Images in this article are editorial illustrations, not photographs of specific vehicles or owners.
Picture a Saturday morning in Newport Beach, Scottsdale or Greenwich. A Huracán, a pair of GT3 RSs, something orange and McLaren-shaped. Then you walk behind an SF90 and notice the plate: pale blue and white, mountains across the top, Montana. Nobody in the parking lot is surprised. Montana plates, and the “Montana loophole” everyone talks about, have been part of the exotic car scene for years. They have also become a target for tax investigators: California has charged 14 people in an alleged $20 million case and passed a law aimed squarely at the practice, and other states have launched their own programs.
What You Need to Know
- Montana has no general sales tax and charges registration fees based mostly on a vehicle’s age, not its price.
- Out-of-state owners commonly use a Montana LLC to own and register the vehicle.
- The approach gained an early foothold with motorhome buyers in the late 1990s and later spread to supercars, boats and planes.
- Montana permits the registration. It doesn’t settle what the owner’s home state requires, which usually turns on where the car is kept and driven.
- In March 2026, California charged 14 people in an alleged $20 million case, and in September it enacted SB 1406. By then, at least 10 states had adopted their own laws or enforcement programs.
Start With the Math
Every explanation of the Montana loophole starts with sales tax. Buy a $1 million hypercar in California and the state’s base sales and use tax rate of 7.25% comes to $72,500, before local district taxes push it higher. On a $3 million car, you’re past $200,000.
Montana has no general sales tax, and its registration fees depend mostly on the vehicle’s age. According to the Montana Department of Justice, the base annual rate for a light vehicle is $217 if it’s four years old or newer, $87 from five to ten years, and $28 at 11 years and up.
Expensive cars pay a bit more. Since January 1, 2018, light vehicles with an MSRP over $150,000 that are 10 years old or newer pay an extra $825 a year, according to the Yellowstone County fee schedule. Many counties add a local-option tax based on depreciated MSRP, and the state adds small fees plus a 3% administrative charge. Altogether, a new $1 million car typically runs about $1,100 a year in state fees before any county tax.
Those are two different kinds of cost: a one-time tax tied to the purchase, and an annual fee to keep a car registered. Paying Montana’s registration fees doesn’t satisfy a tax that another state says is owed. But the difference in size explains why the practice exists.
| At a Glance | Montana |
|---|---|
| State sales tax | None |
| Base registration, 0–4 years old | $217 a year |
| Base registration, 5–10 years old | $87 a year |
| Base registration, 11+ years old | $28 a year |
| Permanent registration (11+ years old) | Optional one-time payment: $87.50 registration plus other applicable fees; ends if ownership changes |
| Extra fee, light vehicle over $150,000 MSRP (10 years old or newer) | $825 a year |
| County local-option tax | Varies by county; some charge none |
| For comparison: California base sales and use tax | 7.25% of the price (one-time), plus local district taxes |
How the Montana Loophole Started: Motorhomes Before Ferraris
The Montana loophole gained an early foothold with motorhome buyers, not supercar owners. Bloomberg Tax traced one early example to the late 1990s, when Bretz RV & Marine, Montana’s largest motorhome dealer, helped customers hold their rigs in LLCs as an asset-protection move. A big diesel pusher can cost as much as a house, and its owners often spend months on the road.
As boomers retired and the RV market grew, a cottage industry followed. Montana registered agents, the in-state businesses that give an LLC its required Montana address, began offering vehicle ownership packages nationwide. Bloomberg counted roughly 200 such agents, with packages commonly advertised around $1,000 and no requirement that owners visit Montana. From motorhomes, the idea spread to Lamborghinis, yachts and airplanes.
How the Structure Works
Registering a vehicle in Montana in your own name generally requires Montana residency. The state does allow certain nonresidents to register there, such as people working in Montana, under specific rules. For an owner who lives elsewhere, the usual route is an LLC.
An LLC formed in Montana is a Montana entity, with a Montana registered agent and address. The LLC, not the person, buys and owns the car, so it can title and register the car in Montana. A few details matter to car people:
- One LLC can own several cars, including an entire collection.
- Older cars can get permanent plates. Vehicles 11 years or older may take permanent registration, which needs no renewal as long as ownership doesn’t change. That’s a real draw for classic and collector cars.
- No inspections. Montana has no state safety or emissions inspection program.
- The county number tells a story. Montana plates carry a county prefix. A 2021 Montana legislative fiscal report found luxury-vehicle registrations concentrated in counties without a local-option vehicle tax, led by Flathead, Granite and Deer Lodge.
It’s Not Always About Taxes
Tax savings get the headlines, but owners cite other reasons too. Some collectors keep cars in several states. Full-time RV owners may have no fixed home state. Owners of older or modified cars like skipping emissions testing, some prefer that an LLC keeps their personal name off a registration, and permanent plates on a 1970s Porsche are simply convenient.
Hagerty, which has covered the practice in depth, describes actively used RVs and cars genuinely stored outside the owner’s home state as the more defensible uses. The picture changes when a car is kept and driven full-time in one state while registered in another.
Where the Montana Loophole Meets Home-State Law
This is the most misunderstood part of the subject.
What Montana permits. Montana allows an LLC to be formed there and allows that LLC to register vehicles there. Its revenue and justice departments have long treated the issue as one for other states to address, and have said registered agents generally comply with Montana law, according to Bloomberg Tax.
What the home state requires. A Montana registration doesn’t establish compliance anywhere else. Most states require vehicles kept there to be registered there by that state’s applicable deadline. Most also have a use tax, sales tax’s twin: if sales tax wasn’t paid where something was bought, use tax may be owed where it’s used.
That’s why lawyers distinguish tax avoidance, using the rules as written, from tax evasion, misrepresenting facts to dodge a tax that’s owed. The LLC itself isn’t the deciding factor. The facts are: where the car is garaged and driven, who controls it, and what was stated on the paperwork.
Insurance matters too. Insurers underwrite a policy based on where a car is kept, who owns it and how it’s used, so owners should disclose those facts accurately to their insurer, wherever the car is registered. For more on how collector insurance works, see our explainer on how Hagerty decides what a collector car is worth.
Why States Are Cracking Down
States have pursued Montana registrations before. Colorado convicted RV owners of misdemeanor tax evasion in 2008, Massachusetts went after Montana-LLC motorhomes in 2010, and Georgia cross-referenced toll records with Montana registrations in 2018, according to Hagerty. What is different now is the scale.
The California case. In March 2026, the California Attorney General announced a 56-count complaint against 14 people, alleging a scheme dating to 2018 that underreported more than $20 million in luxury vehicle purchases and avoided more than $1.8 million in taxes. The vehicles named included a McLaren Elva, a Porsche 918 Spyder and a Ferrari F12tdf. The state alleges false tax, DMV and shipping documents claiming the cars would be used outside California, when they were delivered, driven and stored in the state. The charges are allegations, and the defendants are presumed innocent unless proven guilty in court.
The dealer side. California’s Department of Tax and Fee Administration said it had identified nearly 500 dealers involved in more than 2,500 sales since 2023 to buyers claiming Montana use. The state DMV reported more than 80 investigations and $2.3 million recovered since 2023.
The new law. Governor Gavin Newsom signed SB 1406, by Sen. Jerry McNerney, on September 30, 2026, and it took effect immediately. California already presumes that a vehicle bought out of state and brought into California within 12 months was bought for use there, and treats a closely held company as a California resident when Californians hold 50 percent or more of it. The new law adds that a shell company is treated as a California resident if any shareholder, partner, member or beneficial owner lives in California.
It also makes a shell company’s officers, managers, partners, beneficial owners and members personally liable for unpaid tax, interest and penalties on the purchase, but only if the state can establish that the company stored or used the vehicle in California within 12 months of buying it and didn’t pay the tax. The law describes a shell company as one used to evade the tax, and lists evidence that “includes, but is not limited to” having no specific business activity or purpose, no physical location outside California, no employees receiving W-2s, or no federal tax returns or required returns in another state. California estimates the loophole costs it about $20 million a year.
Other states. As of September 2026, Bloomberg Tax counted at least 10 states, including Illinois, Maryland and Minnesota, that had adopted laws or enforcement initiatives targeting Montana LLC registrations within the previous year. Utah’s 2025 law, SB 52, lets its Tax Commission compare insurance records with registrations, and the state collected $1.6 million in sales tax and $32,540 in fines in roughly its first five months of enforcement, KUER reported. License plate readers have also made repeat sightings of out-of-state plates easier to track; we covered that technology in our explainer on Flock cameras and exotic car owners.
Montana’s Side of the Story
Montana’s position is straightforward. It set a low-tax, low-fee system for its own residents, and the rules apply the same way to everyone who uses them. Out-of-state registrations bring in fee revenue from vehicles that put little wear on Montana roads, and they support a local industry.
The scale is striking. In 2023, Montana had more than 2.3 million registered vehicles but only about 879,000 licensed drivers, according to a Bloomberg Tax analysis, and a former Montana revenue director estimated that more than 600,000 Montana-registered vehicles are operated in other states.
Montana lawmakers have debated the fee structure. A 2025 bill, SB 324, would have reworked registration fees, including those on high-value vehicles; it died at the end of the session in May 2025, and the $825 luxury fee remains in place. Not every Montana-plated car is a tax story, either. Some collections genuinely live in Montana, in storage buildings around places like Bozeman.
If You’re Buying a Montana-Plated Car
Montana-plated cars show up regularly on the used market, especially collector cars. An LLC on the title is common and not a problem in itself, but a few checks help:
- Confirm who’s on the title and who can sign. If an LLC owns the car, the paperwork should show the person selling has authority to act for it.
- Permanent registration doesn’t transfer. Montana’s permanent plates end with a change of ownership, according to the state DOJ.
- Plan to register it where you live and pay whatever tax your state charges on the transfer. A tax attorney or CPA in that state can answer specific questions.
What Montana Paperwork Does and Doesn’t Settle
Montana registration does not, by itself, establish compliance with the laws where the car is kept and driven. Whether a car complies where it actually lives is the question California, Utah and other states have started asking more often.
So the next time you see a Montana plate on a hypercar in a beachfront parking lot, you’ll know the story behind it. Whether anything is wrong depends on facts no one at Cars and Coffee can see.
Frequently Asked Questions
Is registering a car through a Montana LLC legal?
Montana permits forming the LLC and registering the vehicle there. Whether the arrangement complies with the law of the owner’s home state depends on that state’s rules, which usually look at where the car is kept and driven.
Why do so many RVs have Montana plates?
Montana LLC ownership gained an early foothold with motorhome buyers in the late 1990s, long before it became common with supercars. Expensive RVs often travel without a fixed home state.
What does California’s SB 1406 do?
Signed September 30, 2026, it lets California treat an out-of-state shell company as a California resident for use-tax purposes if any shareholder, partner, member or beneficial owner lives in California. It also makes the company’s officers, managers, partners, members and beneficial owners personally liable for unpaid tax if the vehicle was stored or used in California within 12 months of purchase.
Does Montana permanent registration transfer to a buyer?
No. Permanent registration, available for vehicles 11 years or older, ends when ownership changes, so the new owner must register the car again.
This article is general information, not legal or tax advice. Amounts in U.S. dollars. Fees and legal information checked November 2026.
