Car owners from around the country have for years tried to avoid paying their fees and taxes by titling their cars in Montana under a shell company to avoid sales taxes and fees in their state of residence.
The state of Montana has long combined two features useful for people who can afford expensive cars and whose tax planning ranges from aggressive to fraudulent. First, it has no sales tax. Second, it allows for corporations to easily purchase and register vehicles. Most states do levy sales taxes, and usually other taxes and fees that come with owning a registered vehicle.
For years, many have taken advantage of a network of shady fixers to mask their vehicle ownership behind LLCs to get Montana plates, and dodge sales taxes, registration fees, and other state requirements like emissions tests where they actually live. In recent reporting, Bloomberg Tax suggests there could be a million such vehicles.
But while the scheme might not violate Montana law, that doesn’t make it legal.
States have slowly wised up to the problem and charged residents with criminal tax evasion. Many across the country have looked for and charged the fraudsters individually, and California went after dealerships.
Utah recently embarked on the most comprehensive effort against this tax dodge to date after an insolent teen blocked a state senator’s driveway. The resulting investigation comparing registration and insurance data found 80,000 vehicles in Utah with suspicious registrations. By the time the campaign is done, the state could reclaim well over $100 million in dodged taxes, as Bloomberg Tax’s Michael Bologna reported. .
This sort of enforcement is key in all states. Unwillingness to follow a state’s registration laws undermines the state’s ability to collect needed revenue and undermines law enforcement more broadly. Utah’s approach shows that enforcement campaigns can get big results, and other states should follow suit.
For its part, Montana hasn’t been forthcoming about the prevalence of these types of registrations. If the Big Sky State wants to help California luxury car owners, that’s its right. But as Republican Montana State Sen. Greg Hertz put it this spring, “That cash cow is going to start dying for Montana.”
