Out-of staters escape hefty motor home tax by buying in Montana

By BROOK GRIFFIN
Bozeman Daily Chronicle

BOZEMAN, Mont. (AP) -- Call it recreational robbery: An out-of-state resident sets up a dummy company in Montana, buys a motor home under that company name and escapes tens of thousands of dollars in sales taxes.

And there is nothing illegal about it.

In California, where a majority of RV buyers are escaping a sales tax as high as 8.75%, depending on where the buyer lives, law enforcement officials and lawmakers are crying foul at this loophole.

Some Montana officials, however, don't see it as a crime; they see dollar signs. Private business wins by gaining out-of-state business. The state wins by getting more registration fees.

The perceived problem has gotten so much attention in California that that state has created a law-enforcement program specifically to deal with it.

The California Highway Patrol has a program called Californians Help Eliminate All The Evasive Registration Scofflaws, or CHEATERS, which asks people to report California residents suspected of having a vehicle registered in another state.

California Highway Patrol Officer David Constantini runs the program created in 2004 to combat California's diminished sales tax revenue.

"We're missing out on a good $10 million a year, and that's being very conservative," Constantini said. "It's very frustrating."

A $350,000 motor home bought in California would include more than $30,000 in registration fees and taxes. The same motor home bought in Montana would cost less than $300 a year to register, according to the Montana Department of Motor Vehicles. And there would be no sales tax.

Motor homes, Constantini said, actually make up a small portion of the 150 calls a day he receives working at the CHEATERS headquarters. His frustration stems from what he perceives as Montana turning a blind eye.

"Montana is by far the biggest problem," he said.

Dean Roberts, administrator of the Montana Department of Justice Motor Vehicle Division, said the problem is not just buyers from California.

"It's Texas, Florida, pretty much places where people winter," Roberts said.

Even though the process is legal in Montana, Roberts said, there is a legal courtesy to consider.

"We have some obligations to protect the laws of the other 49 states," he said.

Generally speaking, out-of-state residents contact a lawyer in Montana to set up a limited liability company, or LLC, and use that company name as a tax shelter for the RV. In Montana motorcycles, ATVs, boats and RVs are permanent-registration items, with a single payment good for as long as the owner has the vehicle.

Sometimes the buyers never even come to Montana, but just have their attorneys set up the LLC, register the vehicle and send Montana plates to the owner in another state.

One way the state of California catches the tax evaders is by way of a law that allows the state to impose the sales tax for up to a year after a vehicle is purchased. If the owners can wait a year before bringing it into the state, however, they get off tax-free.

Most California RV owners who try to take advantage of the system, Constantini said, can't wait for a year to bring the vehicle home. Those are the ones getting caught by his department.

"I would say 80 percent of people are bringing them in," he said.

Not all RV shoppers looking to evade their home-state sales tax come to Montana, however, Roberts said. Other states that don't charge a sales tax see similar tactics.

"There's no way of knowing how many of them are bought in Montana," Roberts said.

There is a simple way to close the loophole.

"Say they have to be housed in Montana," he said.

If the motor home registered in Montana had to be permanently housed here there would be no issue. Owners would find it too tedious to go back and forth to get their vehicle, he said.

Still, the situation is unlikely to change anytime soon, Roberts said.

"It's a legislative issue," he said. "We don't have any interest in pushing it, it's a delicate issue, quite frankly."

Some people don't see a problem.

Jim Murray, General Manager of Bozeman Ford, has been selling motor homes for about five years and the demand from out-of-state customers is high.

"We get quite a few buyers who want to build an LLC," Murray said. "It's very simple. It's very legal."

It is not Montana's problem as long as it's legal, Murray said.

"Why is it so terrible?" Murray asked. "It's just revenue from out of state. Montana happens to be one of the last free states."