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.
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.
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.
A "loophole" is anything that hasn't yet been legislated.
ReplyDeleteJust recently saw a similar news article here in MN involving one of the biggest dealership networks in the state (who are trying to distance themselves from the former employee at the center of most of the Montana sales). Much like Vermont's corporate laws or Cayman Islands financial laws it's hard to tell someone else to change their laws that work well for them but are painful for the rest of us.
ReplyDeleteIt seems police have no problem coming up with reasons for pretextual stops so I would imagine CHP officers could make hay out of finding drivers whose driver license and car license don't match. That was an expensive lesson a while back for California off-road motorcyclists who wanted to ride two-stroke bikes not legal for sale in CA, but got big fines when DNR found their ID address and vehicle registration mismatch.
oh wow... that's a red flag a driver/rider can't dodge... getting busted in or on a vehicle that isn't California compliant, or has a Montana plate, but they have a California drivers license
DeleteI don't think it's been brought to my attention until you mentioned it, that those have to match!