From The Drive · Byron Hurd · · 1m 10s
California Closes Montana License Plate Loophole
California law ends Montana shell company tax loophole for vehicles.
In brief
California law ends Montana shell company tax loophole for vehicles. California’s new law requires Montana-based shell companies with California residents to pay sales tax on vehicles. Originally reported by The Drive.
California law closes Montana license plate loophole
California State Bill 1406 became law on Sept 30, 2026, closing a Montana license plate tax loophole.
Old law allowed out-of-state shell companies to avoid tax
Existing California law exempted vehicles registered to out-of-state businesses from sales tax if less than half of business operations were in California.
Montana shell companies exploited the loophole
People registered fake LLCs in Montana, which don’t charge sales tax or require vehicle inspections.
New law expands tax residency definition
The law now considers any shell company with a California resident as a California resident for tax purposes.
California residents now liable for unpaid taxes
Any officer, manager, partner, or beneficial owner of a shell company must pay California sales tax on vehicles.
Tax consequences for shell companies
Shell companies with California residents face tax liability on vehicles, including penalties and interest.
What to remember
California’s new law requires Montana-based shell companies with California residents to pay sales tax on vehicles.
