Some owners of expensive recreational vehicles are defrauding Massachusetts out of hundreds of thousands of dollars by registering their RVs in Montana and avoiding state and local taxes, a FOX Undercover investigation has found. Click here to read the Inspector General's report .
Investigators with state Inspector General Gregory Sullivan's office have already identified 23 RVs owned by Montana companies and registered in Montana when in fact, Sullivan says, the vehicles should have been registered and taxed here.
"This is a tax fraud rip-off scheme. The victims are the other taxpayers in Massachusetts," Sullivan says.
The scheme, well-known in the RV community, saves owners from paying sales tax when they purchase the vehicle. Because the vehicles sell for hundreds of thousands of dollars, the sales tax alone can cost tens of thousands of dollars, and excise taxes can also be thousands of dollars.
All RV owners have to do is set up a limited liability company in Montana, and use that company to buy the RV and register it in Montana, which has no sales or excise tax. But state officials point out that all vehicles driven more than 30 days in Massachusetts must be registered here.
Sullivan also worries about these giant RVs being on the road without safety or emission inspections, which are not required in Montana.
"We have a safety system in Massachusetts made for these kinds of vehicles to make sure that they don't have rollovers, that the brakes are good. There's a lot of weight. They could crash into cars. And what's happening? They're not getting inspection stickers because it's a Montana plate," he said.
Sullivan released a report this week about the RV scheme, and says there are many more illegally registered RVs in Massachusetts than the 23 his investigators found. Montana's corporate secrecy laws, though, make them almost impossible to find.
"We know the extent of this is much greater than that. Much greater. Because the information is blocked from our view. Montana won't give it up," he said. "You can't get information from the system. They set it up that way and I think it's despicable, frankly."
But FOX Undercover found people like Charles Pickett, who created a limited liability corporation in Montana in 2006 to register the RV sitting in his Rehoboth driveway.
"I have no idea what you're talking about," he said, pointing out the Massachusetts plates on his RV.
But the Massachusetts Registry of Motor Vehicles says Pickett registered his RV here just a week ago, on March 17. Had he not been caught, Pickett would have saved $9,770 in sales tax alone by registering as he did in Montana, plus an annual excise tax.
Another RV originally registered in Montana belongs to Hilton and Thomas Jenkins of Mattapan. They initially avoided $11,064 in sales tax by registering through a Montana corporation.
"Oh, I'm not going to talk to you about that. My husband's not here," Hilton Jenkins said when FOX 25 approached her at her home.
It's the same story in Bridgewater, where FOX Undercover found RV owner James Pistorino.
"Were you trying to cheat the state out of tax money?" FOX Undercover reporter Mike Beaudet asked Pistorino.
"No," he replied. "I was just trying to save myself some money."
Pistorino didn't need to set foot in Montana to set up the James J. Pistorino Limited Liability Company and save $11,826 in sales tax and thousands a year in excise taxes.
The Montana tax scheme is no secret to Marty Hanoud, president of Marty's USRV in Berkley. He's been selling RVs for more than 30 years.
"I think most of the RV people are aware of the Montana loophole," he said. "But we don't advise it because if you house it and live in Massachusetts, then you need to pay the Massachusetts sales tax."
He may not advise customers to set up a Montana company, but he'll sell to one who does.
"We have sold to some corporations," he said.
Pointing out the amenities in some of the motor homes he sells, which have a suggested retail price of up to a half-million dollars, Hanoud said, "Everybody's just trying to find a legal way to save some money and enjoy this lifestyle."
Saving money by illegally registering an RV may benefit the owner, but Sullivan warns it's at the expense of every other taxpayer.
"They're really not cheating the government. They're really cheating everybody else who has to pay these taxes," he said.
Sullivan also wants Montana to change its laws to make it easier to find out who's buying these vehicles. A spokeswoman for Montana Secretary of State Linda McCulloch said on Monday that McCulloch would call FOX 25 to comment, but since then no one from that office has called.
The Registry of Motor Vehicles has already been in contact with all 23 RV owners identified by the Inspector General and warned them to register in Massachusetts.