What Is The Best State To Get A Car Title?

Montana LLC License Plate Scheme
So, let’s talk about the Montana LLC license plate scheme that’s out there. You probably heard about it, read about it, maybe you’ve seen it on different social media. And a lot of it has to do with highline. In this article from Jalopnik, it talks about exotic cars or maybe big RVs or motor coaches that have high values.

Why Montana Appeals to Out-of-State Vehicle Buyers
And that’s one of the reasons why this happens because Montana has no sales tax. When you purchase a vehicle in Montana, if you’re a resident, you don’t have to pay sales tax. So, if you buy a $50,000 vehicle and your sales tax in your state is 7%, that could be three or $4,000 in taxes. If you lived in Montana, you wouldn’t pay any taxes and that could be a lot of money.

The Corporate Workaround Method
So, what a lot of people try to do is say, “Well, I’ll just register title in Montana.” Well, the problem is states are not allowed to give out titles for people who are non-residents. You can’t just pick a state and title in that state. You have to get a title from the state where you live. So, what some people are doing is forming a corporation in Montana, putting in the name of the corporation, and then getting the title in that corporation name. So, that’s how the process works.

Legal Problems with the Montana Scheme
A few problems with that. First of all, it’s technically illegal because you have to get the title and registration from the state where you live. Well, how you going to get caught? We’ll talk about that in a minute. how the states are enforcing this and cracking down on it. The second thing is the states are losing a lot of money. As you could imagine, out of state license plates are costing towns big money. So if you lived in, let’s say in this case, Connecticut and you titled your car in Montana, Connecticut doesn’t get the sales tax and they get a lot of their corporate revenue, their state revenue from sales tax.

Other Motivations Beyond Tax Avoidance
But there’s other reasons why sometimes people would want to do the Montana registration besides tax. It could be that they don’t want to get their car inspected or they don’t have the right paperwork or they don’t have a title or they only have a bill of sale is evading something. Either evading taxes or evading the proper process. Now, the process to go through Montana to form a corporation and to do the transfer and to get a LLC and everything else, it’s actually harder than going through your own state. Every state has a process of getting a title when you don’t have the right paperwork. So, that problem can be solved. You’re going to have to pay the tax. So, if you just are fixated on doing tax evasion, then do the Montana thing and hope for the best.

Automated License Plate Recognition Technology
How are they catching people? Well, this may not seem like it directly relates to the Montana plates, but they’re finding stolen vehicles and they’re using the same technology to find Montana vehicles that are in the wrong state. It’s called ALPR, automated license plate recognition. So, as you’re driving around, and we’ve talked about this before, your license plate goes by probably a hundred cameras in a day. You probably don’t see most of them. They could be on Uber vehicles. They could be in parking lots. They could be on street signs, on police cars, on tow trucks. And as they’re driving, it’s collecting all this license plate information. Over time, they’re uploading this information to government agencies.

Government Investigation Methods
Talk about how they do this here in a minute. And the government agencies are going to make note of are there Montana plates or out of state plates that go by the same intersection every day on a regular basis. What that means is that person is not just a tourist on vacation from Montana visiting Connecticut. They’re there every day for six months. So now they’re going to do an investigation because what you have to remember is the tax on a vehicle is not just a sales tax. It’s a sales and use tax. Even if you have a legitimate corporation in another state, if your vehicle is regularly in Connecticut and you’re a resident there, you have to title it there.

Private Companies and Revenue Collection
So here’s what they do. The DMV can’t help much with these out of state plates. So the cities and states are using private companies that do ALPR. They scan license plates and in this one town of Danbury, Connecticut, it’s not a big town. They investigated 8,000 vehicles. And these outside companies get a kickback. They get 40% of the tax revenue with no upfront cost to the city. Waterberry, Connecticut caught 4,000 cars. Stanford, Connecticut caught 8,000 cars. They got $1.3 million in taxes from this investigation. So, it’s big money for them. So, it’s a big incentive to do this.

Legal Requirements and Penalties
And here’s what the law says. And this is Connecticut law, but most states is the same. If a vehicle is garageed in a municipality, meaning regularly parked overnight, even on the street, it must be taxed there regardless of where it’s officially registered. As an example, if you winter in Florida, but if you’re more than 90 days in Connecticut, you have to pay. And there’s penalties. There’s fines. There’s even criminal sanctions. There’s also programs for anonymous reporting. So, if you see somebody with a Montana plate, you can turn them into the government and you can get a commission on it.

Insurance and Logistical Problems
In addition, there’s some other logistical problems with having a Montana plate. You have to figure out where you’re going to get your insurance from. If you get it from Montana, it may not cover you in your state. So, if you get in an accident, it’s not covered. If you get it from your state, it may be reported to the DMV that your license plate is in Montana, which could be a problem.

Government Task Forces and Enforcement
Our meetings that we have every month with officials and representatives from government agencies and private companies. They all have a task force and their task force is trying to get this revenue gap fixed. Now whether you have an opinion about this tax or about taxes in general really doesn’t matter. The bottom line is that this outofstate scheme to avoid taxes or to avoid emissions or smog or registration fees or anything else is something that the states are taking very seriously.

Historical Context and Legal Consequences
And as you remember, the old Vermont loophole that used to exist for vehicle registrations was discovered and shut down because states were losing money and a lot of people had serious repercussions from that. Some people even had criminal prosecutions for that. Remember that if you’re signing a document for registration, it’s under the penalty of perjury. So, you want to make sure you’re not doing anything that could accidentally get you into trouble.

Visit Our YouTube Channel for more insights and discussions on various topics. Consider subscribing to our YouTube channel. Click here!