California is taking action against a tax evasion scheme involving luxury cars registered in Montana. Wealthy car buyers have used the “Montana loophole” to register Ferraris, Porsches, and other high-end vehicles in Montana, which lacks sales tax, while driving them in California. This practice has cost the state over $10 million annually in lost tax revenue.
Since 2023, California tax investigators have identified 500 dealers involved in 2,500 suspicious sales. These transactions have led to charges against 14 individuals, including auto dealers and customers, for concealing over $20 million in luxury vehicle purchases and evading $1.8 million in taxes. The charges include conspiracy to commit tax evasion, filing false sales tax returns, and money laundering.
California’s Department of Tax and Fee Administration has been actively investigating these cases. According to Shannon Robinson, the agency is working to close the “significant tax gap” caused by these schemes. The state has deployed license plate readers to identify Montana-registered vehicles frequently seen in California.
In response, lawmakers are proposing bills to tighten rules around shell LLCs and residency requirements. State Sen. Jerry McNerney introduced a bill to label LLCs as shell companies if they lack specific business activities or fail to maintain a physical location outside California.
California Attorney General Rob Bonta emphasized the importance of recovering unpaid taxes, stating that every dollar lost affects the state’s roads, schools, and vital services. The state plans to continue its crackdown on tax evasion, aiming to bring more individuals into compliance.
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