Californians Exploit Montana Loophole to Avoid $2M in Sales Tax

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A 57-count complaint filed by the California Department of Justice accuses 14 people of a tax-evasion scheme that concealed the purchase of more than $20 million worth of luxury vehicles in Montana, which has no statewide sales tax, allowing buyers to avoid about $2 million in California levies. Investigators found hundreds of California-based dealerships involved in more than 2,500 suspicious sales to customers claiming they're Montana drivers.

Why it matters

This case highlights how some Californians are exploiting legal loopholes to avoid paying millions in state sales taxes, depriving California of much-needed revenue. It also raises concerns about the integrity of vehicle registration and sales tax collection systems, as well as the potential environmental impact of luxury vehicles evading California's strict emissions regulations.

The details

The 57-count complaint accuses the defendants of conspiracy to commit tax evasion, filing false sales tax returns, money laundering and perjury. Investigators found text messages where dealership employees, shipping agents and customers bragged about taking part in tax-free purchases. The vehicles included a $1.8 million McLaren Elva, a $1.5 million Porsche 918 Spyder and a $1.26 million Ferrari F12TDF.

• The scheme began in 2018.
• The complaint was filed by the California Department of Justice last month.

What’s next

California officials said their effort to recover revenue includes scrutinizing car sales made to buyers in other states without a general statewide sales tax, such as Alaska, Delaware, New Hampshire and Oregon.