The Montana loophole is officially over.
California is known for its high taxes. They’re so high, even rich people feel they are unfair. For years now, those who purchased supercars would register them in Montana to avoid the state’s high sales tax. Basically, tax evasion.
California drivers would create fake companies in Montana to purchase vehicles there. Why Montana? There is no general sales tax or high fees for vehicles. Let’s say you want a McLaren Elva. You know, casually. At 9.5%, you’re looking at $171,000 in sales tax. Or zero in Montana. I mean… It’s a no-brainer.
But in March, California started cracking down on this loophole. The CA Attorney General charged 14 people for “conspiracy, filing false sales tax returns, failing to file tax returns, perjury, and money laundering.”
“When bad actors abuse legal loopholes and submit fraudulent documents to evade their obligations, the California Department of Justice will not stand idly by,” said Attorney General Rob Bonta. “Every dollar of unpaid taxes is a dollar taken from California’s roads, schools, and the vital services our communities rely on.
“Schemes that defraud the government of millions in taxpayer money will not be tolerated.”
Honestly… If I’d seen the roads being improved, I might have given this statement a nod. But given how these taxes are being “used,” I sorta have to side with the rich guys who don’t want to pay extra taxes on their Maybachs and Lamborghinis.
Unfortunately for these struggling wealthy supercar owners, things just got worse.
The Montana loophole is no more
In March 2026, California State Senator Jerry McNerney (Democrat) presented SB 1406, meant to close the “Montana Loophole.” Governor Gavin Newsom signed it into law this week.
With SB 1406 in place, California residents can be held liable for unpaid sales tax, interest, and penalties if they are caught with an LLC in Montana that has no physical location, no real business purpose, and no employees.
“For years, wealthy tax evaders have avoided paying California sales taxes by setting up phony shell companies to buy Ferraris, Lamborghinis, and other luxury vehicles in Montana and then bringing the vehicles back to our state,” McNerney said.
“Closing the Montana Loophole will help restore some fairness to our sales tax system by ensuring that everyone pays what they owe. SB 1406 also enables the state to recover up to $20 million in lost revenue each year to pay for road repairs and other essential services.”
