Montana LLC for Kentucky Resident

[LaWandaJo]

We have a 2005 National RV Tropi-Cal that we bought last October and titled it under our newly formed Montana LLC. All has been good until last Thursday when the Director of Department of Revenue saw my coach in the driveway on his way to a state park meeting and came up to me. He identified himself and said that even though I had titled my coach in Montana it didn't excuse me from paying "Use Tax and Personal Property Tax." He was very nice about it, but I didn't give him my name. I gave him the name of the firm that set up my LLC, Deer Creek Corp Services. He told me they had no idea the scope of people setting up LLCs to avoid tax and they are targeting them as they find coaches with MT plates. Yesterday I received a letter from the state identifying me as the owner of this coach with the MT plate number and asking me for copies of the bill of sale, amount, dates, etc. Deer Creek says to just tell them I am not the owner and let them run the game of trying to find me. I am not interested in getting into a pissing contest with the state of KY and wanted to get some input from the FMCA members. Does anyone have any direct experience or expertise regarding these LLCs? I have to reply to this in a few days, so a quick responce is appreciated. I could use some objective advice.

Regards,

Michael Swinea

FMCA # F410336

615-394-6841

[Guest BillAdams]

I cannot give you any legal advice, but if the LLC was setup correctly, you are not the owner. However, the owner of the LLC may be liable for these taxes. The states are getting really tired of losing expected taxes due to loopholes and they are aggressively pursuing the collection of these taxes.

If they can prove that the RV with out-of-state tags are actually being used by residents of their state, then they are winning at collecting these taxes. If you plan to live in KY and have the RV parked in KY for more than 6 months per year (determining state of residence) then you could well be (sorry, the LLC could well be) liable for the State's taxes.

Again, I am not a lawyer and the person giving you this advice is not YOUR lawyer. You might want to consult with a lawyer in your state with your personal interests at stake.

[salter64@hotmail.com]

Check back records for a judge in Fort Smith, Ark., a few years back. He was found guilty of evading taxes in Arkansas for the same thing. He has lost his appeals, job and retirement, and was fined and charged back taxes and interest.

Dave Salter

[dalltop]

Just a good reason to have a large garage with a door on it.

[diplomatman2002]

As a member of the FMCA Governmental and Legislative Affairs Committee, I have seen more and more of these LLC cases coming to light.

First of all, let me make clear that I or the committee is not in a position or pretend to give legal advice concerning this situation, only an attorney can do that. Speaking only as a CDL trainer and someone who has contacts with several state motor vehicle departments on a regular basis, I can tell you that this LLC issue is being looked at very seriously by states as a source of revenue. Presently California, Colorado, Texas, Mass, Conn and several other states are coming down hard on LLC holders.

In a conversation with a Massachusetts law enforcement official, I was told that they will key in on any motorhome and towed car that have different state registrations, They will ask to see the registrations for both vehicles. Then, if the RV has an LLC, they will check the drivers license and see if the operator has a CDL license. Assuming at that point that the RV is owned by a business. Then the RV will be checked to see if it has an IFTA fuel sticker. They will determine that the LLC is a business and therefore it is required to pay a fuel tax. Then a case will be brought seeking all back fuel taxes from the date of origin on the LLC, plus fines. The driver could face a ticket for driving out of class.

LLC holders have to weigh whether it is in their best interest to take this risk or pay the taxes and register in their home state.

Paul

[garykd]

Hi Paul,

Wouldn't the requirement to have a CDL be determined by the driver's state the license was issued in? An example might be a Montana coach tag with a Florida driver's license driving in Mass. I think Florida law would take precedent if Florida does not require a CDL to drive a vehicle owned by a LLC. It would be similar to driving a 26K + lbs coach in a state requiring a special license to drive such a vehicle. Florida has no such requirement. Therefore, the state (i.e., Texas) could not ticket a Florida driver with a regular driver's license for driving a coach in Texas.

[diplomatman2002]

In reference to the need to have a CDL license to drive an LLC vehicle. Since an LLC or Limited Liabilaty Coporation is considered a business, some class of a CDL would be required to operate any vehicle registered as such. If the RV was registered as an RV and not as an LLC in your home state, then that state's laws would govern what type of license you would be required to have to operate the vehicle.

A few years ago I trained and had tested every salesman employed by an RV dealer because NY ruled that even though the salesmen did not drive for a living, when they took a customer out for a demo ride they were driving a coach with Dealer Plates and the plate was registered to a business and needed a CDL. I have just touched on a few situations where states can use the law to their benefit if they want to cite you.

Another isssue is since you are registered as a business and traveling the interstate, are you required to be registered as a DOT-elegible commercial vehicle and required to have DOT numbers on your coach?

It all boils down to, Do you want to certainly be legal or do you want to take that chance and posssibly pay hundreds or thousands of dollars fighting a case?

Paul

[garykd]

Hi Paul,

I sent you a PM.

[garykd]

Montana considers a vehicle a commercial vehicle only if it is used to transport people or property for hire and weighs over 26,001 lbs. Therefore, if the coach (regardless of weight) is owned by a Montana LLC and does not transport people or property for hire, Montana does not consider the coach a commercial vehicle. With the reciprocity agreements in place for all 50 states, there should be no danger of being asked for a CDL if the coach is not used to transport people or property for hire. Since the state of registration (Montana) does not consider a coach (in this example) a commercial vehicle, there should be no problem with DOT regulations or fuel permits. Does this stop an overzealous officer from citing the owner, nope. However on these points the citizen should win the case.

The title of this thread is correct. It is specific to Kentucky. The OP wants to know about things to do with Kentucky. Those posting advice for the OP to obtain advice from a Kentucky based attorney is valid.

I have looked at many states DMV (for driver's licenses) web sites. They all read pretty much the same (word for word the same). I remember in the late 80s or early 90s there was a move to standardize all the states DMV rules.

I think the question about being "caught" has more to do with storing the vehicle in state X when it is owned and titled to a Montana LLC. The Montana LLC is not the problem. Where one stores the vehicle or where it spends most of its' time, is the problem. Now comes the difficult part. Each state can have different rules for when a vehicle must be titled in their state. The OP needs to determine the rule for Kentucky. A quick check of the Kentucky DMV web site did not uncover what the Kentucky rule is.

[nick.lahni@precisionautobody.cc]

Sounds like it would be a lot easier just to pay the tax and forget about it!

[garykd]

Hi nlahni,

Just paying the tax is not always the best/simplest or correct thing to do. I can only speak for Florida. The law is the law. If one can comply with the law why would one give $30K to the state? An example might be a coach sales price of $500K. The state wide sales tax is 6% of the sales price. Local counties and municipalities can add more. For this example the base sales tax would be $30K. If there are 1% adders, that makes the bill $35K. Florida is clear on the requirements to be exempt from this tax. If I can meet the requirements, then I will do it. If I am required to pay the tax, I'll change my residence to a state more competitive than Florida. This means Florida would lose a bunch more $s than the $s in this single transaction. Florida understands this. Florida remains competitive for my business as a citizen of Florida.

The law allowing sales tax exemptions was written by and for those having multi million dollar yachts and airplanes. These people spend a whole lot of $s in Florida as citizens of Florida. Those who own RVs aren't even a rounding error on the topic of sales tax. Florida wants people who own these high dollar items as residents of the state. Other state legislators either to not care or do not recognize they need to remain competitive to keep those who can afford high dollars purchases as residents. Other states may also have a large percentage of captive citizens who can not move readily. Florida has a large percentage of people who can change their residence quickly and without much trouble. All this means the rules are different for each state.