California Cracks Down on Tax Evasion Scheme Using Montana License Plates

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California officials have charged 14 people in a tax evasion scheme that used Montana license plates to conceal the purchase of over $20 million in vehicles in order to avoid an estimated $2 million in California sales taxes. The scheme, known as the "Montana Loophole", involved dealership employees, shipping agents, and customers working together to submit false tax and registration documents to claim the vehicles were being used out-of-state when they were actually kept and driven in California.

Why it matters

This case highlights California's efforts to crack down on tax evasion schemes that deprive the state of millions in revenue from vehicle sales and registrations. The high volume of suspicious sales, particularly in affluent areas like Beverly Hills, suggests this may be a widespread problem costing the state significant losses in tax dollars.

The details

According to the 57-count criminal complaint, the defendants conspired to commit tax evasion, file false sales tax returns, engage in money laundering, and commit perjury. Investigators found hundreds of California dealerships involved in over 2,500 sales to customers claiming Montana residency, often for luxury and exotic vehicles. The scheme allowed buyers to avoid an estimated $72,500 in sales tax on a $1 million car purchase.

• The tax evasion scheme began in 2018 and was uncovered by California authorities in 2026.

What’s next

California officials say they will continue scrutinizing all car sales made to buyers claiming Montana residency, and have begun 81 criminal investigations since 2023 that have identified 601 fraudulently registered vehicles and recovered $2.3 million in owed taxes and fees.