buying You Can Avoid Paying Taxes on Your New Car, Although It's Risky Business

16:25  26 october  2017
16:25  26 october  2017 Source:   caranddriver.com

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  How Much Can You Afford to Spend on a Car? If you don't have a clear picture of how much you can actually afford, it's all too easy to bite off more than you can chew getting behind the wheel of a new car. Many people fall in love with a dream car and enter a state of denial when it comes to the math. Or they let themselves be lulled by a friendly salesperson into buying more options than they need or extra-cost items they can do without, like an extended warranty service contract.Affordability, of course, means different things to different people, and usually hinges on both household income and existing obligations.

Avoiding high tax on your new car is possible, but it can be a risky business . Many insurers view LLCs as week-old fish, and will deny a claim if you lied about where it will be driven. Folks often establish Montana LLCs because they’re furious over their state’ s steep taxes .

Shop for All Cars New Cars for Sale Used Cars for Sale Certified Cars for Sale Get a Free Quote Build and Price. Avoiding taxes and evading taxes are not conjoined twins, because Did you , in good faith, establish your LLC as a business to make a profit? If not, it may be judged a shell corporation.

You Can Avoid Paying Taxes on Your New Car, Although It's Risky Business© JOHN PHILLIPS You Can Avoid Paying Taxes on Your New Car, Although It's Risky Business From the October 2017 issue

A few years ago, at a Kruse auction, I sat beside a bald bidder who’d already lost precious portions of his mind over a 2007 Ford Mustang GT-H, the black-and-gold Hertz clone. “I will get this car,” he assured, and he did, but for a sum greater than the Mustang’s original sticker. I asked about applicable auction fees and sales tax. “Oh, no sales tax,” he said. “Montana plates.”

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Well, now I live in Montana and finally grasp the BB’s (bald bidder’s) boast. Right now, my adopted state is enjoying a humming cottage industry of people who, for fees ranging from $174 (no attorney) to $1500 (an earnest attorney), will create a limited liability company, or LLC, for nonresidents. That LLC is a “legal entity” and doesn’t need to stipulate your name or state of residency. In turn, your LLC can buy, well, let’s call it a “company car” that happens to be a pearlescent-mauve McLaren 570S costing $250,000. If the BB had purchased that McLaren in his state of residency—let’s say in Michigan— he’d pay 6 percent sales tax, or $15,000. But if he’d bought the car through his Montana LLC, he’d pay zero sales tax because Montana doesn’t collect any. Of course, once the BB had his car, he’d have to bolt on funky Montana plates, front and rear.

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But if he’d bought the car through his Montana LLC, he’d pay zero sales tax because Montana Avoiding taxes and evading taxes are not conjoined twins, because one of them can put you in Did you , in good faith, establish your LLC as a business to make a profit? If not, it may be judged a shell

You Can Avoid Paying Taxes on Your New Car , Although It ' s Risky Business . Six percent sales tax on a 0,000 McLaren 570S would be ,000. Want to avoid that?

Let me be clear: This is 100 percent legal in Montana. The law was established in 1991. But we’re dealing with state law here, not federal, so whatever laws Montana enacts may not jibe with those of, say, California. In fact, there are state regulators in a foaming tizzy about their inability to collect sales taxes that have been nullified by Montana’s LLCs. Not only California but also Arizona, Colorado, Maryland, Massachusetts, Michigan, Nevada, Oregon, and Washington. Some have set up tip lines so that citizens can report suspected tax cheats. Last year, in fact, Californians reported 260 Montana plates to the CHiPs, who can say, “Please prove your established state of residency.” Montana-plated vehicles are said to be prized in California, where they can often obviate smog checks, unless the car is used primarily in California. Of course, who knows if it is?

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So pensions are a great tax break right now, although you might have to pay income tax when you take the money in retirement. [Related story: Savers need to register for new tax -free allowance]. So by eating more healthily you avoid paying so much Vat. It ’ s also worth pointing out that smoking

Although you may be tempted to try to avoid paying these nanny taxes in the hope of trimming your payroll costs — tax experts You see, trying to dodge the nanny tax can be very risky business indeed. If you meet certain criteria, you ’re required to play tax collector, whether you like it or not.

The thing is, do you plan to insure your McLaren? Many insurers view LLCs as week-old fish. If you’re ethical, you’ll tell your agent that your true state of residency is Michigan, that you’ll drive the McLaren in Michigan and will store it in Michigan, but the car will bear Montana plates in the name of a Montana LLC. “Oh, really?” says your agent, pointing to the clause that says, “False statements on your insurance application are grounds for denying a claim.” Now what? You drive your uninsured McLaren to ­Mar-a-Lago for Vlad’s big birthday bash? Have you seen the valets at that place?

Avoiding taxes and evading taxes are not conjoined twins, because one of them can put you in prison. If your state decrees that it has primary jurisdiction and that you’ve formed the Montana LLC for the sole purpose of evading taxes, you’ve evaded taxes. They’ll apply the legal test of “piercing the corporate veil.” Did you, in good faith, establish your LLC as a business to make a profit? If not, it may be judged a shell corporation. Go tell Judge Judy, but you’ll likely dole out more than the $15,000 you saved in the first place.

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"But now is not the time to start a new business or buy a luxury car . It ' s the time to be patient, pay your taxes , and just let things sink in." If you hear of any investments "guaranteed" to pay more than 6%, it ' s likely very risky , illegal, or possibly a scam.

It ' s risky , which is why the tax relief is offered to incentivise investment, but you could avoid paying £150,000 to the taxman. This is one of the strategies the government is planning to crack down on, although its plans have attracted controversy and could be watered down as a result.

I contacted attorneys Jared Heggen and John Bennett in Missoula, Montana, both substantial players in this business. Heggen can set you up with an LLC to buy a luxury vehicle—e.g., our mythical McLaren—for $1495, depending on services rendered during a mandatory one-hour consultation. Heck, I spend an hour just getting out of bed. Heggen told me: “We provide guidance whether the client would be compliant with tax and registration laws in his state of residence. Plus, we require him to seek independent counsel in his state.” Heggen enforces that by making you sign a notarized promise.

Heggen went on to describe a scenario unknown to me. “If the client’s state of residence has a sales-and/or use-tax clearance test period [my emphasis], I could assure him he’d not incur sales or use tax, provided the car was shipped to a Montana storage facility. The vehicle then must stay out of the state of residence during the test period.” For some states, such as California, Bennett says that can mean storing your luxury vehicle outside the state for up to 12 months but with 30-day windows for servicing. “It’s complicated. Florida and Massachusetts demand six months. Arizona, 90 days. Unless you spend a half million on a car, this is not for you,” he warns. By the way, Bennett drives a Ferrari F430 Spider and a 1967 Fiat Dino Spider.

Folks often establish Montana LLCs because they’re furious over their state’s steep taxes. Of course, the way to fix that is not to evade the tax but to change the law.

I hope the BB is right now performing burnouts in his Mustang and not studying contract law at Leavenworth. But I’ll tell you this: I plan to invest in Montana storage facilities, to which I’ll have all the keys. I’ve never driven a 570S.

Five More Ways To Save When Buying A New Car .
Nobody likes to give their money away; this article will show you how to keep some of it when shopping for a new car.1. Don’t be in a hurry.

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