Montana LLC, can you really avoid sales/use tax

[judybuddy]

Saw an add in a sailing mag that said "form an llc in Montana and register your boat under it and there is no sales, use or licensing tax" Does anyone know about this or has anyone done it. We just bought a boat in Florida and we live in Tx and are faced with about 6,000 in taxes.
Thanks,
Buddy

[Pblais]

If you keep the boat in FL more than 90 days after purchase - you pay the tax or run for the rest of your life. FL is a tough state on boats. In fact you'll need to prove you left the state with the boat in less than 90 days or you owe the tax - period. Two neighbors had to prove it after bringing the boats home VA. There is no court trial either.

If you can haul the boat to DE you can be free of boat taxes, but FL will follow after you because you bought it there. Use tax is based on where the boat is not where you live or say you live or pretend to live. All 50 states have their own little twists to the game so all states are a bit unique though many are similar.

Setting up the company after you bought the boat is interesting. Think about that. Do you think a really dumb tax collector is going to accept that? Setting up companies is something you might try before you buy the boat so the money isn't coming from your personal account. When dealing with commercial taxes the game changes but you bought the boat not a company. Transfering the boat to a company won't change the fact of record that you personally bought it.

Paying money to someone that ran an add in a sailing magazine saying you can beat use taxes just shouldn't sound that sensible should it? Asking strangers on the internet if the guy in the magazine is legitimate is maybe not much better but we won't ask you for any money. I'm sure he will.

Once you can get that all worked out you can find lots of great sailing infomation here. We have folks all over the world - even from Texas. We really do try to help each other as much as we can. Sorry about your taxes but I sure hope you like your boat.

[hellosailor]

Buddy, I'd suggest you check with all three states directly. All of them should have their sales/use/property tax rules on their web sites. What Paul says about Florida giving a buyer 90 days grace and then collecting agressively is so. But...if the boat goes out of Florida, and you are not Florida residents, I have no idea what Montana will ask of you.

Texas is probably similar to other states--where a resident is only liable for "use tax" or "property tax" if the vehicle/vessel enters the state. So who knows.<G>

Let us all know if Montana tells you they welcome immigrants!<G>

[markpj23]

Having bought my boat in LA and not paying sales tax there on a documented vessel, I still had to pay sales tax to the good state of Texas when we moved the boat there. Like most other states I've dealt with, they see what % sales tax you paid when the boat was purchased, then subtract that from their sales tax rate and collect the difference.

Another "gotcha" was that since we purchased the boat >60 days prior to our arrival in TX, they also wanted to charge me the penalty for not having registered the boat within 20 days of the sale. I had to jump up & down on a supervisor's desk to make them understand that I was in transit to their fine state and wasn't even sure if that's where we would keep the boat. Had to get a copy of the marina contract to serve as proof that the boat had just entered TX waters.

If you buy the boat using a Montana LLC, you must keep it outside of TX waters for at least 4 years in order to avoid TX sales tax. They closed the "offshore purchase" loophole even before California did.

Guess this is another reason why we should have cast off in LA and just kept going!!

[judybuddy]

Thanks to all. I doubted there was a silver tax bullet, but I had to ask, as I'd never heard about the Montana LLC thing till I saw it in the mag. I had called the Tx tax folks and they said register/pay within 20 days of entry and no problem. We checked with the Florida tax people before we left there and they said what yall said.
So we'll pay the Tx tax piper and enjoy the boat.
Fair winds,
Buddy

[hellosailor]

Apparently Montana has no sales tax on boat purchases:
http://www.gullboatsandrv.com/framesets.htm

And creating an LLC would be one way to create a "paper" corporation with a Montana address to purchase and register a boat that way. That still would not prevent the next state (i.e. Texas) from exercising its normal motor vehicle laws, which might require the boat to be re-registered in Texas after a short period (30-90 days in most states) of physically being located in Texas. Then of course, if the sole business of the corporation was owning the boat and sheltering it from taxes, that kind of tax evasion has been thrown out by state and federal tax authorities for decades now, i.e. the IRS can and does declare a corporation to be void and then gone after the real owner.

No problem if you do all your sailing in Montana though.<G>

Another good resource for state=-by-state tax shoppers:
https://www.retirementliving.com/RLtaxes.html
Where they list many taxes, state by state.

[Charlie]

Used to live in Montana. In fact my attorney's office was involved in creating Corporations for people in California that purchased RV's and avoided paying taxes thru a federal loop hole that allows Corporations to move there assets into different states w/o paying taxes. It went on for a few years till the state of California decided they would sue the attorney's (I'm not sure on what basis) so the attorney's decided it wasn't worth it and stopped doing it. Never went to court but I imagine that if the case was tried, for the reasons mentioned by Hellosailor, the Corps wouldn't have held up.

[ssullivan]

Hmmm...you all live in the wrong states. Move to a state without use, property or income taxes THEN buy your boat.

[hellosailor]

Sean-
"Move to a state without" You could make a fortune selling this list.<G>

[Pura Vida]

Down here we don't tax on what you earn but on what you buy (and in some cases own). Everybody can have their own ideas of right and wrong on methods of taxation but if you have a boat in Texas expect to pay taxes in Texas regardless of how you own it.

TPWD: Boat Ownership - Titles and Registration

[Pblais]

"Move to a state without" You could make a fortune selling this list.<G>

DE is a free state but sailing sure sucks untill you get far enough off shore that you are not in the state any more. ots of foks keep boats there so they can spend a half day getting to the Chesapeake.

It's not where you live - it's where the boat lives.

[irwinsailor]

I have a freind that bought is boat for $5000. and the GPS for $25000. only the boat is taxed.
It is all in how you write it up at the time you close the deal.

[ssullivan]

Originally Posted by hellosailor

Sean-
"Move to a state without" You could make a fortune selling this list.<G>

There are actually states like this. I reside in one, officially (was even born there) and travel around with my boat. This really only works for a liveaboard that doesn't stay put. My state has no use tax, no income tax and no property tax on boats. They get the land owners BADLY, but hey... what do I care? I'm not a land owner.

So... there are literally no taxes due on my vessel. Just a state registration fee and federal documentation fees.

[coot]

Originally Posted by ssullivan

My state has no use tax, no income tax and no property tax on boats. They get the land owners BADLY, but hey... what do I care? I'm not a land owner.

Since your location is listed as "trying to figure it out", maybe you could tell us the name of the state?

[Pura Vida]

Originally Posted by irwinsailor

I have a freind that bought is boat for $5000. and the GPS for $25000. only the boat is taxed.
It is all in how you write it up at the time you close the deal.

This is a common practice here. The most common prices for a car is $100 on the tax forms (or so I have heard). It can backfire, but rarely does.