Purchase and registration of vehicles by a Montana LLC was a “sham transaction” subjecting Indiana residents to use tax

Indiana Residents were managers of a Montana LLC, which they established with the help of a Montana “Service Company.”  As reported by the Department, the “Service Company” invited potential clients to “Register your vehicles in Montana and Pay No Sales Tax.”  The “Service Company” was designated as the LLC’s Montana ”agent.”  Except for the vehicle purchases, Residents provided no “documentation or evidence establishing any business or non-business activity by the LLC in Indiana, Montana, or any other state in the union.”  They made no effort “to acquire, maintain, or dispose of any property other than [the] vehicles in question.”  The Department found that the purchase of the vehicles by the LLC and their registration in Montana served no purpose other than avoidance of sales and use tax.  “The formation of the LLC and the titling of the vehicles in the name of the LLC constituted a ‘sham transaction.’”  Residents owed use tax on the vehicles, which were acquired in a retail transaction and used or stored in Indiana, since no sales tax had been paid “at the point of purchase or anywhere else.”  Letter of Findings No.  04-20130292 (2009, 2012 tax years) (posted Sept. 25, 2013)