California Looks To Close The Tax Loophole On Montana Supercar Plates Scheme

You wouldn't think that billionaire-loving California governor Gavin Newsom would ever do anything to upset his wealthy friends, but believe it or not, California has actually followed through on its plans to crack down on rich tax cheats registering their cars in Montana. Late last month, the state charged 14 defendants with conspiracy to commit tax evasion, filing false sales tax returns, money laundering, and perjury, over accusations that they worked to hide more than $20 million in car sales from the state and avoid paying nearly $2 million in taxes. 

According to the New York Times, the state's investigation turned up more than 2,500 sales since 2023, involving hundreds of dealerships, to owners who registered the cars in Montana but stored and drove them in California. All together, those cars accounted for about $10 million in unpaid taxes. Unpaid taxes that the state would now like to collect. It's also working to cut off ongoing fraud by looking at every vehicle sale to buyers claiming to live in Montana to determine whether the sale is legitimate or not. 

The 14 people charged in the latest case aren't the only ones the state has been going after, either. Since 2023, California has reportedly opened at least 81 separate investigations and found 601 fraudulently registered vehicles. That, in turn, has allowed the state to recover a reported $2.3 million in unpaid taxes and fees. 

In partnership with the Department of Motor Vehicles, the California Department of Tax and Fee Administration has also published a list of the cities where they flagged the most suspicious sales, and what do you know, Beverly Hills is number one, with 416 suspicious sales. Costa Mesa wasn't far behind with 359, while Van Nuys is third with 273, and San Diego is fourth with 269.

There are, of course, laws in place that are supposed to prevent someone who lives in a state such as California from buying a car, registering it in a low-tax state they don't live in, and then driving their new car on out-of-state plates. In fact, dealers in California are already required to track their sales and maintain proper records to ensure out-of-state sales are actually delivered out of state. But when there's money to be made, you're bound to find people who are willing to break the law, and the state alleges that's exactly what happened here.

The investigators claim to have found evidence that dealership employees conspired with customers and shipping agents to facilitate the fraud. In this particular case, prosecutors obtained a treasure trove of text messages between the accused co-conspirators that shows them discussing their crimes in surprisingly plain language. 

That includes texts such as, "Lana made me provide a fake bill of lading which cost $200 but did allow me to pickup the Urus," "don't want the state of California to know anything about this car," and, "70k saved — I can't believe the registration lasts for 5 years — that's crazy. Stupid California. Paid 3k to own a 600k car for 5 years — lol in Cali that's like 75k for 5 years. Hella dumb. Good we bought the lake Oswego house."

These weren't cheap cars we're talking about here, either. As part of the scheme, those charged are accused of hiding the sale of a McLaren Elva worth $1.8 million, Porsche 918 Spyder worth $1.5 million, Ferrari F12tdf worth $1.26 million, and more. And as the NYT points out, those wealthy buyers can save some real money if they manage to avoid paying California's sales taxes. On a $1 million car, the savings are more than $70,000.

"When bad actors abuse legal loopholes and submit fraudulent documents to evade their obligations, the California Department of Justice will not stand idly by," California's Attorney General Rob Bonta said in a statement. "Every dollar of unpaid taxes is a dollar taken from California's roads, schools and the vital services our communities rely on."

It's not like these people can't afford it. They just don't want to pay into the system that helped make them rich in the first place. But while Montana gets most of the headlines when it comes to vehicular tax fraud, don't think you can escape scrutiny by pretending to live in a different state that doesn't charge sales tax. California has its eye on sales in states such as Alaska, Delaware, New Hampshire, and Oregon, too. 

California isn't the only state going after wealthy residents registering their cars in other states, either. Earlier this year, Tennessee resident and YouTuber Cody "WhistlinDiesel" Detwiler found himself in handcuffs after being "indicted on charges of tax evasion and filing a false sales tax return." That arrest also came only months after Detwiler was arrested the first time on tax evasion charges related to a Ferrari he had registered in Montana.