High-end exotics with Montana license plates are surprisingly common. No, there isn't some sort of secret luxury performance car playground hidden in Big Sky country behind all of those Treasure State plates you'll find everywhere but there. Instead, there's a loophole, one that lets owners who actually live in other states avoid sales taxes and registration fees from their home jurisdiction.
Now the "Montana Loophole", as it's called, is turning into a noose. California state officials have started taking it seriously, beginning with 14 people charged with 56 counts of tax evasion and other financial crimes.
California Knows How To Tax Party
The California DMV, Department of Tax and Fee Administration, and the state's Department of Justice began this investigation in 2024. It uncovered what the Attorney General calls "a scheme stretching back to 2018." The AG's office says that these 14 defendants worked separately and together to submit false forms and bills of lading that showed the vehicles were shipped or used outside of California. Officials say those vehicles were not, in fact, sent out of the state.
Buy a new car in California, and you're looking at 7.25% sales tax to start. Different areas can have fees that are slightly higher. Montana, on the other hand, charges zip. Nothing. Nada. Buy a new million-dollar car in California and you could be looking at another $7,000 in registration fees on top of the tax, adding upwards of $100,000 to the purchase. Montana, meanwhile, charges $217 per year for a new car.
The loophole is simple. Register an LLC in Montana, and claim that it owns the vehicle. Now you've evaded all of that tax. Keep it out of California for 12 months, and you can bring it back home without the sales tax. But prosecutors say that it's not a valid loophole, and that owners aren't waiting a year.
California officials are now looking into every car sale made to buyers claiming to be in Montana. The state's investigators listed thousands of suspicious sales. California is also using plate readers and surveillance systems to monitor for Montana license plates and other registration and tax violators.
Millions In Evaded Taxes Recovered
Ferrari
Since 2023, California has started 81 criminal investigations. It has found 601 confirmed fraudulently registered vehicles, and recovered $2.3 million in taxes and fees so far. This case represents another $1.8 million in taxes avoided.
Source: California Office of the Attorney General
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This article originally appeared on CarBuzz and is republished here with permission.
