Can Louisiana Residents Avoid Louisiana Sales and Use Tax Liability by Purchasing Recreational Vehicles with Foreign LLC’s?

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The Louisiana Supreme Court has ruled yes.

In Thomas v. Bridges, Robert Lane Thomas, a Louisiana resident, admitted he formed a Montana LLC (Angel Rocks, LLC) solely to avoid the Louisiana sales and use taxes (approximately $47,000.00) for the purchase of a recreational vehicle (“RV”). Although the Board of Tax Appeals affirmed the Louisiana Department of Revenue’s assessment against Thomas individually, the District Court reversed the assessment. The Court of Appeal upheld the reversal, finding Thomas’s appeal met the Department of Revenue’s procedural requirements, and the Department failed to show the veil of the Montana LLC should be pierced and further failed to show Thomas should be held individually liable. Thomas v. Bridges, 2013-1855 (La. 5/7/14) — So.3d –.

In Thomas, the Supreme Court held that the Louisiana Department of Revenue clearly erred by assessing taxes against Thomas personally without even addressing Angel Rocks, LLC being listed in the certificate of title and in the bill of sale.

The Court noted that use of particular business entities to avoid taxes, far from being fraudulent, is a common and legal practice. The Court also addressed that under Louisiana and Montana law, LLC’s can be formed for “any legal purpose” and that the use of a legal loophole does not, by itself, constitute fraud.

It should be noted that the Supreme Court, in two separate concurrences, encouraged the legislature to address the issue in their next legislative session. However, until the underlying Louisiana statute is amended and/or changed, Louisiana residents who incorporate LLC’s in other states to purchase RV’s, and store them outside of Louisiana, cannot be assessed Louisiana sales and use taxes absent the Department of Revenue establishing fraud/piercing the corporate veil of the purchasing LLC.

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