This seems to be aimed mostly at dealers of high-end cars that are avoiding sales tax payments, not necessarily people registering gray-market or non-emissions-compliant cars. Still, be careful if you're a CA resident with MT plates on any of your cars.
California regulators are reviewing every recent car sale in Montana as they crack down on a tax-evading scheme called the “Montana Loophole” where drivers dodge Golden State levies by purchasing a vehicle in a place with no statewide sales tax.
The California Department of Tax and Fee Administration and Department of Motor Vehicles said in a news release Friday that since 2023, they’ve found hundreds of California-based dealerships involved in more than 2,500 sales to customers claiming they’re Montana drivers. Many of the sales involve luxury or exotic cars, and regulators said it cost the state more than $10 million in lost revenue.
Investigators listed the cities in California with the most suspicious sales at dealerships. Beverly Hills has the highest with 416, and in the Bay Area, Mill Valley appeared among the top 10. There are only a couple of car dealerships in Mill Valley, and both are for luxury brands: Ferrari and Porsche. Regulators found that Mill Valley is connected to 99 suspicious sales.
On Friday, the California Department of Justice announced charges against 14 people it alleges were using the loophole to cheat the state out of $20 million in luxury vehicles purchases. SFGATE reviewed the complaint filed last month alleging one Bay Area resident purchased multiple sports cars that retail for over $200,000 — including a 2022 Lamborghini Urus and a 2022 Lamborghini Huracan — outside the state using the loophole.
The tax loophole takes advantage of states like Montana that don’t have statewide sales tax. Visitors from other states purchase and register a car there to save money, sometimes by setting up a limited liability company. The pricer the purchase, the more the loophole can save the tax dodger. In California, the base rate sales tax is 7.25%, which for a 2022 Lamborghini Urus that costs over $250,000, amounts to more than $18,000.
Montana is the most popular state for car owners to take advantage of the loophole. In 2023, Big Sky Country had 879,000 licensed drivers but more than 2.3 million registered vehicles. Bloomberg found that Montana has more than double the national average vehicle-to-driver ratio.
Since 2023, the California DMV investigators said they found 601 vehicles that were fraudulently registered, recovering $2.3 million in registration and taxes. Meanwhile, the CDTFA said it started auditing nearly 300 dealers for high-end vehicles that were related to states with no taxes. Besides Montana, the agency is looking into other no-tax states such as Alaska, Delaware, New Hampshire and Oregon.
California law requires residents to pay sales tax on a new vehicle. Dealerships are also obligated to ensure that car purchases for out of state are properly delivered to that state.
Nearly 100 Marin County car sales linked to 'Montana Loophole' scheme
California regulators are reviewing every recent car sale in Montana as they crack down on a tax-evading scheme called the “Montana Loophole” where drivers dodge Golden State levies by purchasing a vehicle in a place with no statewide sales tax.
The California Department of Tax and Fee Administration and Department of Motor Vehicles said in a news release Friday that since 2023, they’ve found hundreds of California-based dealerships involved in more than 2,500 sales to customers claiming they’re Montana drivers. Many of the sales involve luxury or exotic cars, and regulators said it cost the state more than $10 million in lost revenue.
Investigators listed the cities in California with the most suspicious sales at dealerships. Beverly Hills has the highest with 416, and in the Bay Area, Mill Valley appeared among the top 10. There are only a couple of car dealerships in Mill Valley, and both are for luxury brands: Ferrari and Porsche. Regulators found that Mill Valley is connected to 99 suspicious sales.
On Friday, the California Department of Justice announced charges against 14 people it alleges were using the loophole to cheat the state out of $20 million in luxury vehicles purchases. SFGATE reviewed the complaint filed last month alleging one Bay Area resident purchased multiple sports cars that retail for over $200,000 — including a 2022 Lamborghini Urus and a 2022 Lamborghini Huracan — outside the state using the loophole.
The tax loophole takes advantage of states like Montana that don’t have statewide sales tax. Visitors from other states purchase and register a car there to save money, sometimes by setting up a limited liability company. The pricer the purchase, the more the loophole can save the tax dodger. In California, the base rate sales tax is 7.25%, which for a 2022 Lamborghini Urus that costs over $250,000, amounts to more than $18,000.
Montana is the most popular state for car owners to take advantage of the loophole. In 2023, Big Sky Country had 879,000 licensed drivers but more than 2.3 million registered vehicles. Bloomberg found that Montana has more than double the national average vehicle-to-driver ratio.
Since 2023, the California DMV investigators said they found 601 vehicles that were fraudulently registered, recovering $2.3 million in registration and taxes. Meanwhile, the CDTFA said it started auditing nearly 300 dealers for high-end vehicles that were related to states with no taxes. Besides Montana, the agency is looking into other no-tax states such as Alaska, Delaware, New Hampshire and Oregon.
California law requires residents to pay sales tax on a new vehicle. Dealerships are also obligated to ensure that car purchases for out of state are properly delivered to that state.
