MTPR

How Montana Became A Tax Haven

Dec 18, 2015

Did you know Montana has a reputation as a tax haven? Just as some people go to Switzerland to shelter their money, thousands of people come to Montana to get their license plates.

"How much do you figure it saved you in sales tax?"

"Well our motor home is $522,000, so at 6 percent ... it's substantial ... $30,000."

In this video posted on the Web site of Deer Creek Corporate Services, founder Michael Willing interviews a customer identified only as "Dave", who says he flew from Phoenix to Helena to register his motorhome.

Is this legal? Absolutely, says Eric Stern, chief of staff with the Montana Secretary of State’s Office.

"It's legal for them to do here. The legislature has specifically authorized it and that’s what we go on.”

Montana law doesn’t require a vehicle to be in the state to be registered here, and you don’t have to be a Montana resident, either. You can get a Montana address by creating an LLC, or limited liability company. And since there’s no sales or excise tax here, Montana plates are cheap — just $300 to register a new motorhome, no matter how much it cost to buy.

It’s no wonder companies have sprung up taking advantage of this loophole. Just Google “Montana LLC” and you’ll find lots of firms eager to help you set up your  own shell company.

Deer Creek Corporate Services did not respond to our request for an interview, but on their video "Dave" seemed pretty pleased with the process.

"Dave, how’s it been to work with Deer Creek?"

"Awesome!  One stop shop! ... Left Phoenix at about 6:00 this morning, flew in here, you guys set up my appointment at the DMV for me and everything …”

Screen capture from Deer Creek Corporate Services video. Founder Michael Willing and "Dave" talk about setting up an LLC in Montana in order to reap the benefits of the state's vehicle registration taxes.

Eric Stern at the Secretary of State’s office is aware that out-of-state residents like "Dave" are registering their expensive vehicles here to dodge thousands of dollars in taxes at home. Basically, he says, that’s not Montana’s problem.

“Right. That's not our business. If they're from Nebraska, that's Nebraska’s business, and the Department of Revenue in Nebraska is the people you'd have to talk to about it.”

Deer Creek’s web site warns clients, “You will need to understand and comply with use tax laws in the states where the vehicles are located.” 

Of course, the only way customer “Dave” in their video could have saved $30,000 is by not complying with the law in Arizona.

Chances are, if you’re from another state, and you ask officials back home about getting Montana plates, you’ll get an answer like this:

"This is illegal. It’s tax evasion.”

That’s Minnesota state trooper Tiffani Scheigert, in a report broadcast on WCCO Minneapolis this fall.

Massachusetts inspector general Gregory Sullivan was equally brusque back in 2010 when interviewed by a Boston TV station.

“This is a tax fraud ripoff scheme. The victim are the other taxpayers of Massachusetts.”

Many states have lowered the boom on residents driving with Montana plates. Minnesota says it’s caught 80 people and collected over $1,000,000 from them. Colorado collected over $2,000,000 in a 2008 crackdown, according to the Denver Post. California and Arizona have set up web pages where people can report their neighbors who drive vehicles with out of state plates.

So just how many people from other states have taken advantage of Montana’s liberal registration laws? State officials don’t actually know; but Joann Loehr, Chief of Montana’s title and registration bureau, offers this clue:

“We pulled some statistics and there's 101,000 LLCs currently registered in the state. That doesn't necessarily mean they're all from out of state.”

That’s 101,000 cars and trucks registered to LLCs, out of 1.5 million vehicles total. Assuming that some of those vehicles belong to actual businesses in Montana, that still leaves thousands of Montana license plates on Winnebagos and Ferraris in other states, but the exact number is a mystery. Loehr says the MVD’s database isn’t set up to find people using an LLC as a shell company for registration purposes.

"When they fill out the application and the paperwork, that information is not shown on there, so we don't necessarily know what state they're from. That might not be something that's captured in their system.”

The Secretary of State’s office is where LLCs are registered, and you can look up an LLC on their website, but only if you already know its business name.

A spokeswoman for the Secretary of State says over 2,200 companies are registered through Deer Creek. But she declined to release a printout of names of people who registered those companies, because the state considers that information confidential.

As Eric Stern says, there’s no real incentive for Montana to change its laws to help other states collect their taxes.

"It doesn't cost Montana anything. If they're saving sales tax on a vehicle in another state, it doesn't come out of our pockets. In fact, we make about two million bucks a year on the registrations from LLCs. And I can't break out the number of what is just from the vehicle registrations cuz we're not able to tell.”

Massachusetts issued a report in 2010 urging Montana to make its registration system more transparent and cooperate with investigators from other states, but the Montana Legislature has shown little interest. House Minority Leader Chuck Hunter, who’s been in the legislature for six years, can’t recall the last time he’s heard the issue addressed in Helena, but he says it might be worth studying in some future session.

Until then, people like "Dave" will keep coming to Montana and leaving with Big Sky license plates, saving thousands of dollars, as long as they don’t get caught back home.