The affluent community is quite aware of the “Montana license plate loophole” strategy. This ambiguous practice allows wealthy and savvy individuals to register their luxury sports cars and hypercars under a shell LLC established in Montana rather than registering them personally in their home state. The objective? To evade sales taxes and registration fees, also known as tax evasion.
It’s technically legal, but it’s not exactly ethical. To do it properly, one must adhere to a defined process in a specific sequence, be discreet about it, and exercise a fair amount of patience. Not everyone adheres to this, leading the California Attorney General’s office to file a 56-count indictment against 14 individuals for varying degrees of “conspiracy, filing false sales tax returns, failing to file tax returns, perjury, and money laundering.” But this isn’t a recent phenomenon; it’s just the most recent incident. In November, YouTuber Cody Detwiler, known as WhistlinDiesel, was apprehended on tax evasion charges in Tennessee related to this very practice. For many, this entire affair is essentially the Mercedes-Benz G-Wagon Write Off playbook.
The latest podcast episode of The Drivecast delves into the Montana license plate loophole controversy. It discusses how this open secret within the automotive community operates, why it’s technically permissible under Montana law, yet fraudulent in the states where these vehicle owners actually reside, the ongoing legal developments in both California and with WhistlinDiesel, and why other states have yet to rein in this loophole.
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Complete Transcript
Kyle Cheromcha: Alright, Andrew, you’ve got three, four, five cars… I don’t even know. How many are registered in Montana? Be truthful.
Andrew Collins: None in Montana. If you count lawn equipment and buggies, we have six or seven vehicles registered locally.
Kyle: And you’re an honest person. You live in New York, paying New York registration and sales taxes. Do you spot many Montana plates around? I see them constantly, but my proximity to California with its wealthier population might amplify that.
Andrew: Yes. Well, I reside in a rural part of New York, so they’re not too common, but they do pop up occasionally. I bumped into Amanda Seyfried in a coffee shop here once, confirming we have some affluent folks around. No, she wasn’t using Montana plates, but I’ve seen them a few times.
Kyle: It’s a strange experience. You’re in traffic or at a car show, spotting an exceptional vehicle like a Koenigsegg or an unusual JDM import, such as a Delica van, and you think, “Wow, how cool! Let me check it out.” But then you glance at the plate and think, “Ehhh, okay.” You feel a judgment brewing.
Andrew: It’s been a longstanding issue. I remember noticing this before I truly understood cars, thinking, “Wow, that Porsche must have traveled far from Montana. How exciting.” But if you casually googled it, you could find blogs dating back that chronicle why numerous hypercars had Montana registrations. This secret has been known for quite a while.
Kyle: Indeed. And the idle chatter surrounding this incident has reached national headlines, with everyone exclaiming, “Did you know this?” Meanwhile, the automotive community is like, “Yeah, we’ve been aware for ages, folks.” Also, it’s worth noting for any listeners out there: seeing a car with an out-of-state plate often elicits thoughts like, “Wow, they drove from far away.” When I see a Massachusetts plate in California, I think, “That car has journeyed across the nation.” However, when spotting a Montana plate, the likelihood that it’s tax fraud is not negligible.
The oddity is that it’s a license plate—it’s visible from outside. You’d think law enforcement could easily notice it, yet it’s astonishingly difficult for state authorities to catch individuals exploiting this law fraudulently. It’s baffling how it’s like advertising on your car, saying, “I might have dodged my taxes.” Yet it takes a massive enforcement challenge like this case from California for it to be flagged to the broader public.
So, provide some background on this loophole. I know it’s been a long-standing issue. The law has existed in Montana for quite some time, yet it has now gained attention. How does this work?
Andrew: Sure. In essence, someone creates an LLC in Montana and instead of purchasing the vehicle personally, the LLC buys it. And since there’s no sales tax, that’s not an issue. The LLC allows you to bypass the residence requirement in Montana, only needing the entity’s name on the title, and off you go.
Kyle: You don’t have to live in Montana to form an LLC, really? Just fill out some paperwork and you’re in business?
Andrew: Precisely. Some of the earliest public uses of this loophole involve RVs, gaining popularity among individuals living full-time in their RVs without a permanent address needing plates. They thought, “Well, what are my options?”
Then a few small businesses arose to handle the necessary paperwork and setup, and people began connecting the dots: “Hey, if I register my $1.5 million Porsche 918 this way, I effectively save about $100K on California sales tax.” Consequently, these companies began marketing this as a feature as well.
Because it’s technically legal—provided you complete certain steps and checks—people started pursuing it more frequently.
Kyle: It’s a feature, not a bug. And we’re not here to provide a guide on how to execute this. If you’re curious, numerous resources exist online, which ironically hints at the idea that there are ample signs suggesting this is acceptable. So you either establish an LLC in Montana or pay someone to do it for you, usually costing around a thousand dollars, correct?
Andrew: You could set it up yourself for considerably less, but yes, many small businesses offer these services for about a thousand bucks.
Kyle: So you either handle it independently or pay to have it done. Then you now have “I Hate Sales Taxes LLC” registered in Missoula, Montana, and you buy the vehicle through the LLC and register it under that name. I assume there’s some sort of LLC address or PO box to give it a Montana affiliation.
Andrew: A PO Box, yes.
Kyle: And that’s all, right? Are there any additional stipulations or hurdles these individuals have to clear to somewhat meet legal standards?
Andrew: There are a few. Insurance can be a tricky area with this. Some insurers may cover your vehicle based on its parking location rather than where it’s registered, yet it largely depends on the policy and insurer because a vehicle must be stationed somewhere to qualify for insurance based on its location. Moreover, each state has regulations concerning how long cars can remain in their territories under certain tags. For instance, here in New York, when I drove my cars from California, you technically have three months to transfer your tags. However, the LLC provides some protection, as laws are murkier for commercial entities.
Consider commercial trucks; they often have permanent license plates. For example, U-Haul registers its vehicles in Arizona, even if many don’t return there. So this corporate buffer protects individuals from getting into trouble over it. Nevertheless, if they were involved in an accident, I suspect numerous legal issues would arise.
Kyle: What’s with storage facilities in Montana holding people’s vehicles? Is it a cooling-off period they must remain in Montana for some duration?
Andrew: Yes, in a sense. Specifically regarding California versus Montana, if you’re aiming for maximum legitimacy, ideally, you shouldn’t bring a car purchased in Montana into California within 12 months. The rationale behind this rule? I’m not sure; perhaps it’s meant to deter the practice.
Kyle: Just adding a little friction, huh?
Andrew: Exactly, and that leads us to the case we’re discussing today. The reason these individuals faced trouble is that they allegedly forged forms indicating where the vehicle had been. This document, known as the bill of lading, details shipping origin and destination, and these dealers and buyers purportedly falsified such documents to claim the car was in Montana longer than it actually was. That’s how they ended up caught.
Kyle: It’s somewhat ironic, like catching Al Capone for tax evasion while he was a violent gangster and bootlegger. If they’d adhered to the cooling-off period and drove the car into California with a Montana plate as if it were theirs, they would still be violating the law because the car would be living in a state where it wasn’t registered for longer than permitted. Yet one major issue that trapped them was the fake cooling-off period. Had they completed it appropriately, they might have evaded the consequences.
Andrew: Yes, or at least received a far lesser reprimand. I mean, the Attorney General’s charges are pretty grave—failing to file sales tax is one matter, but perjury and money laundering are serious felonies that carry significant consequences. So while the shady use of tags is problematic, perjury is a real concern.
Kyle: This case involves wealthy individuals purchasing vehicles that cost millions—like a Porsche 918 Spider, McLaren Elva, Ferrari F12tdf, or Lamborghinis. But isn’t this loophole also exploited by those buying less costly vehicles?
Andrew: Yes, indeed. If you have something like a Nissan Skyline or an unusual import that can’t meet California emissions, this may serve as a workaround, especially if you’re located in a state where you wish to avoid taxes. There are valid reasons for setting up an LLC to protect yourself in various legal scenarios.
Kyle: As a California resident, I can confidently say the emissions testing can be a hassle. The fact that they test vehicles dating back to 1976 every two years means that cars failing smog checks can be rendered unusable in California. The minor number of old vehicles falling into that category contributes to less pollution than the multitude of newer cars in circulation.
So if you’re evaluating the situation and concluding, “What I intend to do is technically against the law, yet I’m not contributing significantly to the state’s emissions,” you might opt to register the vehicle in Montana where emissions testing is nonexistent. Additionally, for those importing vehicles from abroad, being compliant with California’s emissions is often impossible, so Montana becomes a reasonable option.
Andrew: Yes, my views on this are mixed. It undoubtedly resides in a gray area. In today’s internet climate, everything tends to shift toward black and white, but escaping taxes on a luxury item is separate from trying to navigate owning an unusual car that isn’t frequently used. Writing laws robust enough to encompass every scenario is quite challenging, but there are definitely levels to this.
Kyle: When a loophole is wide enough, anything able to pass through will do so. There’s no method to distinguish the genuine enthusiasts who merely desire a unique car from the wealthy seeking to avoid taxes. Why does Montana maintain this practice? What’s in it for them? It seems they’re irritating all the other states.
Andrew: Montana isn’t likely to close the loophole since they do benefit financially from these registrations, alongside the numerous small businesses thriving off this. They have absolutely no motivation to shut anything down. From their perspective, everyone legitimately registers their businesses here.
However, what might eventually transpire could be an interstate data sharing initiative. For example, Montana collaborates with Utah since California isn’t the sole state confronting this dilemma. Montana tags appear across the country. They have arrangements with Utah to exchange information on residency and LLC registrations. While I won’t go into extensive detail about that, they have mechanisms to determine whether someone is genuinely running a business in Montana or merely attempting to evade registration taxes.
Kyle: I wonder why Utah landed that favorable agreement.
Andrew: Right? Think about the complexities within California’s government compared to Utah’s. Utah’s officials have significantly fewer challenges, to put it plainly. They aren’t preoccupied with the broader issues that California faces.
Kyle: Indeed. Turning back to the case specifics, the California Attorney General’s office announced they’re losing $10 million annually. So how did this case come to light? What’s the timeline? Provide an outline of what these individuals engaged in.
Andrew: Sure. The California Attorney General’s office and law enforcement have been monitoring this for quite some time. They have established a task force referred to as True, which stands for Tax Recovery in the Underground Economy by the Department of Justice. It resembles a Jackie Chan movie, but it’s genuine.
They claim to have identified nearly 500 dealerships involved in around 2,500 dubious sales since 2023. They label them as suspicious, keeping an eye on them. To catch this particular group, they primarily focused on the aforementioned bill of lading forgery.
A few dealerships, some well-known names like a Ferrari dealership and a BMW dealer—not just obscure sketchy operations—were accused of producing false documents asserting that vehicles were in Montana when they were indeed in California. While the AG didn’t detail how they obtained the texts, it probably constitutes another podcast episode, but there’s a wealth of incriminating texts.
I’ll include requisite “allegedly” disclaimers, but they provided exchanges like, “Can you obtain my forged signature?” It was anything but discreet. Once this evidence accumulated, although there haven’t yet been convictions, it’s highly likely some individuals will face repercussions.
Kyle: We’ll include a link to the complaint in the show notes; it’s well worth reading in full. The texts from these individuals are especially amusing. It’s quite entertaining to see such messages in a formal legal document, as the contrast between their vocabulary and perceived intelligence is humorously stark against the typical legal jargon.
For instance, “Saved 70K. I can’t believe the registration lasts for five years. Unreal. Stupid California—I paid 3K to register a $600K car for five years. LOL in California, that’s about 75K for five years. Hella dumb.” And another: “I don’t want the state of California to be aware of this car.” Oh, well, they sure do now.
Andrew: I know, right? My favorite was, “I’m buying a car. Need to perform the Montana process. Woot, woot. This is amazing!!!!” Why can’t wealthy individuals communicate like normal people? It seems to be a lost art.
Kyle: We saw similar themes in the Epstein files. The emails of exceptionally powerful individuals often resemble the writings of a fifth grader. Psychologists would have a field day analyzing that.
Here’s another exchange I find amusing between two people—one being a vehicle owner and the other a dealer. “Do you have any clients with Montana plates?” “Yeah, a few.” “Have they encountered any issues?” “Not yet, but they’re always anxious, LOL.” You would be too if you were breaking the law! “Have any of them been stopped and received a ticket for the Montana plates?” No reply. Well, there you go.
Andrew: Exactly, it’s… If you were legitimately conducting business and driving your car from Montana to California, that would be acceptable. But if your goal is merely to save on a vehicle, especially something as trivial as a Mercedes GLE, that’s less acceptable.
Kyle: Breaking the law can only be deemed acceptable if it’s for a worthwhile purpose. That’s the takeaway here. So did they pursue both vehicle owners and dealers?
Andrew: Yes, both. They haven’t publicly stated, “This dealership has been closed because of this.” Instead, they’re focusing on individual actors. There’s one individual associated with sales, alongside numerous individuals on the purchasing side. I won’t reveal names since I prefer to avoid any unwanted attention, but they’re targeting individuals for now.
Kyle: I’m intrigued by your perspective on this. It seems like other forms of bad behavior—social media has really showcased this practice. As you mentioned, it’s been an open secret for numerous years, but more commentary arose over the last few years, especially following cases from various states, now culminating in a significant indictment from California. I think social media plays a notable role because it has brought this possibility to a much wider audience than those who would have learned through personal research or referring to others. A considerable number of wealthy individuals on social media are interested in trendy cars, as that attracts followers and engagement. So, people are incentivized within our current media landscape to exploit something like this.
Andrew: Yes, it’s both about the opportunity and potential to draw attention to yourself, honestly. I think many outsiders see a photo of a hypercar with Montana plates and don’t associate Montana with a high-value vehicle like a Ferrari F8. It’s eye-catching, which may spark curiosity.
If you’re inclined towards tax evasion, you might think, “How can I set this up?” Conversely, those possessing a more critical mindset toward wealth disparity might view this as another topic for grievance.
Kyle: It’s also surprising how a simple Google search for tips about registering a car in Montana yields a plentiful array of guides. We previously discussed the businesses in Montana that facilitate the LLC formation and registrations, aiding clients on the ground. Before our recording, I glanced around and found a site called webuyexotics.com, which essentially helps you sell your exotic automobile, whether to them or on consignment.
They even have a whole area titled registering a car in Montana, outlining the pros and cons. Pros include no hefty charges, savings on sales tax. They even lack sales tax and don’t require emissions testing. Cons, however? Well, it’s illegal. Actually, there’s a subsection that states whether Montana registration is legal for non-residents—“In short, it depends.”
So it depends if you’re utilizing the law rightfully or merely dodging taxes. A plethora of signs indicating its legitimacy exist, but if you’re not assessing it closely and you’re wealthy wanting to follow others on social media, you may encounter a site like this, thinking, “Oh, there’s a comprehensive guide. I’ll simply proceed with this.” Little does one recognize the legal nuances unless they dive into the specific laws of their state.
This situation reminds me of the Mercedes G Wagon loophole. We produced a YouTube video about this last year. A segment of U.S. tax code allows small business owners to write off equipment purchases, including vehicles, against their income, regardless of how much they pay upfront. So, purchasing a $50,000 tool, putting just $5,000 down, allows you to deduct the full $50,000 from your income, lowering your tax burden. For a vehicle to qualify, it must weigh between 6,000 and 14,000 pounds and be used 50% for business.
The Mercedes G Wagon fits this bill, and there’s no practical way to substantiate how someone is using that vehicle for half business and half personal use. While some enforcement exists, there are documented channels that people can exploit, and many take advantage of that. The G Wagon, in particular, is an expensive vehicle that remains eligible under those criteria.
In the same vein as the Montana loophole, a whole sector of accounting firms exists, possibly some law firms too, explaining, “Hey, this is how it functions. Here are the benefits and drawbacks.” Again, it’s pros and cons. Ultimately, it’s another illustration of a law that was established for a specific intention being utilized counter to its original purpose by individuals who likely cannot afford to avoid this loophole, and there remains no effective way to enforce this properly.
Andrew: Right. Especially in today’s climate, asserting that you possess a business is easier than ever. All it takes is saying, “I have a modeling business. Here, check out this million photos of me next to this vehicle.” Bam! Instant legitimacy.
Kyle: This is perhaps the most attention any of these cases have received, although it’s far from the first time a state has targeted individuals. Georgia pursued a similar case a few years back, and last year, YouTuber WhistlinDiesel—who boasts 10.5 million subscribers and is known for his outlandish antics—was indicted for felony tax evasion in… what was it? Tennessee? That’s his residence. It was the same situation concerning a Ferrari F8 Tributo he planned to destroy on his channel—he purchased it via the Montana loophole, got arrested, and it became a “government is targeting my favorite YouTuber!” saga. The reasons behind the case took a backseat to the controversy itself, yet it mirrors the issues facing the owners and dealers in the California case. Why do you think this California case has resonated more than past incidents? Is it due to the cumulative effect?
Andrew: Yes, they finally snagged a big fish, right? They’ve been investigating this for the past two to three years and probably devised strategies throughout this significant bust. Thus, it’s made a considerable impression now that law enforcement has the time to strategize and figure out how to catch individuals.
Kyle: Honestly, browsing through forums, social media comments, and articles on The Drive, many responses to these cases are filled with indignation. Numerous commenters express sentiments like, “Screw those wealthy individuals, go after them!” Yet many of these voices probably don’t exploit this loophole or register vehicles in Montana. They appreciate that others can but also object to a state attempting to reclaim taxes they never originally received. It’s a surprisingly polarizing response.
Andrew: Absolutely. This resonates in our society—many individuals at the economic margins rally for the wealthiest. It’s perplexing. The WhistlinDiesel case stirs mixed opinions from me; after all, he did use the car for a business-related purpose. Perhaps he was on sound ground.
Kyle: He wasn’t in Montana, but he genuinely had a business operation unlike many others.
Andrew: Exactly. So in that instance, I felt his case edged closer to legitimacy compared to numerous others. Nevertheless, his high profile certainly made him a notable target.
Kyle: That was his assertion: “They pursued me due to my following, enabling them to make an example of me, and they’ll regret doing so.” I imagine many of his subscribers—and possibly millions—rallied online against the state for this enforcement of the law, and rightfully so. Notably, the fact that WhistlinDiesel, a.k.a. Cody Detwiler, can argue he was comparatively closer to compliance due to using it for a business purpose underscores the ongoing confusion surrounding this matter, illustrating the varied opinions on the legality and acceptance of the law due to its inherent complexity.
Andrew: Our nation relies on vague law enforcement standards. Consider speed limits—does anyone strictly adhere? Certainly not. Yet, some face penalties. That’s how our system functions—it’s a peculiar reality of compliance versus transgression, with vast gray areas where individuals can maneuver beneath the radar.
Kyle: Especially in traffic; it does seem enough Montana-registered cars circulate freely, allowing many to evade scrutiny until… I bet some California individuals were stunned when they were indicted, particularly the vehicle owners who might genuinely think they were acting appropriately because this entire system appears to validate their actions. What’s the problem, right?
Andrew: It’ll be fascinating to observe the defense strategies; I anticipate some press releases will emerge. They could potentially set significant precedents. If the law aligns with law enforcement, perhaps we’ll see more comprehensive interstate DMV agreements, similar to the Utah collaboration. Conversely, should it go the opposite route, the implications might lessen significantly. I have ambivalent feelings on the matter; indeed, with fifty states in existence, why should you abide solely by a specific set of regulations?
Kyle: That complexity poses challenges. The varying state laws can cause frustration; while some diversity is beneficial, it also complicates situations, leading to convoluted expectations such as, “If you reside in a state, you should probably honor its tax requirements, and if you wish to avoid those taxes, consider living in a state without them.”
Andrew: Absolutely! And as you highlighted with emissions, the pollution from older cars is a mere fraction of the issue. Crafting laws that account for everyone becomes quite challenging. My stance is clear: individuals purchasing luxury vehicles should pay their state taxes without question.
Kyle: And if your finances hang on whether you can afford registration fees for a luxury car, perhaps reassess your priorities. If you’re pondering, “Should I allocate funds for my family or register my Porsche 918?”, then someone should assist you in making those financial decisions.
Andrew: Right. Is it food for my family or registering my exotic car? Please, someone lend a hand!
Kyle: So, returning to Montana, we briefly touched on this issue earlier, but it bears reiterating: Montana has no motivation to rectify this situation. I’d be intrigued to see the communications exchanged among Montana officials, including governors, legislators, DMV personnel, and others involved in facilitating this arrangement with states expressing, “That’s our revenue! What’s going on?” Yet, I can’t fathom what form of pressure other states could exert on Montana to initiate change.
Andrew: I’m not sure enforcing pressure is the answer. Perhaps an incentive would be required, such as, “Hey, we can offer you some financial benefits if you assist us in pinpointing the right individuals.” Because what consequences could California impose on Montana? It might require a gentler approach to foster cooperation. The prominent question becomes whether these lax tax regulations genuinely support business operations—what issues do they address, if any?
Kyle: After years of this, it clearly showcases Montana’s perspective: “Well, we profit from this arrangement, so why change?” They likely have a sizeable number of individuals with second homes there, which aligns with their initial intent—residency in another state while registering a vehicle in Montana. Even if they only occupy that home one month yearly, the vehicle remains registered statewide, eliminating the need to juggle out-of-state plates or transporting the vehicle back and forth.
There are logical foundations for why this law persists; however, the potential for misuse is glaring and substantiated. I doubt anyone can feasibly maintain this law in its current format without continuous exploitation.
Andrew: Isn’t it ironic that individuals often buy these luxury cars for ostentation, yet they prominently display the “I’m evading taxes” tag alongside their extravagant purchase? It piques one’s interest—purchasing a Lamborghini should convey wealth, yet they utilize a Montana tag to escape the tax burden. It’s perplexing and rather ironic.
Kyle: That Montana plate communicates: “I can easily afford this, but I refuse to contribute.”
Andrew: Exactly. So many people cheer this behavior, “Way to keep your cash and not share it!” It’s astounding how detached they are.
Kyle: I’m sure many listeners are contemplating: “The law permits this, and taxes are excessive across the board, so why is there such a fuss about this loophole?” Society significantly complicates matters, leading one to fear repercussions primarily if they get caught.
I’m not keen to dive into a philosophical debate regarding taxes, but it’s abundantly clear that individuals who benefit from state roads should contribute something towards maintaining them and the surrounding infrastructure. Those with cars registered in Montana are not contributing, despite being well-off enough to do so, creating a stark contradiction.
Andrew: The ultimate display of wealth would be residing in Iowa while solely registering everything in California and boldly declaring, “I’m contributing more taxes.” But this whole saga of tax evasion presents a convoluted dilemma. It just embodies our society’s conflicts.
Kyle: That sums up the Montana plates succinctly: “I’ve plenty to spare to buy this luxury, but I’m resolutely against giving back to the community.”
Andrew: Precisely! And a surprising number of individuals applaud such actions, asserting, “You’re wise to retain what you can!” They seem oblivious to the deeper implications.
Kyle: Many might contend that the existing law allows this loophole; thus, it’s unjust to chastise those engaging in activities others are also pursuing. However, the absence of legal repercussions only derives from the fear of exposure.
I don’t intend to get into an ideological tax discussion, but my conviction remains that residents benefiting from state infrastructure should contribute to its upkeep. If you’re driving a car registered in Montana, you are evading your responsibility, especially if that vehicle is a premium model, indicating your ability to contribute. This contrast is striking.
Andrew: The real display of wealth would be residing in Iowa while registering everything in California and confidently proclaiming, “You know what? I’ll take on additional taxes.” But this whole issue… It reflects many layers regarding the legal framework and the ongoing debate around fairness.