There are many good reasons to live in Montana—and one of them is so good that increasing numbers of people are only pretending to live here.
That reason? Montana has no sales tax. That means out-of-state residents who set up a limited liability company in Montana could buy an expensive vehicle, or, better yet, a very expensive RV, in the company’s name and avoid tens of thousands of dollars in sales taxes in the state where they actually live.
The tax dodge has so become common that authorities in Park County, Wyoming, are warning state residents not to try getting away with the illegal move. They are also urging anyone who knows of such violations to report them to the Park County Communications Center at 307-527-8700.
Sheriff Scott Steward did not respond to calls seeking comment, but he said in a press release issued this week that the problem “appears to be some Park County residents are purchasing vehicles out of state, particularly in Montana, and then licensing those vehicles there.”
“My department will be actively investigating individuals engaged in avoiding Wyoming’s vehicle registration laws,” he said.
Park County Treasurer Barb Poley, who is also quoted in the release, said in an interview that the county is losing some money in vehicle registration fees, but by far the biggest impact is in the loss of sales tax revenue.
For instance, she said, it would cost $749 to register a 2015 Chevy Silverado 2500 pickup in Park County, and the 4 percent sales tax bill would be $1,529.80. If you bought the same truck in Billings, there would be no sales tax, and a clerk in the Yellowstone County treasurer’s office estimated the registration fee would be between $450 and $500.
An even more appropriate example, though, according to Poley, would be the used motorhome she registered Wednesday morning. It’s factory price was $259,000, she said, but with depreciation the tax bill on it was $7,800 and the registration fee was $3,695.
If a resident of Cody had purchased that motorhome in Montana and registered it there, she said, Park County and the state of Wyoming would have been out nearly $11,500.
The motorhome example is also a good one because RVs appear to be the focus of schemes to persuade people to establish a limited liability company, or LLC, in Montana. Just type “Montana, LLC, RV” into a search engine and watch all the websites pop up.
They openly promise to help people set up LLCs specifically to avoid paying taxes on an RV.
Mike Harker, the owner of Arrowhead RV in Powell, Wyoming, which is also in Park County, said it isn’t just Wyoming residents taking advantage of Montana’s no-sales-tax status. Last summer, he said, a German couple who have a residence in New York state stopped at his business. Their big RV had Montana plates, he said, and the couple openly acknowledged buying it in Montana to avoid the New York sales tax.
Harker said the problem has gotten worse since Montana introduced lifetime license plates a few years back. That means people can pay a one-time fee and never worry about having to show that they actually live here.
“The problem is getting worse,” Harker said. “It’s going viral.”
One website promoting Montana LLC formation even says: “Vehicles registered in Montana, with a few exceptions, require no inspection, and never need come to Montana. With Montana’s scenery being so breathtaking, most of our clients do travel through Montana, and we enjoy the opportunity to meet our clients in person and assist them with their legal needs in person.”
But, as the press release from Park County authorities makes clear, the practice is also illegal and leaves people who indulge in it open to potential fines and liable for restitution for back taxes and fees.
Those websites, and some vehicle sales people in Montana, Harker said, “tell the people it’s perfectly legal. Well, it’s perfectly legal in Montana … . But what they fail to inform them of is, it’s illegal to be involved in that sort of transaction in the state they reside in.”
As Park County Attorney Bryan Skoric says in the press release: “Despite what some are told by out-of-state sales people, simply setting up a post office box or limited liability company in Montana does not exempt you from paying Wyoming sales tax and licensing your vehicle in Wyoming.”
Poley said Park County alone is losing tens of thousands of dollars in taxes and fees.
“That’s just an estimate,” she said. “There’s no way for us to honestly know.”
According to Wyoming statute 31-20-201, vehicles must be registered in Wyoming if the owners:
♦ Remain in the jurisdiction of Wyoming for 120 days or more, no matter where they live.
♦ Are registered to vote in Wyoming.
♦ Hold a valid Wyoming hunting or fishing license.
♦ Have filed for a homestead or military tax exemption on property in Wyoming.
♦ Have applied for public assistance in Wyoming.
♦ Live in Wyoming for the purposes of employment.
♦ Or are engaged in a trade, profession or occupation in Wyoming and lease or rent a residence there.
Harker said Wyoming highway troopers are on the lookout for cars and trucks with Wyoming plates pulling camper trailers with Montana plates. There is also another danger: Harker said he has heard of cases in which people unlawfully register their vehicles in Montana and then, when they have an accident, “the insurance agent will deny the claim because it’s fraud.”
The problem is not unique to Montana and Wyoming, Harker said. California threatened to sue Oregon, another no-sales-tax state, over Oregon’s refusal to crack down on people using the vehicle tax dodge. He said Oregon now makes a more determined effort to determine whether people registering vehicles in that state actually live there.