Nov 18, 2015

Trying to register local vehicles in Montana is generally illegal, prosecutor says

Don’t try skipping out on your vehicle’s taxes and registration fees by posing as a Montana business owner.

That’s the warning issued by Park County officials, who believe a small number of local people are using some legal tricks in Montana to avoid paying sales taxes and registration fees in Wyoming.

Park County Sheriff Scott Steward said last week that his office plans to start taking “a more proactive approach” in investigating local vehicles that are questionably registered in Montana.

The sheriff and other county officials had put out a news release back in April aimed at educating people about the problem.

“Park County is losing tens of thousands of dollars from both sales tax revenue and vehicle registration fees,” Park County Treasurer Barb Poley said in the release. “This is unfair to the vast majority of Park County residents who obey the law and pay their fair share.”
Local people who improperly register their vehicles in Montana are costing Park County thousands of dollars, officials say. Courtesy photo

County residents and businesses paid more than $3.5 million in taxes on their new and used vehicles between July 2014 and June 2015, according to data from the treasurer’s office.

Even if only 1 percent of local vehicles are registered in Montana, local and state governments are missing out on more than $36,000 in tax revenue each year — and that doesn’t count the lost annual registration fees.

Poley’s office is responsible for issuing local license plates and she knows there are local residents driving around with Montana plates.

“We've honestly had people in our office that will say they don’t like the price (the 4 percent sales tax) so they say, ‘Fine, we’ll go plate it in Montana,’” Poley said in an April interview.

She’s heard similar stories from local auto dealers, who’ve had prospective customers decide they’d rather buy their vehicle in sales tax-free Montana.

“We've honestly had people in our office that will say they don’t like the price (the 4 percent sales tax) so they say, ‘Fine, we’ll go plate it in Montana,’” said Treasurer Barb Poley.

A Wyoming resident who buys a car or RV in Montana is supposed to register it here — and pay Wyoming’s 4 percent tax when they do.

However, some people have been getting around that by setting up what’s sometimes referred to as a “shell business” in Montana — a limited liability company (LLC) that exists only to hold assets. They then buy the vehicle in the shell business’ name so that, on paper, the truck or camper is not owned by a Wyoming resident but by a Montana company.

That enables the owner to avoid paying Wyoming’s sales taxes and lets them pay Montana’s generally cheaper registration fees each year. It represents thousands of dollars of savings.


But Park County Prosecuting Attorney Bryan Skoric says it’s also illegal.

Skoric notes that state law generally says you must register your vehicle in Wyoming if you’ve lived here for 120 days or more, are living here for work, are registered to vote here, hold a resident hunting or fishing license or meet any of several other qualifications.

In Skoric’s eyes, a limited liability company that exists only to avoid Wyoming taxes and fees was formed for an illegal purpose — meaning it won’t shield a vehicle owner from the state’s laws.

“If the only thing that LLC does is own a vehicle, and there’s no legitimate purpose to that LLC, I think they have an issue,” Skoric said.

Others, however, have said the practice is OK.

In 2014, the Louisiana Supreme Court ruled that a resident who created a Montana LLC for the sole purpose of avoiding Louisiana’s sales taxes had followed the law. The justices specifically rejected the idea that the resident’s LLC was formed for an unlawful purpose.

“Use of particular business entities to avoid taxes and other liabilities, far from being fraudulent, is a common and legal practice,” the court wrote in a decision specific to Louisiana law.

The Wyoming Legislature is currently looking at how it might crack down on the practice.
According to a draft bill being considered by the Joint Transportation, Highways and Military Affairs Interim Committee, if a resident has a vehicle registered to an out-of-state shell business, it will be presumed that “the resident is the actual owner of the vehicle” and they’ll have to pay all the usual Wyoming taxes and fees.

“It’s got to be in millions of dollars the state’s losing,” said Park County Attorney Bryan Skoric.

Skoric thinks the current laws already makes the practice illegal; a Frannie resident was recently convicted of improperly having Montana plates on his pickup. However, Skoric would also welcome the draft bill if it makes Wyoming’s laws more clear and draws more attention to the issue.

“It’s got to be in millions of dollars the state’s losing,” he said.

Beyond the legality, Skoric sees it as a matter of fairness.

“You want to be able to take advantage of everything Wyoming has to offer in terms of its low tax rate overall, but yet you want to not pay anything into roads and schools and anything down here,” he said in an April interview. “It’s just not the right thing to be doing.”

Park County officials say locals shouldn't try putting Montana plates on their new vehicles. Courtesy photo
Sheriff Steward added, “They're also taking money out of the dealers here, too.”

Setting up LLCs in Montana is something of its own industry, with many different businesses offering to create LLCs on your behalf; Poley said some Montana auto dealers used to openly advertise such services on their websites.

The site for one business that promotes the practice — All Day $49 Montana Registered Agent LLC — downplays the regulations that some local governments impose to encourage licensing vehicles locally.

“The reality is that most (of) our clients don’t really care and will never get in trouble,” says the site. “They’ve been getting screwed by the laws that make the rich richer and the middle class poorer and they think it’s cool to finally play a little tax avoidance game like all the rich people do.”

However, you can count the local sheriff as among those who care about the registration laws.

“There’s a lot of people that we know of that are still driving around with those registrations,” Steward said recently. “It’s just a matter of catching them moving.”

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