Montana Plates Could Finally Get Tax Evaders In Trouble

The state of Montana has long been a haven for luxury and supercar owners thanks to its non-existent sales tax, low license fees, and lack of emissions or safety testing. Keen to take advantage of registration envy from Ferrari 296 Speciale and Rolls-Royce Phantom in Florida, California, and elsewhere, a number of companies have popped up in Montana that allow car owners to set up an LLC within the Treasure State, then register their vehicles there despite owning and driving them elsewhere. However, some of Montana’s neighbors want to curb the practice and crack down on the shell-corporation game, levying back taxes on the vehicle owner in the process.

Other States Want To Crack Down On Tax Evasion

Since vehicle registrations outnumber licensed drivers in Montana by nearly three to one, it’s relatively easy to surmise that not every car wearing Montana plates is actually garaged in Montana. According to Bloomberg Law, this assumption hasn’t gone unnoticed by neighboring jurisdictions. For example, Utah Governor Spencer Cox signed a law in March that would allow for interstate data sharing to locate the alleged “tens of thousands of tax evaders,” who would then be penalized for permanently using and housing cars, boats, and airplanes in Utah without actually paying the state’s registration fees and undergoing emissions inspections. Bloomberg says the efforts could yield up to $100 million for the state in back taxes.

Utah isn’t alone. California public records also show that 10,000 cars valued at more than $2 billion had been sold to Montana LLCs since 2022, meaning it could be missing out on $145 million in sales tax alone, much less emissions and registration fees for those vehicles. In order to curb the practice, the California Department of Motor Vehicles is using surveillance cameras and license plate readers along state highways to identify out-of-state plates used by registration and tax evaders. In fact, the Golden State identified a single owner of multiple high-dollar vehicles who’d avoided paying more than $300,000 in taxes by registering cars in Montana.

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Some Say The Practice Sends A Classist Message

Although setting up an LLC in Montana is as cheap as $50 from some companies, the use of corporations to register cars in the state is dominated by owners of expensive, valuable cars. For example, despite having a population six times that of Montana, Washington state has one sixth the amount of Ferraris registered. There’s not one single Pagani in Washington’s DMV system, while Montana has 31. The graph looks similar for Rolls-Royce, Lamborghini, and McLaren products.

Former Illinois Director of the Department of Revenue Brian Hamer said the use of a shell corporation sends the wrong message to a state’s residents. Hamer now acts as legal counsel to the Multistate Tax Commission, which according to Bloomberg coordinates tax initiatives and enforcement across different US states. He said that allowing the rich and wealthy to avoid paying vehicle use taxes sends a troubling message to those who register their cars within ther home jurisdiction. The Multistate Tax Commission will use Utah and California evasion-hunting practices as a model during an annual meeting for state revenue officials in July. Some of the meeting will focus on recouping tax losses thanks to Montana LLCs.

Source: Bloomberg Law