‘The Montana scheme’: How the wealthy avoid taxes on luxury vehicles, RVs

A quick Google search reveals that it’s a common sighting. High-end RVs are also registered in huge quantities in Montana, even though the owners don’t live here and have no intention of doing so.

Wealthy people across the U.S. are avoiding paying steep sales taxes by having their luxury vehicles or RVs registered in Montana, depriving their home states of revenue and squeezing other taxpayers.

The reason is simple: Montana has no sales tax and no vehicle emissions testing. So, people living in other states save tens of thousands of dollars, even hundreds of thousands of dollars in many cases, by forming a Limited Liability Corporation (LLC) in Montana and using that entity to purchase and register a vehicle here. And some counties make it even cheaper because they don’t have a local option tax in registration.

The loophole has led to at least one lawsuit in Montana because a small county courthouse staff was overwhelmed with the workload and the company wanted their out-of-state clients served in a timely manner.

It’s also causing headaches for investigators in other states, who say it’s hard to enforce but allows wealthy people to avoid millions in taxes.

Country treasurer offices around Montana are inundated throughout the year with vehicle and RV registrations by people who don’t live here. Whether its Teslas in eastern Montana or Lamborghinis in Anaconda or million-dollar RVs in Flathead County, the practice is perfectly legal under Montana law.

All but six counties in Montana have a local option tax of up to .7% of the retail value of the vehicle, and vehicle registration fees are the fourth-largest general fund revenue source for Montana.

The laws in many other states, like Montana, however, are fairly clear that if the vehicle is using that state’s roads, it needs to have paid the registration fees in that state and complied with emissions testing.

Montana sees the reverse of that situation, which means Montana has no incentive to crack down on out-of-state registrations because of the aforementioned revenue, because the vehicles aren’t using roads here, because it’s hard to track where vehicles are used and because the registration process is legal.

There are a handful of companies in Montana, including a few in Missoula and one in Whitefish, that specialize in helping out-of-state clients get around their home state’s vehicle sales taxes, registration fees and emissions tests.

Ben Krakowka, the county attorney in Anaconda-Deer Lodge County, said his county is one of the six that doesn’t charge a local option tax on vehicle registration.

“What that did is create a situation where we were the cheapest place to register your new Ferrari or Lamborghini,” he explained. “Or a Ford Cobra worth 10 million bucks. Every day we’ve got people registering new Ferraris and sports cars. We’ve seen some Corvettes. Once we saw a Ford GT. You have to apply to buy one of those.”

Krakowka said the county gets hundreds of those types of registrations every year. All the LLC needs is a postal address in Montana.

“What people are doing is taking advantage of the system,” he said. “They’re doing it lawfully, but taking advantage of the system to register a vehicle here. If you look it up online, there’s pictures all over the Internet of expensive sports cars with 30 license plates on them.”

The “30” is the number that corresponds with Anaconda-Deer Lodge County on the Montana license plate.

“The cost to register isn’t a big deal when it’s a Ford F250 pickup truck, but it starts to be a big deal when you’re talking about a Bugatti or a Ferrari,” Krakowka said. “The same thing can be done with boats and RVs and planes.”

One attorney in Montana, who is familiar with the registration process, told the Missoulian famous celebrities and politicians have taken advantage of the system.

The website for one company, called Montana Registered Agent LLC, lays out the loophole pretty clearly:

“Your Montana LLC will be given the same rights and privileges as a Montana resident,” the information page says. “Your LLC can purchase and own vehicles, RVs, airplanes, or any other type of personal property. So, let’s say you want to buy an RV that costs $100,000. However, the state you currently live in charges an 8% sales tax that will increase your total amount by about $8,000. Because your Montana LLC is considered a state resident, it can purchase the RV and register it in Montana without being hit with sales tax —saving you thousands.”

An ad for the same company lures customers in with provocative writing.

“It’s time to play with the rules the rich created,” it says. “The middle class gets stuck playing with the rules the rich have written for themselves. You finally have a loophole now that you can use to make the cost of owning (an) RV less.”

The Missoulian was unable to reach a representative of the company for comment.

Krakowka, the county attorney in Anaconda, said the issue caused a huge headache for county workers and even led to a lawsuit.

“In Anaconda-Deer Lodge, we’re a small county,” he explained. “We’re only about 10,000 people. And our courthouse is staffed accordingly. When somebody goes to register a vehicle here, Anaconda makes zero dollars. It’s a service we offer to the community. We’re asking people to register cars, so we give them a place to register so they can lawfully drive.”

But some companies, representing out-of-state clients, have been causing the staff at the courthouse to be overworked with all these out-of-state registrations.

“We were getting backlogged, especially during tax season,” he explained. “Members of the community are coming up to pay their property tax bills. They’re our community, the folks we’re supposed to be looking out after. At the same time, we continue to get in an incredibly large flow of vehicles going to be registered that are never going to hit a street or a highway in Anaconda-Deer Lodge County.”

The owner of a company that helps out-of-state customers started complaining that the courthouse workers were taking too long, Krakowka recalled.

“We explained multiple times to him it’s the busy time of year,” Krakowka said. “We handle these things as they come in. So (the company) would send in a secretary with 100 of these vehicles to be registered. So we ran into a situation where we’re not going to register 100 vehicles while people stack up behind you and normal people wait.”

The company, called Deer Creek Corporate Services, actually sued the county about five years ago, Krakowka explained.

“They wanted (an order) from District Court that we had to handle their vehicles in an expeditious manner,” he recalled. “Whether that was going to mean hiring more staff or when a lady came to the window with 100 we had to do those.”

A judge ultimately sided with the county, Krakowka said.

“We still get quite a few of them,” he said. “Sometimes people try to set it up on their own and when they don’t have a Post Office box here we refuse and they get terribly upset and don’t understand why. At least the company has a Post Office box. I don’t feel real bad for someone if they buy a $2.5 million sports car and an oil change in one of those things costs $5,000. Why get cheap all the sudden when they’re deciding to register?”

(Another county official, who asked not to be named, confirmed that a $2.5 million Italian-made vehicle was indeed once registered in the county.)

The county doesn’t want to add a local option tax or increase vehicle registration fees to deter out-of-staters because that would only hurt locals, Krakowka noted.

He said that while the practice is perfectly legal in Montana, other states have their own laws and have been trying to crack down on the practice.

He’s heard of investigators in places like Florida going to expensive car shows and tailgates and looking for Montana plates. And, he noted, finding various tax loopholes is a longstanding national pastime for wealthy people in the United States.

“It’s not unheard of, as far as registering a company or an LLC in a certain location because the law is more advantageous,” he said. “For example, lots of companies are filed in Delaware because the tax system is especially favorable there.”

He knows some businesses in Montana are making a pretty penny off the process.

“I think there’s businesses and law firms in the state of Montana who have turned this into a point of specialization,” he said. “And they’re doing a good turn of business and I can’t blame someone for doing a good turn of business. If you come up with a really good idea, you should follow through as long as there’s nothing illegal about it.”

An investigation into the practice in Utah by the television news station KSL.com found that the law is murky around the matter and challenging to enforce. Jason Gardner of Utah’s Motor Vehicle Enforcement Division told the station that the law says that if a business entity operates primarily in Utah, it should be registered in Utah.

Tyler Gernant, Missoula County’s clerk, recorder and treasurer, said his county benefits a little bit from those out-of-state registrations on some vehicles because of a local option tax.

“It’s a small percentage of the market value of the vehicle,” he explained. “But RVs don’t pay that. We get a whole lot of them that are just RVs. RVs pay a flat fee up until a certain value, like $300,000.”

Other counties without the local-option tax include Flathead, Big Horn, Granite, Phillips, and Richland. So many companies register luxury vehicles there.

Gernant said there’s so many out-of-state registrations that Missoula County used to have a person who was dedicated to doing nothing but those.

“There’s two big companies in town, and they would come in and the person would just do those all day every day,” he said. “It’s a pretty big business and the state makes a lot of money off it. The two big companies are super good to work with. They make a lot of effort to work with us.”

Although they don’t have a dedicated staff member any more, he said the volume of work required for the job takes up the equivalent of one staff member’s time every day.

Gernant said the most expensive vehicle he’s seen registered here was a Ferrari. 

“The companies do occasionally register expensive cars here, more as a favor to us,” he said. 

Amy Metz is the county treasurer of Richland County, where the county seat is the small town of Sidney near the North Dakota border.

With no local option tax, her staff has to handle out-of-state vehicle registrations as well.

“We can’t argue with them, because it’s legal until those other states start catching them,” she explained. “We’ve done quite a few more lately. We heard there’s a company moving into town. We know they have an office set up. And there’s a couple North Dakota dealers of course that have been doing it. They’re using what we know is someone else’s address.”

Everyone in Sidney knows that expensive sports cars that get registered don’t belong to locals.

“We had a Tesla just today,” Metz said. “We know it’s not from here. The guy was from California. We clearly know. But we can’t do anything. Other states have to start getting after them.”

Earlier this year, Montana Gov. Greg Gianforte and Secretary of State Christi Jacobsen released the Montana Business Economic Report to tout the fact that more than 51,500 new businesses were registered in the state in 2021. The report also said nearly 30,000 Domestic LLCs were registered that year.

Montana’s population was around 1.1 million in 2021.

Oregon, with a population of 4.2 million in 2021, had about 54,640 LLCs registered in the state in 2021, according to the Oregon Secretary of State’s business report from that year.

In 2018, Georgia’s WSB-TV 2 news reported on a state investigation into residents avoiding the Georgia one-time Title Ad Valorem Tax by registering cars in Montana. The title of the station’s story on the investigation was “Wealthy Georgians with exotic cars accused of cheating local taxpayers.”

A Georgia investigator called it the “Montana scheme.”

“It’s costing the state of Georgia millions of dollars a year,” Josh Waites, of the Georgia Department of Revenue, told the news station. “It’s really not fair to every other taxpayer.”