BREAKING NEWS ON MONTANA LLC TAX LOOPHOLEWell, here it is. The big breaking news on the Montana LLC loophole kind of tax evasion. If you’ve been watching our channel for any length of time, you know we’ve been reporting on this Montana LLC title process that’s been used really going back five or six years now. And if you notice, we’ve mentioned that many DMV commissioners have been talking amongst themselves about doing a big crackdown, a big bust of the people that are using this process. And in the internal meetings, they’re mentioning putting together task force operations and starting to do monitoring and enforcement.
CRACKDOWN CONFIRMED BY MAJOR PUBLICATIONWell, big breaking news today out of Car and Driver Magazine, major publication, friends of the channel. We’ve actually been featured in their magazine before that there’s a crackdown on the tax dodging practice by citizens and it’s starting out with a few states. They mentioned Utah and California, although there are seven states right now that are starting to do enforcement and prosecutions and we’re going to get into that a little more in detail here in a minute.
WHAT IS THE MONTANA LLC LOOPHOLE?But what is the Montana LLC loophole? This is a process where if a person has a vehicle that either has a title or doesn’t have a title that they don’t want to go through their state, they want to avoid their state for whatever reason. Maybe they’re trying to avoid taxes. They’re trying to avoid smog inspection emissions. They’re trying to avoid the title process. They’re going to do a Montana process.
WHY MONTANA? WHY LLC?Now, why is it called LLC? Well, no state can give a title to a non-resident. You have to be a resident of a state to get a title from that state. That’s always been the case. You can’t just say, “Well, I live in New Jersey. I want to get a title from Colorado.” You have to get a title from the state where your driver’s license is located. So, what people do is they form a company, an LLC corporation in the state of Montana and then put the vehicle in the name of that corporation, right? And technically, that part’s legal. You can put a vehicle in the corporation name. Montana will let you do that.
NO SALES TAX AND MINIMAL REGULATION IN MONTANAAnd the reason why people use Montana is Montana is a state that does not have sales tax. So when you register a vehicle, you don’t have to pay sales tax. And they don’t have a lot of inspections and emissions and a lot of the regulations that other states have. So many people will use that loophole for their vehicle.
SIDE NOTE: NOT AS EASY AS IT SEEMSNow, just a little side note, the process isn’t any easier than just going through your own state. If you have a title problem, you only have a bill of sale, maybe you have missing documents, you’re not going to be able to magically get a title from Montana. You still have to do some process like a bonded title or a court order title in Montana. So that is not really any different from going through your state.
REAL MOTIVE: TAX AND INSPECTION AVOIDANCESo really, the only difference is you don’t have to pay tax and you don’t have to do emissions. So people think, well, it’s legal, so I’ll do it. Ah, but it’s not really legal. The reason why is the tax is not a sales tax. Taxes for vehicles is a sales and use tax. That’s what the tax is called in the statute.
SALES AND USE TAX MEANS YOU OWE TAXES WHERE YOU LIVESo if you title your vehicle in Montana and then use it in your state, you’re actually evading taxes. Even companies like FedEx or Amazon when they title vehicles in other states, if they use them primarily in a state where they deliver the packages, they have to pay taxes in that state.
ENFORCEMENT HAS BEGUNSo what is happening now? What’s happening now is the other states besides Montana that have been losing tax revenue are now rolling out the prosecutions doing sting operations. They’re doing all kinds of enforcement.
HOW THEY’RE CATCHING PEOPLEHow are they catching people? Well, one way to do it is if they see a Montana plate driving around, they can run the plate and if it’s LLC, they’ll pull it over and they’ll check who’s driving it, what the ownership is. But more importantly, they’re using, and we’ve talked about this on this channel many times, ALPR, automated license plate readers, where around town, they will have cameras that read license plates that will identify a Montana license plate, the same one, driving by over and over for weeks or months at a time. That’s obviously not somebody just on vacation. That’s somebody who is living there.
PURSUING $100 MILLION IN BACK TAXESAnd that’s what they say in this article. The DMV is using plate readers to sniff out Montana plated cars and tracking registrations to catch tax evaders, going after what could be $100 million in back taxes and penalties. So, they’re not playing around.
GOING AFTER LLC MILLSThey’re also going after what they call LLC mills. These are companies that do this Montana process for you. They charge you a fee, and they’re starting to crack down on those. Remember back in the ’90s, there were a few kind of fly by night sketchy car title companies that were using illegal methods to get people titles like fraudulent mechanics liens and some other sketchy methods. And there was one in Nevada. There was one in Tennessee. They all got busted. There are people in prison over that.
NOW TARGETING SERVICE PROVIDERSSo now they’re starting to also crack down on the providers of these services knowing that they’re illegal. And many states have now passed laws closing the loophole.
MULTI-STATE ACTION AGAINST TAX DODGERSTrickier to dodge the sales tax unless you live in Montana. So that’s obviously if you live there, you can register there, not a problem. And in reality, it’s not new. Back in 2019, a few years ago, Georgia did this. They cracked down, but they were a single state. This is a collection of states that’s doing this, and they’re working together to get the records. They can get the records directly from the Montana LLC Secretary of State to find out who the owners are, who the registered agents of that company are, and if they see you’re out of state, they’ll slap you with tax evasion.
MONTANA’S SKY-HIGH CAR OWNERSHIP RAISES FLAGSWhy is this happening? Well, Montana has the highest car ownership by population in the United States, more than double California. That’s because many people are putting cars in their name in Montana, even though they don’t live there. Again, they’re cracking down on using this to dodge paying taxes.
EVEN IF YOUR INTENT WASN’T TAX EVASIONEven if you did the process for some other reason besides just avoiding taxes, if you didn’t pay the taxes afterwards in your state, they’re still going to say, “Well, you did it for another reason, but since you didn’t pay the taxes, that’s tax evasion.” And they’ll come after you for taxes, penalties, interest. They could even seize your vehicle.
BREAKING STORY CONFIRMED APRIL 30THSo, this is breaking news. This article came out April 30th. That was yesterday. We’re recording this on the 1st of May. And if you’ve been watching our channel, you’ve seen the prediction of this coming. And it’s not a prediction. We’ve heard from the DMV commissioners. We work with them all the time, the different states’ DMVs, and they’ve told us that it’s just a matter of time. They had to put together the task force, put together the investigative resources, put together the rules for their state, and now they’ve kind of dropped the hammer, and people are going to find their titles will be revoked.
EXPECT VEHICLE SEIZURES AND PROSECUTIONSThere will be penalties and interest. Some people will have their vehicles seized and there will be some people that will be criminally prosecuted. Probably a few people go to jail, especially the ring leaders, people organizing this and doing it on a large-scale basis.
THE REASON WE NEVER OFFERED THIS SERVICESo, it’s happening now. Now again, once you see it in Car and Driver, that means it’s making the mainstream news. And like I said, we’ve seen it for over a year now where the states have been telling us this is what’s going to happen. And that’s the reason why as a professional certified title company, we never got involved with this. We never did this Montana process.
OUR LONG-TIME CLIENTS ASKED—WE SAID NOWe’ve had clients that we’ve been doing business with for 20 years that said, “Hey, you know, why don’t you do this Montana thing? It seems like a big deal.” We’ve told them this is not going to end well for people who are doing it. Consumers maybe who did it years ago, you might be able to get away with it. But recent registrations will probably get revoked.
DIFFERENCE BETWEEN MONTANA AND VERMONT LOOPHOLEAnd a lot of people ask, well, what’s different between this and the Vermont loophole, the Vermont registration loophole? Because we did those. The difference is this. There was no tax evasion. People who did the Vermont loophole paid taxes and it wasn’t designed to leave the Vermont plate on the vehicle and drive around with, right?
VERMONT LOOPHOLE WASN’T TAX EVASIONYou would actually use the process to get something with your name on it as an owner and then transfer to your state. That’s different. That’s not evading anything. You’re still going through the process of your state. You’re still paying your tax. You’re still abiding by all the rules of your state. It’s just that it’s one step to help you get some documents that’ll allow you to be eligible to register in your state. So, that’s a whole different thing.
MONTANA CASE WILL BE MUCH WORSEThat one still got shut down eventually because some states didn’t like the fact that people weren’t primarily using like a bonded title or a court ordered title. But even something as innocent as that got shut down. This Montana thing is really going to be bad. Mark my words.
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Possible Loan ReductionDid you know that up to 20% of the balance of your existing car loan may be able to be removed from that balance? When you purchase your vehicle, you may have been inadvertently charged extra interest and add-ons, which include things like gap insurance, force-placed insurance, VSI insurance, and add-ons like service maintenance contracts, extended warranties, and theft notifications. There are all kinds of add-ons that they put on car loans in the F&I office (the finance and insurance office) at a dealership.
Baked-In Add-OnsWhen you sign all those documents, sometimes those charges are already baked into the payment that you’re quoted in the showroom. They don’t have to raise your payment. They can just say, “Yes, here’s your payment.” And when you sign it, it’s already in there. They’ve already figured that in. What happens is after you pay on the car for a year or two, you’ve paid down some principal—mostly interest, though. Then you call for your payoff and you owe $32,000, but your car is only worth $24,000. So you have $8,000 in negative equity. You can’t trade it in or sell it because you owe more than it’s worth.
Negative EquityWhat if you could cut off $4,000 or $5,000 worth of that balance, maybe more, and get closer to breaking even? Now you could trade it in, sell it, or work with your lienholder. Some lienholders have a short sale process. You can click the link below.
Options and ReliefEither way, you want to look at all of your options because in many cases, up to 20% of your loan balance can be removed from the principal amount. And 20% could be a lot. That could get you closer to an equity scenario where you don’t have upside-down or underwater balances owed on your vehicle and get you closer to getting out of that high car payment and into something that’s more affordable or a vehicle that’s better suited for your current life.
What is the 25-Year Import Exemption Rule?This is a rule that allows vehicles that are 25 years old or older to be imported without all of the same import requirements typically required by the EPA, DOT, and other customs requirements.
Customs Requirements ExemptionThe 25-year requirement only excludes and exempts vehicles from US customs requirements. It does not require states to exempt vehicles from their titling and registration requirements.
New Opportunities in 2025Now that it is 2025, there are some additional vehicles—tremendously interesting vehicles—that can now be imported into the US without having to go through the stringent import requirements. This is a great article in Motor Trend about some of these new additions to the approved list.
Featured VehiclesToyota Caldina GT: An all-wheel-drive rally-type wagon, similar to a Subaru WRX but in wagon form, available for around $10,000 to $12,000. Subaru WRX Type STI: An upgraded version with 276 horsepower.Mitsubishi Lancer: A very interesting vehicle, typically priced in the $30,000 to $40,000 range. Honda Accord SiR Wagon: A cool car from the late 90s/early 2000s, now importable.
Final ThoughtsOnce you take a look at the new allowances for these Japanese imports, you can see which ones might be of interest. Just make sure that you’re going to be able to get it through the titling process in your state before you start shelling out a whole bunch of money to get one of these cars through customs, because customs is only the first step before it goes into a situation where you can put it on the road and be driving it.
Thinking About Titling Your Car in Another StateSo, you’re thinking about trying to title your car in another state to try to evade requirements like inspections or certain insurance requirements or maybe even sales taxes. Maybe you have the wrong kind of paperwork and you’re thinking, “If I go to another state, I can get my paperwork passed.” Well, whether it’s Vermont, Montana, or other states that you think are going to be easier, keep in mind that if you use another state’s process to evade rules in your state, you’re probably going to get caught. Here’s why. Here’s a good example of what’s called ALPR.
What Is ALPR?ALPR stands for automated license plate readers. And that means that there are cameras all over the place that are monitoring license plates that are driving by. So, here’s what happens. Let’s say you live in California and you have a vehicle that is not going to pass smog or not going to pass inspection or maybe you don’t want to pay sales tax. So you say, “Hey, I’ll just title this vehicle in Montana so that way I don’t have to pass smog. I don’t have to pay the tax. I don’t have to get it inspected and I’ll just drive it around with Montana license plates.” Well, that’s great.
Forming a Montana CorporationNow, first of all, you have to put it in the name of a corporation because states don’t give out titles if you’re not a resident. But what the loophole is, what people do is they form a corporation in that state in Montana. They put the car in that corporation and then they just drive it around in your state and you think you’re legal because it’s a legal plate. However, every state has a law that says if you are a vehicle operator in your state, you have to title and register the car in the state where you primarily use the vehicle.
ALPR and EnforcementAnd you might say, well, if it’s a company car, I can use it anywhere I want. Yeah, you can. But what they’re going to do is they’re going to use ALPR data, automated license plate readers, that’s going to see these license plates all over the place. Now, first of all, in most states, because Montana is such a notorious loophole, if a police officer sees a Montana plate far away from Montana, they’re going to run the plate manually on their computer.
Getting Stopped and InvestigatedAnd if they see that it’s a corporation, they can stop you, check your ID, if you have a California license, why are you driving a Montana car? And if your answer’s no good, they’ll submit a report to the franchise tax board and they’re going to investigate and they’re going to find out that that corporation is in your name or in the name of somebody that is in California. But even if they don’t catch you manually, automated license plate readers are monitoring these plates.
Pattern Detection and InvestigationsIf they see the Montana license plate driving by the same intersection every day for a month, they’re going to figure this is not just somebody vacationing in Santa Monica. This is not somebody just visiting Disneyland in Anaheim. This is somebody who has titled and registered a vehicle out of state to evade something and they’re going to open an investigation. All they have to do is request the records from Montana Secretary of State. It’ll give them a printout. It’ll see the name of a person that’s the registered agent or the name of a person that’s an officer and they will track it back to you.
Legal ConsequencesAnd then they know when you go by an intersection because you go there every day. They’ll pull you over. They may be allowed to seize and impound your vehicle.
Seizure of Vehicle and Government AwarenessThey may also not have to give it back. If they can prove tax fraud, if you did not pay sales tax, if you did not register the vehicle properly, if you did not do smog, they can seize your vehicle and you’re out of luck. You lose the car for good and you can’t get it back. So, these loopholes, you’re not the only one that’s heard of it. The governments know about it. All the different DMV commissioners know this inside and out. The tax departments of every state have very clear understanding of how these work and this is how they undo it.
Task Forces and ALPR TechnologyThey have task force groups committees that are looking to try to catch people that are doing it. What does ALPR look like? Well, here’s a picture. Flock, if you notice on this picture, it says Flock. That stands for Flock Safety. It’s a company that sells these cameras not just to police departments, but if you’re an HOA, if you’re an apartment complex, a parking lot, you can get Flock cameras for your private sector location and it’ll track the license plates there.
Tracking in Private LocationsThe governments can buy that data even from a parking lot, even from, you know, if you pull into, you know, Vons grocery store, they can track your license plate. Police cars, tow trucks, taxis, all kinds of cars have these ALPR readers all over the place and they’re taking pictures just like this and they can automatically read the license plate and track it back.
Triggering InvestigationsIf they see Montana plates on a regular basis, they’re going to flag you and investigate to see why you have a Montana plate. Look, if you’re just visiting on vacation, no harm, no foul. But if they see that it’s in a corporation name, an LLC name, Montana LLC, they’re going to investigate further and undo you because they’re going to figure that you did it for a reason.
Reasons for Loopholes and Their ConsequencesEither your car is not eligible because it’s not going to pass inspection. Maybe it’s not allowed in California. Maybe you did tax evasion because Montana has no sales tax. Maybe it’s something that won’t pass smog. Either way, they’re going to get to the bottom of it and eventually it’ll cost more than what it would have to properly register in the first place.
Insurance IssuesSo, you may get away with it to begin with, but at some point, it’s going to come back to haunt you. Plus, the other problem is insurance. When you tell your insurance agent where you garage the car, where you park the car, you’re going to have to tell them either Montana or California.
Conflicts in Insurance CoverageIf you tell them Montana, you’re going to have a Montana insurance card. And if you use the car in California, if the car gets stolen, it gets damaged, or you cause a wreck, your Montana insurance agent insurance might not cover you because you said that it’s a Montana use vehicle. If they can see that you’ve been using it in California most of the time, they can deny your claim, which means if you total your car, you’re out the money.
Franchise Tax Board InvolvementNow, if you tell them it’s a California address with Montana plates, they may now turn that in to the California Franchise Tax Board. Or even if they don’t, if the franchise tax board looks up your insurance and they see that you put California as an address, that just proves that you’re evading California laws for a California used vehicle.
Final WarningSo, it’s a catch-22. No matter what state you declare that you’re using it in for your insurance, it’s going to create some problems for you. So, think twice about these out-of-state loopholes. Even though it might save you some money or, you know, do something that makes it easier, in the long run, it could create a lot more liability for you than you signed on for.
Many vehicle owners in high-tax states have heard about a seemingly clever strategy: forming a Montana LLC to register their vehicles and avoid paying hefty sales and registration taxes in their home states. This practice is especially popular among owners of luxury cars, exotic sports cars, RVs, and boats. But make no mistake—despite its popularity and the many businesses facilitating it, this tax avoidance scheme is illegal in most circumstances and carries serious consequences.
The strategy is straightforward: A resident of a high-tax state forms a limited liability company (LLC) in Montana, makes that LLC the official owner of their vehicle, and registers the vehicle in Montana with that LLC’s address. The appeal is obvious—Montana charges no sales tax on vehicle purchases and has relatively low registration fees.
“Under Montana law, a business entity formed in Montana can title and register vehicles it owns in Montana no matter where the vehicles are located.” (Draneas, 2024)
Companies specializing in this service advertise widely, with some charging as little as $1,049 for a package that includes LLC formation, registered agent service, and vehicle registration assistance.
Despite what service providers might claim, this isn’t a legal “loophole”—it’s tax evasion when the vehicle is primarily used in another state. Most states have clear laws requiring residents to register vehicles in their state of residence if the vehicles are primarily kept or operated there.
In California:
“California law also provides that an LLC formed in another state but owned at least 50% by California residents is treated as a California resident for vehicle-registration purposes.” (Draneas, 2024)
In Utah:
“The law specifically says that if a business entity has a vehicle and operates that vehicle primarily within Utah, the same standard applies. That business entity is deemed to be a domicile area of Utah or resident of Utah for purposes of registration as well.” (Gephardt, 2023)
Similar laws exist in Georgia and most other states. The legal reality is simple: if you live in a state and your vehicle is primarily operated there, you are required to register it there and pay applicable taxes—regardless of any Montana LLC ownership structure.
The penalties for this form of tax evasion can be substantial, involving far more than just paying the evaded taxes:
In Utah, if caught, vehicle owners face “all the back sales tax and 100% penalty of the sales tax amount that wasn’t paid. So basically, double sales tax” (Gephardt, 2023). On a $100,000 vehicle with an 8% tax rate, that means $16,000 instead of the original $8,000 tax.
In California, owners must pay:
Beyond financial penalties, there can be criminal consequences. In California, a resident named “Trevor” faced potential criminal charges after authorities executed a search warrant on his home and seized his Montana-registered sports car (Draneas, 2024).
In Georgia, authorities conducted what they called the “largest criminal investigation ever into the Montana tax scheme,” executing search warrants on homes and properties belonging to exotic car collectors. The investigation targeted two wealthy Georgians who had purchased approximately 50 exotic cars between them over a four-year period, allegedly depriving Georgia of more than $1 million in tax revenue (WSB-TV, 2019).
Authorities can and do seize improperly registered vehicles. In California, vehicles were seized during the execution of search warrants (Draneas, 2024). In Utah, officials warn that boats with improper registrations “might get impounded and won’t be released until state taxes are paid and settled in court” (KSL, 2024).
States are becoming increasingly sophisticated in their methods to detect improperly registered vehicles:
In California, investigators have visited repair shops to identify vehicles with Montana plates being serviced locally (Draneas, 2024).
In Georgia, authorities have:
Utah recently considered legislation (SB52) that would allow insurance records to be compared with DMV databases to identify vehicles registered out-of-state but insured in Utah (KSL, 2025).
Enforcement actions and public awareness campaigns can quickly change behavior. After Georgia’s WSB-TV aired an investigation into Montana registrations, officials reported that within 24 hours, owners had changed the registration on about 20 cars from Montana to Georgia, resulting in more than $100,000 in tax revenue (WSB-TV, 2019).
In the California case, authorities seized the vehicle owner’s cell phone during their investigation. Why? Cell phones contain a wealth of evidence:
Beyond legal issues with state authorities, this scheme creates potential insurance problems. Many insurers might refuse to pay claims if they discover a vehicle resides somewhere other than what is listed in the policy (Gephardt, 2023). This leaves owners vulnerable to significant financial loss in case of an accident.
While the Montana LLC vehicle registration scheme might seem like a clever way to save money on taxes, the financial risks, legal consequences, and increasing sophistication of enforcement make it a dangerous gamble. With states actively cracking down on this practice and penalties often doubling the original tax obligation (not to mention potential criminal charges), the short-term savings simply aren’t worth the long-term risks.
If a Montana LLC vehicle registration service claims this strategy is perfectly legal, remember that few things in life are certain except death and taxes—and trying to avoid the latter can lead to serious consequences.
Sources:Draneas, J. (2024, June 17). California Cracks Down on Montana LLCs. Sports Car Market. https://www.sportscarmarket.com/columns/legal-files/california-cracks-down-on-montana-llcs
Gephardt, M. (2023, February 21). Utahns save thousands in sales tax by registering new cars in Montana. But is it legal? KSL. https://ksltv.com/526269/utahns-save-thousands-in-sales-tax-by-registering-new-cars-in-montana-but-is-it-legal/
KSL. (2024, November 12). Registering your boat or OHV out of state to save on tax money is illegal warns Utah officials. KSL. https://ksltv.com/ksl-investigates/registering-your-boat-or-ohv-out-of-state-to-save-on-tax-money-is-illegal-warns-utah-officials/705364/
KSL. (2025, January 23). Lawmakers seek crackdown on Utahns illegally registering their vehicles out of state to avoid sales taxes. KSL. https://ksltv.com/politics-elections/utah-legislature/lawmakers-seek-crackdown-on-utahns-illegally-registering-their-vehicles-out-of-state-to-avoid-sales-taxes/730140/
Winne, M. (2019, November 23). Wealthy Georgians with exotic cars accused of cheating local taxpayers. WSB-TV. https://www.wsbtv.com/news/local/wealthy-georgians-with-exotic-cars-accused-of-cheating-local-taxpayers/858532353/
WSB-TV. (2019, November 23). $100K in taxes paid after Channel 2 investigation into exotic cars. WSB-TV. https://www.wsbtv.com/news/2-investigates/more-than-100k-in-taxes-come-in-after-channel-2-investigation-into-exotic-cars/860469930/
Jalopnik. (2018, November 4). Georgia Is Cracking Down On Instagram Bros Registering Supercars In Montana To Avoid Taxes. Jalopnik. https://www.jalopnik.com/georgia-is-cracking-down-on-instagram-bros-registering-1830035589/
Atlanta Journal-Constitution. (2018, October 25). Luxury car owners dodge Georgia tax with Montana scheme. Atlanta Journal-Constitution. https://www.ajc.com/news/luxury-car-owners-dodge-tax-with-montana-scheme/eF1HopLGbDX8EuvYzgNo6J/
Missoulian. (2023). ‘The Montana scheme’: How the wealthy avoid taxes on luxury vehicles, RVs. Missoulian. https://missoulian.com/news/local/business/montana-luxury-car-tax-avoidance-non-residents/article_1f46105e-4c36-11ee-86ad-5bb0a78abd77.html
Bozeman Daily Chronicle. (2017, January 22). Out-of-state car buyers use Montana LLC’s to evade taxes. Bozeman Daily Chronicle. https://www.bozemandailychronicle.com/news/out-of-state-car-buyers-use-montana-llcs-to-evade-taxes/article_b4b37d29-e894-523e-b0ed-be7c0bf7e398.html
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