SHORT ANSWER --> NO.
However, a state can legally pursue someone for tax avoidance even if they form an LLC in Montana and title their asset under that LLC, if the purpose is to evade taxes in the state where the person actually lives or uses the asset.
But the details matter.
Below is the clear breakdown:
1. Creating an LLC in Montana is legal
Montana has no sales tax, which is why many people create Montana LLCs to buy RVs, vehicles, or other large assets tax-free. Forming the LLC itself isn’t illegal.
BUT whether your home state recognizes that as legitimate depends on where the asset is garaged, used, and where you reside.
2. States can charge you if they believe the LLC is a “sham” created solely to avoid taxes
If you live in another state (e.g., California, Colorado, Arizona, etc.) and:
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You use the vehicle/asset primarily in your home state,
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You garage or park it there,
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You are a resident there,
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And the Montana LLC has no real business purpose besides avoiding sales tax,
Your state can legally claim you owe use tax and potentially penalties.
Many states have successfully gone after residents for this exact issue.
3. Common legal charges or actions states take
Depending on the state, they may pursue:
Civil actions
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Assessment of use tax (equivalent to sales tax)
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Penalties and interest
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Vehicle registration violations
Criminal charges (in more extreme cases)
Only when officials believe there is intent to defraud the state:
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Tax evasion/tax fraud
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False statements on registration forms
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Failure to register a vehicle
These are rare but have happened in cases where states believe the Montana LLC was misused in bad faith.
4. Key test: Where is the asset really used?
Courts look at:
Where the owner actually lives
Residency determines tax responsibility.
Where the asset is regularly located
If the RV/vehicle never goes to Montana and always sits in California, that’s a problem.
Whether the LLC has legitimate business activity
If it’s a shell with no operations except holding a single vehicle, states may treat it as a sham.
5. Example outcomes
Real-world:
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California has aggressively fined residents who registered RVs through Montana LLCs.
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Colorado has issued tax assessments even years after the fact.
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Arizona, Nevada, Washington, and Oregon have pursued use-tax violations.
(States see this as a significant loss of revenue.)
What is generally safe?
If the asset is:
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Actually transported to Montana,
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Actually used there,
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Garaged there for long periods,
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And the LLC has a legitimate business purpose,
Then, the states have less grounds to claim avoidance.
Final Summary
Forming a Montana LLC isn’t illegal.
Using it to avoid your home state’s taxes while using the asset in your home state CAN (but not always) result in legal action.
States can and do charge people for improper tax avoidance when the LLC is deemed a sham.
If you would like to learn more about structuring your LLC and safely adding your Car to it, please call or email us.
Call or Text: 406-890-3565
Email: reg@lastbestregisteredagentmontana.com