California Just Filed 56 Felony Counts Over the Montana License Plate Loophole. Here Is What Car Registration Actually Costs You State by State.

TL;DR

• California just filed 56 felony counts against 14 people who used Montana LLCs to dodge $1.8 million in taxes on $20 million worth of luxury cars.
• The state has flagged 2,500 suspect sales across nearly 500 dealers since 2023 and is coming for buyers, not just sellers.
• If you register a car out of state but drive it in California, you could owe the full sales tax plus a 50% penalty on top of criminal charges.

Key Numbers at a Glance

Last verified: March 10, 2026

You have probably seen a Montana license plate on a Lamborghini and thought, "that car has never been to Montana." You are right. And California just made it a felony.

The California Attorney General, working with the DMV and the Department of Tax and Fee Administration, filed a 56-count felony complaint against 14 people accused of registering luxury cars through Montana LLCs to skip California sales tax. The vehicles included a $1.8 million McLaren Elva, a $1.5 million Porsche 918 Spyder, and a $1.26 million Ferrari F12TDF. None of them ever left California.

The charges include conspiracy, perjury, money laundering, and filing false tax returns. And the investigation is not slowing down. The CDTFA has flagged nearly 500 dealers involved in more than 2,500 sales to buyers claiming Montana addresses since 2023.

How the Montana Loophole Works

Montana has no sales tax. Zero. So buyers form a limited liability company in Montana, register the car to that LLC, and drive it in their home state without paying a dime in sales tax or state registration fees. A "bill of lading" (a shipping document that proves the car was transported to another state) is supposed to verify the car actually went to Montana. In this case, prosecutors say buyers purchased fake bills of lading for $200 a pop.

The trick is not new. Car forums have discussed it for years. But California is now treating it as organized fraud, not a gray area.

Why This Matters for Regular Car Owners

You do not need a Lamborghini for this to hit you. Anyone who moves states, buys a car across state lines, or registers with an out-of-state address is in the same regulatory crosshairs.

Here is what California specifically watches for:

• Cars purchased by Montana, Alaska, Delaware, New Hampshire, or Oregon LLCs that never leave California
• Dealers who do not maintain proper shipping and delivery records
• Vehicles that show up at California addresses, service shops, or parking garages despite out-of-state registration

The state sent warning letters to dealers in December 2024 putting them on notice that they could be liable for taxes if they fail to keep proper documentation. Since then, more than 400 investigations and nearly 300 dealer audits have been launched.

The Cities Where It Is Happening Most

The CDTFA released the top 10 California cities by flagged Montana-registered sales:

If you live in one of these areas and bought a car with an out-of-state registration, your transaction may already be on a list.

What Registration Actually Costs: California vs. Montana vs. Other States

The reason people use Montana LLCs is because the gap in registration costs is enormous:

On a $50,000 car in California, you are paying roughly $4,000 in sales tax alone. On a $200,000 car, that is $15,000 to $21,500 in tax. You can see why people are tempted.

The Penalties If You Get Caught

This is where it stops being a clever trick and starts being a financial disaster:

1. Full back taxes owed. California will collect the full sales tax you avoided, plus interest.
2. 50% penalty. On top of the taxes owed, you can be assessed a penalty equal to 50% of the tax amount. On a $200,000 car at 10% tax, that is $10,000 in penalties alone.
3. Criminal charges. As this case shows, California is now prosecuting this as felony fraud, conspiracy, and money laundering. That means potential prison time.
4. Dealer liability. The dealer who sold you the car can also be held liable for the taxes if they did not maintain proper records. Some dealers named in this case include Ferrari of San Francisco and BMW of Murray.

What You Should Actually Do

1. If you recently moved to California

Register your car within 20 days of establishing residency. California defines residency broadly, including renting an apartment, enrolling kids in school, or accepting employment. The DMV registration page has the full checklist.

Required: Current out-of-state title, proof of insurance, valid smog certificate, VIN verification (REG 31 form).

Time estimate: 1 to 2 hours at DMV, or start online.

2. If you bought a car from an out-of-state dealer

Make sure the dealer provided a legitimate bill of lading and that the car was actually delivered to the registered state. If you are driving the car in California within 12 months of purchase, you likely owe California use tax.

3. If you have a Montana LLC registration on a car you drive in California

Talk to a tax attorney before the state contacts you. Voluntary disclosure programs typically result in lower penalties than getting caught in an audit. The CDTFA has opened 400+ active investigations. This is not theoretical.

4. Check your registration costs

Use California's DMV fee calculator to see exactly what you owe. Compare it to what you are actually paying. If the numbers do not match, you have a problem.

5. Review your insurance

A car registered in Montana but garaged in California creates an insurance gray area. If your insurer discovers a mismatch between your registration state and your actual location, they can deny claims. Make sure your policy reflects where you actually keep the car.

Time estimate for this full check: About 30 minutes. What you need: Your registration documents, insurance policy, and purchase records.

Mini-FAQ

Q: Is the Montana LLC thing always illegal? Not automatically. If you genuinely keep and use the car in Montana, it is legal. The crime is registering in Montana while the car stays in California. California law requires you to pay use tax on any vehicle not kept out of state for at least 12 months after purchase.

Q: What if I split time between two states? California generally considers you a resident if you are in the state for more than 6 months per year. If your primary residence is in California, your car should be registered there regardless of where you bought it.

Q: Can California actually track this? Yes. The DMV and CDTFA now cross-reference dealer sales records, Montana LLC registrations, California address databases, and even parking and toll records. The 2,500 flagged transactions came from this kind of data matching.

Q: What about other states doing the same thing? California is the most aggressive, but Virginia, Georgia, and several other states have similar laws requiring you to register where you garage your car. The Montana LLC strategy carries risk in any state with sales tax.

Sources

• California Attorney General press release on Bay Area tax evasion scheme, March 10, 2026
• CDTFA investigation report on Montana loophole crackdown, March 6, 2026
• The Drive coverage of 56-count felony complaint, March 10, 2026