To Incorporate or not to Incorporate

Parallel Lines wrote:
I intend to purchase my motorhome out of state and register it in my home state. but I am not planning on paying sales tax in the state where I bought the motorhome since I am not registering it there. Am I doing the right thing?

It's how most states work. To me, "right" means legal.

Parallel Lines wrote:
As I get ready to buy my first Class A motorhome, people keep telling me that I should incorporate in this state or that state because of the lower cost of taxes, registration and licensing. I assume this is legal since lots of people seem to be doing it. I am curious how many people on this forum have experience with this practice.

Is this something that I should consider?

Depends on how bad the tax bite is and can guarantee you that I would be doing so, if spending 1.6M or so on a new Prevost or other.
This is the reason why you see so many high end units with Montana plates and the place most famous for establishing an LLC for this purpose. Perfectly legal, when done right and always a win, win. Even if you end up paying the tax later for whatever reason, you're no worse off. Before you purchase, head out to a motorcoach resort of sorts, in season and take a look around for someone who has a MT plate, that you might be able to talk with.

To expand on variations between states, in some cases a selling dealer can take care of the out of state registration for you, particularly if they are close to a state line and regularly make sales to out of state purchasers. When I bought my truck in North Carolina, they gave me a drive-out tag and I was charge no tax as they did a low volume of sales to Tennessee residents.

Salesman did tell me that had I been from South Carolina, they could have handled the sales taxes/registration for me, as they regularly sold to South Carolina residents.

Effy wrote:

DownTheAvenue wrote:

Effy wrote:

DownTheAvenue wrote:
Another issue is financing. Unless you are paying cash, most places will not finance a RV owned by a LLC.

This isn't really true. We used to own an RV rental business and had no issue getting a commercial loan. Now, that said we had a legitimate business. Interest rates on commercial loans are higher and the amortization time is less - if I remember correctly I think max is 10 years on something as heavily depreciated as an RV.

To the OP, if your objective is to avoid paying taxes you legally and rightfully owe, then this is a bad idea. Not only legally but ethically. Can you do it? Sure. Should you do it? Depends on your moral constitution. I look at it this way. The "man" you are sticking it to isn't the government, it's your neighbors who have to pick up the tab for what you don't pay via their taxes. I will say that Montana LLCs as a tax shelter for RV's is coming under more scrutiny and the penalties are no fun. But if you have your heart set on it, there are attorneys who will set it up and if you abide by certain conditions it can be done.

Actually this is very true. Essex (Bank of the West) a major financier of RV's, will not finance a motorhome held in a LLC. In your business, you had a legitimate running business with a line of credit. Much different.

Whole lot more banks out there than Essex.

Effy is 100% correct. I don't know where this stuff gets started, but some think it is gospel when someone puts information like this on some internet board. There are numerous lenders and insurance carriers available to someone that decides that an LLC is the right thing for them. In the case of insurance carriers, they are simply adding to the policy "an additional insured." Really nothing special at all. As for lenders, there are many. In fact, there are brokers that specialize in LLC financing arrangements at very competitive market rates. One that I know of is Destination Services in Missoula, MT.

Please do yourself a favor. If you decide to take the LLC route, research this stuff yourself and do not depend on information you get in places like this.

DownTheAvenue wrote:

Effy wrote:

DownTheAvenue wrote:
Another issue is financing. Unless you are paying cash, most places will not finance a RV owned by a LLC.

This isn't really true. We used to own an RV rental business and had no issue getting a commercial loan. Now, that said we had a legitimate business. Interest rates on commercial loans are higher and the amortization time is less - if I remember correctly I think max is 10 years on something as heavily depreciated as an RV.

To the OP, if your objective is to avoid paying taxes you legally and rightfully owe, then this is a bad idea. Not only legally but ethically. Can you do it? Sure. Should you do it? Depends on your moral constitution. I look at it this way. The "man" you are sticking it to isn't the government, it's your neighbors who have to pick up the tab for what you don't pay via their taxes. I will say that Montana LLCs as a tax shelter for RV's is coming under more scrutiny and the penalties are no fun. But if you have your heart set on it, there are attorneys who will set it up and if you abide by certain conditions it can be done.

Actually this is very true. Essex (Bank of the West) a major financier of RV's, will not finance a motorhome held in a LLC. In your business, you had a legitimate running business with a line of credit. Much different.

Whole lot more banks out there than Essex.

I purchased my coach in Arizona while I was living in New Mexico. I did not pay taxes in Arizona but the dealer had to escort me to the state line. Strange, I know. Then I registered the coach in New Mexico and paid sales taxes there.

Effy wrote:

DownTheAvenue wrote:
Another issue is financing. Unless you are paying cash, most places will not finance a RV owned by a LLC.

This isn't really true. We used to own an RV rental business and had no issue getting a commercial loan. Now, that said we had a legitimate business. Interest rates on commercial loans are higher and the amortization time is less - if I remember correctly I think max is 10 years on something as heavily depreciated as an RV.

To the OP, if your objective is to avoid paying taxes you legally and rightfully owe, then this is a bad idea. Not only legally but ethically. Can you do it? Sure. Should you do it? Depends on your moral constitution. I look at it this way. The "man" you are sticking it to isn't the government, it's your neighbors who have to pick up the tab for what you don't pay via their taxes. I will say that Montana LLCs as a tax shelter for RV's is coming under more scrutiny and the penalties are no fun. But if you have your heart set on it, there are attorneys who will set it up and if you abide by certain conditions it can be done.

Actually this is very true. Essex (Bank of the West) a major financier of RV's, will not finance a motorhome held in a LLC. In your business, you had a legitimate running business with a line of credit. Much different.

It's almost as simple as the posters above say.......how it really works is that each state has it's own law on sales or use taxes and it's own law on what coaches or other vehicles are registered. Sometimes using a corporation or LLC allows you to register a vehicle in that state and avoid sales or use taxes in another state. This, of course, means that where you keep the unit must also have a law that does not require you to register the coach there. Really you are finding a wrinkle in how the laws dovetail that fits your situation.

Some require registration if you have a permanent residence in the state, some require it if you have it there the most of the various states it enters, some require you to keep the coach there 6 months to be registered there. And of course you buy insurance where you have it registered.....

Net result, you need to figure out the rules and costs for each option, and whether you need an annual inspection in that state, and what the rules are going to be on where you use it and store it.

There are legal ways to register in other states and there is a reason for it. For example, I live in California. Lets say I mainly use my motorhome in Nevada so I get a storage place in Reno and that is where my motorhome lives and I drive there to use it. Not only can I register it in Nevada, I have to register it in Nevada because Nevada law would require it since that is where it would be most of the time. That doesn't mean I can't bring it back to California, but there are time limits as to how long it can remain in California before I would have to register it here.

What people have done is used laws that were designed for legitimate purposes like I described, in order to get simply get around paying higher taxes or registration fees. That is when you start getting into trouble.

pointrow wrote:
There has been a lot of debate over this. Montana Corp avoids sales tax but if your state catches you in state they can come after you for the tax and penalty.The way they prove it is checking your credit card purchases to see where you have spent your time. Some keep there coach out of state in storage.
Basically some has to turn you in.
I considered it but decided not to since I had inside storage at home.
Crappy deal: you paid income tax when you earned it and Sales tax when you spend it.
good luck
pointrow

That may be true for some states, however, certainly is not true for many others. A person needs to check the laws for their home state and talk to the experts. Then make a decision based on the facts and what is right for their circumstances and not information from internet boards where we find many urban legends.

Safe travels.