Tips and Tricks

Is Registering Your Vehicle in Montana the Right Choice?

First off, here's the "small print."

Because of today's world where many people want to sue people, let me say first and foremost, I am not a lawyer and I do not pretend to represent myself as one. I am not giving legal advice. I am only trying to help people understand what's involved based on their own particular situations; they can make a choice that may be appropriate for them. For legal advice, I would strongly suggest that you contact an attorney for all legal matters.

The examples I give below are purely for illustration purposes and not to be taken as what would apply to everyone. In life, we all have variables to choose from...whether to make a left turn or a right, have a second cup of coffee, get up early or sleep late. Everybody has choices and this may be one of those times.

Oftentimes I am asked a question by either a member with Americas-Mailbox or someone who is considering joining Americas-Mailbox as to whether registering their vehicles in Montana is a good idea or not. The answer could be yes or no, depending on each person's own individual situation. While I would certainly not condone illegal behavior by evading tax laws, I have no problem avoiding taxes, which is certainly fully legal.

As of the time of this writing, many states don't like the idea that you are registering your vehicle in any state other than their own...it's a money thing. At the time of this writing, Montana still allows people to do it despite some states putting pressure on Montana to stop the practice. When this will happen, I don't know...I hope it doesn't. Personally I feel that many states are after only one thing and that one thing is your money. Many people feel that the states take the money and don't do anything for it. Whether that is correct, who's to say? Some states make a huge amount of money off of vehicle registrations and charge a sales and/or excise tax of over 10%. At that rate, on an RV that costs $500,000, that is $50,000 just in tax alone. It's no wonder that some people feel that they have to do things to avoid paying the state from where they came.

To begin the procedure to register the vehicle in Montana, the parties need to open an LLC (Limited Liability Corporation). Since many people who choose to do this do not have the knowledge of Montana corporate laws or the legal expertise, it is usually a good idea to hire a professional to do this work for them.

In Montana, an LLC is good for one year and needs to be renewed every year. There are a number of attorneys or services who can do this but before I give any recommendations, let's decide if it may be a good thing for you in your own situation.

To be able to decide if the Montana option is good for you, let's look at this more closely by asking several questions...

  1. Have you already paid sales tax on the vehicle in another state?
  2. How expensive is that vehicle?
  3. How long will you be keeping that vehicle?
  4. Is it important to you to want to have assets in a corporation that offers protection in case of lawsuits?

 

If you've already bought and paid sales tax on your vehicle, then for that, you've lost that money but you can still decide if you want to for future purchases.

In most cases, if the vehicle is a Travel Trailer (TT), most 5th wheels or a used entry level motor coach, it probably isn't worth it. For example, depending on variables (loan on vehicle, is vehicle in a Trust, do you own the vehicle outright, etc.), the cost of opening up an LLC can be around $1,000 and cost around $125 per year to maintain. Taking a vehicle for which you've paid, say, $50,000 in South Dakota (using the Americas-Mailbox's location), you would pay 3%, which would come to $1,500. If you kept your vehicle for say 6 years, in Montana, you would have paid around $1,625, amounting to about $125 more.

However, if you trade your vehicle in every 3 years, the numbers show it to be worthwhile. Assuming that in 6 years, you had 2 vehicles (one every 3 years) and paying the same $50,000 each time, the price in Montana would be a little higher (after all, you're changing the vehicle, but keeping the same corporation), but the tax in South Dakota (at current 3%) would be $3,000, or an approximate $1,350 more during the same time frame.

However, looking at an example of someone who purchases a mid-level to upper end 5th wheel or motor coach, the numbers climb dramatically. Let's take a coach valued at $500,000 and that person trades it like his friend above every 3 years for a total of 2 vehicles over a 6 year period. At $500,000 each, paying a tax of 3%, that amount would be $30,000, yet with a Montana LLC, that same person would still pay around the same $1,625 that their friend in Montana did.

Now using common sense, it would be safe to assume that the attorneys would certainly want to (and rightfully so) charge a few bucks to handle the paperwork for the purchase of the 2nd vehicle. That number was not taken into account with the numbers I've drawn out for you.

You can see how the numbers add up. And of course, as Question #4 points out, you may have the protection of assets that a corporation can offer. For what protection that would be, again, contact an attorney.

Again, please don't accept the above as gospel as its only purpose is to show that there may be options, options that you may not have known existed. I've only posted this on the website here to help you decide some of the basics and to know what some of the questions are to ask. After all, it costs nothing to ask questions, it only costs if you don't.

Now here comes the commercial...whether or not you decide an LLC in Montana is a good thing for you, you can still use Americas-Mailbox to handle all your mailing needs as well as (if you want to) your Home Base Services such as driver's license, income taxes (federal only as SD has no state income taxes), insurance, your billing address and so on.