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Montana LLC vs establishing domicile for tax a...

Yahoo Message Number: 7731
In a message dated 12/22/2003 12:45:49 PM Pacific Standard Time, bill@... writes:

more in taxes than I am legally obliged to pay. As long as you are not commiting fraud, there should be no problem. >>
I believe that those two sentences are mutually exclusive in the context of "not paying any more in taxes" than you have to. Where you are forming a LLC in another state to avoid the taxes in the state you live in, courts have held that to be fraud and the consequences have been heavy. Forming the LLC in the other state is legal. Using it to avoid taxes, in this context, may not be.

Robert

Re: Montana LLC vs establishing domicile for tax a...

Reply #1 –
Yahoo Message Number: 7743
You may want to debate that point of view with all the businesses that incorporate in the state of Delaware, because they have more favorable business and tax laws. Or, all those who set up trusts so that 50% of their assets are not confiscated by the government upon their death, but instead may be sheltered for their children. I regularly fill up in Indiana before crossing into Michigan, the fuel is 20 cents per gallon cheaper, less state tax. Or, how about this one: I want to buy a $50,000 car, but the interest on the loan is not deductible. So, I take out a $50,000 mortgage on my home, use the money to buy the car, and am allowed by law to deduct the interest payments on the home loan from my income tax obligation.
Fraud, or tax avoidance????
Bill

Quote from: Dipterafisher@a\.\.\.\[br\
] > In a message dated 12/22/2003 12:45:49 PM Pacific Standard Time, > bill@u... writes:

paying any

Quote
more in taxes than I am legally obliged to pay. As long as you

are not

Quote
committing fraud, there should be no problem. >> >

I believe that those two sentences are mutually exclusive in the

context of

Quote
"not paying any more in taxes" than you have to. Where you are
forming a LLC in

Quote
another state to avoid the taxes in the state you live in, courts

have held

Quote
that to be fraud and the consequences have been heavy. Forming the

LLC in the

Quote
other state is legal. Using it to avoid taxes, in this context,

may not be.

Re: Montana LLC vs establishing domicile for tax a...

Reply #2 –
Yahoo Message Number: 7764
In a message dated 12/23/2003 3:49:22 AM Pacific Standard Time, bill@... writes:

incorporate in the state of Delaware, because they have more favorable business and tax laws.

It is true that Delaware has some favorable rules for how corporations conduct their business, but a corporation that "does business" in California still pays taxes in California. So there is no "Fraud, or tax avoidance".
confiscated by the government upon their death, but instead may be sheltered for their children. >>

Trusts, in some states, are a "legal" method of reducing taxes on certain assets, so there is no "Fraud", where the Trusts are properly drawn, even though there is tax avoidance. However, if the state you are a resident of does not recognize trusts as a shelter, they won't be effective for property subject to that states tax laws upon your death.

20 cents per gallon cheaper, less state tax. >>
You are in Michigan when you fill up so there is no "Fraud" even though you are avoiding taxes.

However, you live in California and go to Oregon (no state sales tax) and buy a big ticket item which you bring right back into California, are you responsible for paying California State sales tax on that item? Yes, however, if you don't voluntarily declare it your chances are very slim that you will get caught. Fraud? Yup.

the loan is not deductible. So, I take out a $50,000 mortgage on my home, use the money to buy the car, and am allowed by law to deduct the interest payments on the home loan from my income tax obligation. >>

Legal "tax avoidance" so no "Fraud".
You live in California but don't want to pay California sales tax on the purchase of an RV so you set up a LLC in Montana, take delivery out of state and drive back into California within 91 days and California is where the RV is most of the time. Are you protected by having a LLC in Montana? Probably not. Why did you set up the LLC? If its only purpose is to avoid California taxes, you could face serious penalties and jail time.
You can negotiate an RV purchase with a dealer in California, pay for it in California, take delivery "out of state" (nonsales tax state) and keep and use the RV out of California for 91 days, bring it back into California on the 92nd day and keep it in California ever after and not have to pay the "sales tax". Why is this not "Fraud"? Because there is a statute that makes it legal to do this, which you can find on the California Franchise Tax Board's web site.

Robert

Re: Montana LLC vs establishing domicile for tax a...

Reply #3 –
Yahoo Message Number: 7768
Hi Robert,

Well said. Tax advoidance is legal.
In California, it's now even better and legal by law, take delivery of any vehicle out of state and stay out 91 days out of 180 (they don't even have to be consecutive)and pay no sales tax.
Fred Kovol

Re: Montana LLC vs establishing domicile for tax a...

Reply #4 –
Yahoo Message Number: 7770
In a message dated 12/23/2003 6:58:56 PM Pacific Standard Time, fredkovol@... writes:

even better and legal by law, take delivery of any vehicle out of state and stay out 91 days out of 180 (they don't even have to be consecutive)and pay no sales tax. Fred Kovol >>

That's the way the law reads, Fred. I'm told, however, that it is easier to prove that you were out 91 days in the first 6 months if you do it consecutively after taking delivery and before you bring it back into California. There is another way you can avoid California sales tax on an RV. If you are using the RV in "interstate commerce" you are exempt from California sales tax if the mileage the vehicle is driven in "interstate commerce" is more that 50% of the total mileage driven in the first 6 months after taking "out of state" delivery. Works for RVers who work shows and the like.
There are lots of ways that taxes can be "avoided" legally. If you made a lot of money in 2003 and use an RV in business, you can depreciate up to 50% of the purchase price of a "new" RV in the first year. There is also the 179 depreciation allowance that can be taken. All legal tax avoidance methods.
Being "self employed" provides many opportunities to legally avoid taxes.

Robert

Re: Montana LLC vs establishing domicile for tax a...

Reply #5 –
Yahoo Message Number: 7771
One correction and one addition to Robert's otherwise correct statement below:

It is the California Board of Equalization that controls this, not the California Franchise Tax Board.
http://www.boe.ca.gov/pdf/pub52.pdf describes the process.

The other option, BTW, under the above pub is to take delivery out of state, use it out of state for one or more days, bring it into California, and from that date of entry, keep it out of state in use and/or storage for 1/2 or more (some documents read more than 1/2) of the next six months.

California tried to change the above law in 2003, but it was sent to the inactive file on 09/12/2003. So old rules still apply.
http://www.leginfo.ca.gov/cgi-bin/postquery? bill_number=ab_694&sess=CUR&house=B&search_type=email

Herb

Quote from: Dipterafisher@a\.\.\.\[br\
] > In a message dated 12/23/2003 3:49:22 AM Pacific Standard Time, > bill@u... writes:
....

You can negotiate an RV purchase with a dealer in California, pay

for it in

Quote
California, take delivery "out of state" (nonsales tax state) and

keep and use

Quote
the RV out of California for 91 days, bring it back into
California on the

Quote
92nd day and keep it in California ever after and not have to pay

the "sales

Quote
tax". Why is this not "Fraud"? Because there is a statute that
makes it legal to

Quote
do this, which you can find on the California Franchise Tax
Board's web site.

Re: Montana LLC vs establishing domicile for tax a...

Reply #6 –
Yahoo Message Number: 7777
Herb thanks for correcting my error about the FTB vs BOE.
state, use it out of state for one or more days, bring it into California, and from that date of entry, keep it out of state in use and/or storage for 1/2 or more (some documents read more than 1/2) of the next six months. California tried to change the above law in 2003, but it was sent to the inactive file on 09/12/2003. So old rules still apply. >>
Herb, do you have a cite for the above. I know the statute states that the RV can be in storage, out of state, but I have been told that California was ignoring that provision and required that it be "used" out of state.

Robert

Re: Montana LLC vs establishing domicile for tax a...

Reply #7 –
Yahoo Message Number: 7779
For a complete "how to", you can go to the Board of Equalization website at www.boe.ca.gov and download PUB52. This document will tell you everything you need to know about use tax exemption. You can even call a BOE office and ask questions. They will help you believe it or not!
Don

'02 Intrigue #11427
'02 Intrigue #11427

Re: Montana LLC vs establishing domicile for tax a...

Reply #8 –
Yahoo Message Number: 7780
http://www.boe.ca.gov/pdf/reg1620.pdf page 4 (b)(3) (it has an odd outline number convention where the top level is (a), then numbers, then cap letters).

The six month option is clearly use and/or storage. However, the option that most people know about is the first 90 day option where it has to be in USE for 90 days before brought into the state. My understanding is that you can USE it for 1 month, store it (also out of state) for 1 month, then USE it for 2 months and finally qualify. You need 90 days of USE (need not be contiguous) before it enters CA. Here they are looking for park receipts (not storage yards), and food, cell phone, electric, ... receipts. BOE is giving one of my new friends serious problems because part of the 90 days was in storage, and by the time I found out about it, it was too late for him to get it back of out state for 1/2 of the six months from date of first entry into California (note, all initial time out of state is lost when you elect to use the 1/2 of six months after entry. In his case, he had entered California feeling he had qualified under the 90 days rule. During the next five months, he had been out of state for only one month. He only had one month left to qualify for two more months out of state -- ouch. I have heard of one case where the BOE tells the person, that they need to get it back out of the state to qualify under the six month rule, because they failed to qualify under the 90 day rule!
Really, the safest approach is to take delivery out of state, USE it for at least one day and night out of state. More nights than this don't count. Well document the entry date into California (stay one night at a CA RV park, don't park it beside your home the first night), then keep the RV out of state for more than 1/2 of the following six months, which may be 91 or even 92 days, due to the number of days in those months. (Mine was one month in CA, 1 month out, 1 month in, 1 month out, 5 days in, 18 days out, 14 days in, 16 days out, then I filed before the six months were up). Actually, I counted nights, which they were happy with.

Herb

Quote from: Dipterafisher@a\.\.\.\[br\
] > Herb thanks for correcting my error about the FTB vs BOE.

....

Quote
>

Herb, do you have a cite for the above. I know the statute states

that the RV

Quote
can be in storage, out of state, but I have been told that
California was

Quote
ignoring that provision and required that it be "used" out of

state.

Re: Montana LLC vs establishing domicile for tax a...

Reply #9 –
Yahoo Message Number: 7781
BOE is very helpful, but always as for a tax specialist, and don't accept the advice given by the first line group that answers the phone. Their information, on two occasions, was WRONG, or one individual was very negative about the use of this tax regulation by RVers. Tax specialist has always been friendly and helpful, and to the best of my knowledge, correct.

Herb

Quote from: dons2346
For a complete "how to", you can go to the Board of Equalization > website at www.boe.ca.gov and download PUB52. This document will

tell

Quote
you everything you need to know about use tax exemption. You can

even

Quote
call a BOE office and ask questions. They will help you believe it

or