California Cracks Down on ‘Montana Loophole’ that Evades Tax on Luxury Vehicles, 14 People Charged

The defendants allegedly used false documents to claim certain vehicles were delivered outside California.

A stolen luxury car that was recovered by a special unit with the California Highway Patrol, on March 24, 2022. Courtesy of California Highway Patrol

The California Department of Tax and Fee Administration (CDTFA) and Department of Motor Vehicles (DMV) announced on March 6 that they are investigating auto dealers suspected of enabling customers to use the “Montana Loophole” to avoid paying California taxes and fees.

The loophole refers to the practice of buying and registering vehicles—often expensive luxury automobiles—through a Montana-based LLC. Montana has no sales tax and allows out-of-state buyers to avoid paying sales tax and higher registration fees, even when they primarily use their vehicles in other states.