From Road & Track · Emmet White · · 1m 10s
California Closes Montana License Plate Tax Loophole
California law ends tax evasion by luxury car owners using Montana shell companies.
In brief
California law ends tax evasion by luxury car owners using Montana shell companies. California's new law closes a tax loophole allowing residents to avoid sales taxes by registering high-end vehicles through Montana shell companies. Originally reported by Road & Track.
California law closes Montana tax loophole
California Governor Gavin Newsom signed SB 1046 into law on September 30 to end tax evasion by luxury car owners using Montana shell companies.
How the loophole worked
California residents formed limited liability companies in Montana to register high-end vehicles and avoid home-state taxes while skipping vehicle inspections.
Tax evasion impact
California lost $20 million annually in tax revenue since 2023 from luxury vehicle sales through Montana shell companies.
New law criteria
The law requires shell companies to lack business activity, have no physical location outside California, and fail to employ staff with W-2 tax statements.
Enforcement actions
California launched 80 investigations since 2023 and recovered $2.3 million in owed taxes from illegally registered vehicles.
What happens next
California tax officials can now impose tax liability on vehicles registered through shell companies owned by California residents.
In short
California's new law closes a tax loophole allowing residents to avoid sales taxes by registering high-end vehicles through Montana shell companies.
