California is suing 14 owners for evading $20 million in taxes by registering luxury cars in Montana. Learn the loophole and what’s at stake. Read now.
California authorities have launched a major crackdown on a group of high‑end vehicle owners who exploited a tax loophole by registering their supercars in Montana, a state with no sales tax. Federal prosecutors allege that 14 individuals conspired to evade more than $20 million in taxes, money that would have funded roads, schools and other public services.
The scheme
By creating a Montana‑based limited liability company (LLC) and listing it as the legal owner, the drivers were able to obtain Montana license plates for cars that they lived in, drove, and stored in California. Because Montana does not levy a state sales tax or a vehicle registration tax, the owners avoided the hefty California fee—up to 7.25% of a vehicle’s value, or roughly $72,500 for a $1 million car.
Supercars at the center of the case
- McLaren Elva – valued at $1.8 million
- Porsche 918 Spyder – valued at $1.5 million
- Ferrari F12tdf – valued at $1.26 million
Each of these machines would have triggered a multimillion‑dollar tax bill had they been registered in California.
Evidence of intent
Messages uncovered by investigators reveal the deliberate nature of the fraud. One text warned, “Don’t let California officials know about this car.” Another compared costs: “Saving $70,000—registering in Montana for five years is crazy. In Cali it’s $75,000 for the same period.”
Legal response
California Attorney General Rob Bonta said, “When bad actors exploit legal loopholes and submit false paperwork to dodge their obligations, the Department of Justice will not stand idly by. Every dollar of unpaid tax is a dollar taken from our streets, schools, and essential services. Fraud involving millions of dollars in tax revenue will not be forgiven.”
State enforcement tools
Since June 2023, California has paired automatic license‑plate readers (ALPR) with registration and tax databases to flag out‑of‑state plates that are actually being used on California roads. The initiative has already recovered $2.3 million in unpaid taxes and registration fees.
Why the loophole exists
Montana’s tax structure is uniquely attractive: no sales tax, no emissions testing, and no periodic vehicle inspections. Only five U.S. states share the “no sales tax” status, and Montana is one of them. In contrast, California’s sales tax can reach 7.5%, and its vehicle registration fees are among the highest in the nation.
How the workaround works
Specialized service firms set up a Montana LLC for roughly $1,825—including the state’s $825 “luxury tax.” The LLC is listed as the title holder, allowing the car to be plated in Montana even though the owner lives and drives the vehicle in California.
What’s next?
California officials are urging all residents who use a vehicle within the state to register it locally. The collaboration between the Department of Motor Vehicles and the California Department of Tax and Fee Administration continues to tighten enforcement, aiming to close the loophole and protect public revenue.