For decades now, people who want to avoid paying taxes on their vehicles or want to keep their car on the road without a state safety or emissions inspection have turned to out-of-state registration. This process, which is illegal, allows owners to use loopholes in state vehicle registration laws to register and get plates for their cars, even if they don’t live in those states.
If you’re a gearhead, you probably know about the most popular version of this trick, commonly known as the “Montana loophole.” Anyone, no matter where they live, can form a Montana LLC and register cars to that LLC, without paying a lick of tax to their home state (they don’t pay any taxes to Montana, either, since Montana doesn’t charge sales tax on vehicle registrations).
Wealthy individuals have regularly been exploiting this loophole to avoid paying taxes on their extra-pricy exotics. It’s the reason you see so many fancy supercars with Montana plates in places like California. Those aren’t people visiting from Bozeman; they’re almost all Californians who are avoiding paying the state’s 7.5% sales tax and skirting strict emissions tests.
Up until recently, the people who use loopholes like this have faced virtually no consequences. But lately, states have been cracking down. Last year, Utah signed into law a new data-sharing arrangement between Utah and Montana “to locate and assess tens of thousands of Utah tax evaders, with a particular focus on the owners of cars and boats registered in Montana,” according to Bloomberg. Back in July, California’s tax agency identified over 1,500 vehicles that had potentially been improperly registered to Montana to avoid registration fees.
Now, seven months later, California is taking action. And it’s doing so in a big, seven-figure way.
A “Scheme To Avoid The Reporting Of $20 Million” In Purchases
California Attorney General Rob Bonta announced Friday that his office charged 14 people in a 56-count complaint that included conspiracy, filing false sales tax returns, failing to file tax returns, perjury, and money laundering. The state alleges these individuals failed to report $20 million in luxury vehicle purchases, including a BMW X7, a Porsche 911 GT2 RS, a Porsche 918 Spyder, a Lamborghini Urus, a Lamborghini Huracan, a McLaren 765LT, a Ferrari F12 TDF, and a Ferrari SF90, resulting in around $1.8 million in lost tax revenue.
According to the Attorney General’s office, the individuals have, since 2018, schemed “individually and together” to prepare and submit false DMV forms to suggest the vehicles were purchased for use outside of California, even though they were never shipped or driven outside of the state. The complaint itself contains quotes from several text messages between the defendants, one of which seems to depict a defendant admitting that they added “generic signatures” to one of the vehicle’s bill of lading.
Here’s what the AG had to say about all of this:
“When bad actors abuse legal loopholes and submit fraudulent documents to evade their obligations, the California Department of Justice will not stand idly by,” said Attorney General Rob Bonta. “Every dollar of unpaid taxes is a dollar taken from California’s roads, schools, and the vital services our communities rely on. Schemes that defraud the government of millions in taxpayer money will not be tolerated. Today’s announcement should serve as a reminder: If you break the law and engage in fraud and theft, my office will hold you accountable.”
This should be a wake-up call for those who are currently rocking Montana plates on cars that shouldn’t have them. While this is certainly one of the higher-profile cases of tax evasion taken on by California, it certainly isn’t the first, nor will it be the last. According to DMV director Steve Gordon, the California DMV has recovered $2.3 million through 80 investigations of improper registration.
As I mentioned earlier, the California Department of Tax and Fee Administration has a list of over 1,500 potentially fraudulent vehicles registered in Montana to look through. The cars above are just a small handful of that bunch. Something tells me they won’t stop there.
The same is true for people in Utah using the Montana scheme to skirt taxes. According to Bloomberg, supporters of the bill in that state say the data-sharing arrangement could yield up to $100 million in recovered taxes and penalties. That suggests officials are prepared to hand out more than just slaps on wrists.
The steps follow states like Iowa, Illinois, and Massachusetts, which, over the past decade, have cracked down on out-of-state registrations by residents using Montana LLCs. Most recently, Tennessee has very publicly cracked down on YouTuber Cody “WhistlinDiesel” Detwiler’s Montana registrations, arresting him twice.
My suggestion? If you’re legally able to, just register the damn car in your home state. Sure, it makes things cheaper in the short run, but over a long enough period of time, you’ll end up paying in one form or another. At least if you register your car properly to begin with, you won’t end up with a criminal record. For me, that feels a bit nicer than saving a few bucks in registration fees.
Top graphic image: DepositPhotos.com
Years ago I worked for an insurance company that specialized in classic cars and exotics. One day we got an assignment from leadership to verify the registration status of every vehicle insured above a certain value within that product line.
The Montana plates themselves were an issue, since we didn’t write policies in Montana. But what really raised red flags was that many of those cars were insured on personal policies rather than commercial ones. Our investigation team saw that mismatch as a potential indicator of broader fraud risk.
Note the Montana plates on the Autopian CrossTour… although this is a legitimate business endeavor.
as someone who had to renew their UT registration last month, it’s about damn time
Good.
Saw an article on this on SFGate.com this am, was thinking of emailing it to the tips email, but you all beat me to it.
Last car I saw on Craigslist (SF Bay Area) with a Montana plate was a Gen 1 Honda Insight.
p.s. How often do you folks check the tips email?
Frequently in my experience. Gotten responses from Matt and more often Mercedes same day. And if I didn’t see a response it usually turned into an article pretty quick.
They also go out of their way for giving reasons on why they chose not to write about something.
Thanks! I sent something, but it was about vintage small airplane manuals I want rid of, not a story idea.
Hell yes. Nothing gets my goat more than selfish assholes not registering their vehicles in the state it is operated in. Paying for road maintenance and shared services is part of the social contract that 50% of this country seems hellbent on wiping their ass with.
I’m not sure — not having lived in California for over 15 years — but I believe another reason for the Montana (or other out-of-state) registration is to evade CA’s emissions regulations and the regular testing that goes with them.
CARB can get just as nasty as the AG, I believe. In either case, you wind up not being able to drive your car. Don’t know if you can be jailed for a “tune” or removing emission-control devices on older cars, but it wouldn’t be a complete surprise.
Surely, a new exotic can meet CARB, no? I wouldn’t think they need to hide from emissions, but I don’t own one.
They can. One of the problems with CARB that the legislature tried (and failed) to fix last year is that it is difficult or impossible to Smog a vintage car — the emissions equipment from the ’80s doesn’t work as well as it used to.
But yes, any new exotic can meet CARB, but you often have to order a ’50 state emissions’ package (which is really just the paperwork).
The “Leno Law” has been revived with a new Senate bill making the rounds. It’s not the rolling 30-year exemption that I’d prefer, but still very workable. https://www.sema.org/news-media/enews/2026/09/lenos-law-returns-california-sb-1392
If you see MT plates on a newer car in CA, it’s to avoid taxes. On an older car, it’s to avoid smog checks.