one to specifically avoid taxes.
My friend shelled out thousands of dollars in legal fee’s as well as hefty fine AND paying back the “evaded taxes”. Yes, a lot of exotic car owners do this as it saves them thousands upon thousands however if put in the rare predicament that they do get caught, most of them have the ability to hire a top tier team of lawyers that will get them out of it.
Example above with Trump proves half the situation. Trump is able to use loopholes because he is hiring the best of the best (and most expensive) to “help” him figure out these things and to represent him incase of the worst case scenario happening.
You do not see normal everyday people using the same loopholes used by Trump for a reason; if so this country would collapse. The same reasoning applies to the ordinary person attempting to use the “Montana LLC”.
Will you likely never get busted doing this? Probably, but if you do, make sure you’re also able to pay your way out of it.
Before the Montana loophole, I knew of a lot of nice cars being registered in NC. I’m driving down from NJ to NC next week to pick up a new S90. Sales tax is only 3 1/2% and insurance is less than NJ (the car will be registered NC). The “no front plate” thing is a bonus.
The North Carolina PPT (personal property tax) is a bit of an inconvenience but they way Volvo’s depreciate, it shouldn’t be so bad after year 2.
