# California Closes Montana Tax Loophole for Luxury Cars

> California bans luxury car tax evasion by shell companies in Montana.
- Title: California Closes Montana Tax Loophole for Luxury Cars
- Summary: California bans luxury car tax evasion by shell companies in Montana. California's new law closes a tax loophole where residents used Montana shell companies…
- Keywords: california, montana, sales tax, luxury cars, shell companies, tax evasion, sb 1406, gavin newsom, cars, sports, Closes, Tax
- Source: Autoweek — https://autoweek.com/news/a74068046/california-finally-closes-the-montana-loophole-for-exotic-cars
- Author: Mark Vaughn
- Published: 2026-10-07T19:03:29+00:00
- Read time: 1 min
- Topics: california, montana, sales tax, luxury cars, shell companies, tax evasion, sb 1406, gavin newsom, cars, sports
## California cracks down on Montana tax cheats
California is outlawing a tax strategy where residents used Montana shell companies to register luxury cars and dodge sales taxes.
## Montana loophole tax evasion
California residents created shell companies in Montana to purchase luxury vehicles, avoiding California's sales tax.
## California sales tax rates
California's sales tax starts at 7.25% but can reach 10.75% with local taxes added.
## Ferrari example
A new Ferrari 12 Cilindri starts at $464,000 and can cost over $600,000 with options, adding $64,500 in state taxes.
## Montana loophole cost
California lost $20 million yearly due to the tax evasion scheme, according to Senator Jerry McNerney.
## SB 1406 law
California's new law closes the Montana loophole by treating Montana shell companies as California entities if a member is a resident.
## Enforcement actions
California targets shell companies with no real business, using license plate readers and data analytics to recover lost tax revenue.
## Key takeaway

California's new law closes a tax loophole where residents used Montana shell companies to avoid sales taxes on luxury vehicles.