If you’ve been in an RV park, you may have noticed what seems to be a disproportionate number of South Dakota and Montana license plates. The truth of the matter is, they are not really from Montana or South Dakota, but have established a residency and registered their vehicles in those states, for a number of reasons, mostly economic.
Montana for RVers
Montana has no sales tax on RVs, making the purchase cheaper, and the vehicle registration fees are relatively low; this makes registering an expensive vehicle like an RV in Montana a good option.
Many RVers make Montana work for them by establishing an LLC (Limited Liability Corporation) in Montana, and registering their RV as a business vehicle. If you plan to run a business from your RV, this might be a good option for you.
Montana Code Annotated § 61-3-303, entitled “Original registration — process – fees,” and which provides, in subsection (1), the following:
(1) Except as provided in 61-3-324, a Montana resident who owns a motor vehicle, trailer, semitrailer, or pole trailer operated or driven upon the public highways of this state shall register the motor vehicle, trailer, semitrailer, or pole trailer in the office of the county treasurer in the county where the owner permanently resides or, if the motor vehicle, trailer, semitrailer, or pole trailer is owned by a corporation or used primarily for commercial purposes, in the county where the motor vehicle, trailer, semitrailer, or pole trailer is domiciled.
The Montana Attorney General interprets the statute to mean that a Montana “legal entity” may register vehicles in Montana. So now, there is a whole industry in Montana based on the establishment of Limited Liability Companies (LLCs) for RV purchasers to avoid sales tax in their home states. Most Rvers will employ a law office to do this. As with all tax and legal issues, it’s essential that RVers find aa good lawyer to help them make the right decisions.
Let’s say you want to buy a $350,000 motorhome in your home state, but you’d rather not to pay the sales tax in your state of residency. You can set up an LLC in Montana, and purchase the motorhome in the name of the Montana LLC, and register it in Montana, and avoid the sales tax in your state of residency.
But this is not without risk. You must be honest about the difference between an LLC that actually conducts business, and an LLC set up only to avoid sales taxes. An LLC that actually conducts business for a profit has legal standing everywhere. But Montana promotes “shell LLCs” simply to avoid paying sales taxes in other states. It is these shell LLCs that may become a problem for you. In Montana, setting up a shell LLC so that out-of-staters can avoid sales taxes is perfectly legal, but your state of residency does NOT have to follow Montana state law, and if their law conflicts with Montana on the issue of LLCs and sales tax, they can ignore the Montana LLC, and make you pay sales taxes.
Montana does have a state income tax, and as of this writing, here are the rates:
1% on the first $2,800 of taxable income.
2% on taxable income between $2,801 and $5,000.
3% on taxable income between $5,001 and $7,600.
4% on taxable income between $7,601 and $10,300.
5% on taxable income between $10,301 and $13,300.
6% on taxable income between $13,301 and $17,100.
6.9% on taxable income of $17,101 and above.
Montana tax returns are due April 15 or the next business day if that date falls on a weekend or holiday.
South Dakota for RVers
People choose to register their vehicles in South Dakota for tax reasons. However, South Dakota does charge a 4% excise tax (which is still much lower than many states, and the vehicle registration fees are also low.) While the cost to register an RV in South Dakota may be more expensive than Montana, there are a lot of good reasons people choose South Dakota. The number one reason, South Dakota has no state income tax, and very low state sales tax.
Also, South Dakota has a number of mail forwarding services, which make it is easy to establish residency in South Dakota. A mail forwarding service in South Dakota can pave the way for you to become a South Dakota resident, but you also need to get a South Dakota driver’s license, and register your vehicles there. If you are using a South Dakota mail forwarding address, you will also need to complete the Residency Affidavit, and provide one document proving your temporary South Dakota address (it can be a hotel/motel receipt, or a campground or an RV park receipt, no more than one year old) and one document, no more than one year old, proving your personal mailbox service address, such as the receipt from the mail forwarding service, or a piece of mail with your mailing service address on it.
The three most popular mail forwarding companies in South Dakota are My Dakota Address, Dakota Post, and America’s Mailbox. A good South Dakota mail forwarding service will help you with the documents you will need to get your South Dakota driver’s license and vehicle registration. In fact, many will turn the vehicle registration forms in for you, for a small fee, and you don’t need to be in the state to do it in person. But for your first time, you must be in state, to appear in person for your driver’s license photo, and to surrender your old one from your previous state, and, your vehicles must be registered within 90 days of arrival in the state.
Those are the reasons why you will see a lot of South Dakota and Montana license plates on RVs. As with anything, do your own research, and think carefully about the best state for you, whether it is South Dakota, Montana, your present domicile state, or another state. There are always options.
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