# California Closes Montana License Plate Loophole

> California law ends Montana shell company tax loophole for vehicles.
- Title: California Closes Montana License Plate Loophole · The Drive
- Summary: California law ends Montana shell company tax loophole for vehicles. California’s new law requires Montana-based shell companies with California residents to…
- Keywords: california, montana, sales tax, shell company, license plate, vehicle taxation, cars, technology, Closes, License, Plate, Loophole
- Source: The Drive — https://thedrive.com/news/heres-how-california-closed-the-montana-license-plate-loophole
- Author: Byron Hurd
- Published: 2026-10-06T14:57:28+00:00
- Read time: 1 min
- Topics: california, montana, sales tax, shell company, license plate, vehicle taxation, cars, technology
## 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.
## Key takeaway

California’s new law requires Montana-based shell companies with California residents to pay sales tax on vehicles.