The “Montana Loophole” — according to the California Department of Tax and Fee Administration or CDTFA — is a scheme where buyers create out-of-state limited liability companies (LLCs) to register their high-end automobiles to avoid paying California taxes and fees.
In a Friday press release, the CDTFA, in partnership with the Department of Motor Vehicles , is “targeting high-end automobile dealers and their customers through investigations and audits.”
CDTFA and the DMV are examining all sales made to Montana purchasers, not just those involving LLCs. CDTFA has identified close to 500 California dealers involved in more than 2,500 sales since 2023 to customers claiming to use the vehicle in Montana. These sales, many of which involve luxury or exotic cars, cost the state more than $10 million a year in lost tax revenue.
The CDTFA press release singles out California’s top offending communities, including Beverly Hills with 416 suspicious registrations, followed by Costa Mesa with 359; Van Nuys with 273; and San Diego with 269.
The New York Times, in a Monday article, says "A Bloomberg Tax analysis of Federal Highway Administration data found that in 2023, Montana was home to more than 2.3 million registered vehicles but only 879,000 licensed drivers.
"That 2.68 vehicle-to-driver ratio is by far the highest among states and more than double the national average."
