Robinson said there is a \u201csignificant tax gap\u201d the state is looking to close through investigations.<\/p>\n
\u201cWe\u2019re talking about really large, hefty sales prices on these vehicles. So uncovering even a handful of them makes a large, large impact on our revenue for our state that provides vital services for Californians,\u201d Robinson said.<\/p>\n
![\"A](\"https:\/\/www.newsbeep.com\/us-ca\/wp-content\/uploads\/2026\/04\/1775211548_990_.jpeg\")
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A Gunther Werks Touring Turbo Edition Porsche 911 Coupe on display at the Quail Motorsports Gathering in Carmel in 2023. <\/p>\n
(David Paul Morris \/ Bloomberg via Getty Images)<\/p>\n
Under state law, residents are required to pay California sales tax on vehicles unless they are first used out of state and stay out of state for at least 12 months. Dealers are required to maintain records showing sales of vehicles so that authorities can ensure vehicles sold to buyers in another state are actually delivered there.<\/p>\n
Since 2023, California tax investigators have identified 500 California dealers involved in some 2,500 vehicle sales to customers claiming to have used the vehicle in Montana. These sales, many of which involve luxury or exotic cars, cost the state more than $10 million a year in lost tax revenue, the agency said.<\/p>\n
Investigators have grouped suspicious auto sales by location, listing the top 10 cities where such sales have taken place. Beverly Hills had the highest number, with 416. Costa Mesa followed with 359, Van Nuys with 273 and San Diego with 269. Irvine, Santa Monica and Newport Beach also made the list.<\/p>\n
And earlier this year, the state\u2019s Department of Justice charged 14 people \u2014 including auto dealers and customers purchasing cars \u2014 for concealing the purchase of more than $20 million worth of high-end vehicles including Ferraris, Porsches and Lamborghinis, and evading upward of $1.8 million in state taxes. <\/p>\n
The criminal complaint, filed in February, lists more than 50 charges, including conspiracy to commit tax evasion, filing false sales tax returns, money laundering and perjury. A general manager and another employee at San Francisco Exotic Cars in San Rafael were named in the complaint, according to the dealership staff directory.<\/p>\n
In text messages, defendants explicitly sought to conceal their purchases, according to the criminal complaint.<\/p>\n
\u201cDon\u2019t want the state of California to know anything about this car,\u201d one defendant in Santa Clara County said in message to another defendant, who was allegedly involved in the logistics of the transport of vehicles and preparation of fraudulent documents. <\/p>\n
The defendant went on to ask whether any customers with Montana license plates \u201chad any issues.\u201d The defendant handling the logistics and documents replied \u201cNot yet\u201d and added: \u201cBut they are always paranoid lol.\u201d<\/p>\n
\u201cWe need to ship a 488 pista [Ferarri] from San Mateo to Campbell but on the bill Of lading put it\u2019s going to Montana,\u201d another defendant said in a message. \u201cIs that doable lol.\u201d<\/p>\n
Yet another defendant, who according to the complaint bought a Lamborghini worth hundreds of thousands of dollars, gloated about the avoided fees.<\/p>\n
\u201c70k saved \u2014 I can\u2019t believe [Montana] registration lasts for 5 years \u2014 that\u2019s crazy,\u201d the defendant said in a text. \u201cStupid California. Paid 3k to own a 600k car for 5 years \u2014 lol in Cali that\u2019s like 75k for 5 years. Hella dumb.\u201d<\/p>\n
That defendant, according to the complaint, failed to report and pay $38,094 in sales tax.<\/p>\n
San Francisco Exotic Cars did not immediately respond to a request for comment.<\/p>\n
Mark Milton, managing attorney at Milton Law Group in Missouri, said people should be cautious of tax shelters that sound too good to be true. Milton said he has had clients who have received bills for unpaid sales and personal property taxes after getting pulled over on the highway.<\/p>\n
He said there are situations where one could legitimately have Montana plates, but that is different from those \u201cordering an LLC over the internet just for the purpose of avoiding California taxes.\u201d<\/p>\n
\u201cIf you have nexus to Montana, like if you own property there, or you have a second home, or something like that, you have a better defense,\u201d Milton said. \u201cIt\u2019s a very case-by-case basis.\u201d<\/p>\n
Milton explained that some dealers get involved because it may more easily allow them to facilitate sales if they can help customers avoid hefty taxes. Kickbacks in theory could be involved as well, he said.<\/p>\n
He said some who participate in such schemes might \u201cthink there\u2019s nothing wrong with it\u201d because some attorneys advertise the service and tell them it\u2019s aboveboard.<\/p>\n
A quick internet search reveals a cottage industry of sorts in Montana seeking to help people with such LLCs.<\/p>\n
An FAQ on the website of a law office based in Missoula, for example, answers the question \u201cIs this legal?\u201d by stating that the scheme is in fact legal \u201cas long as you meet and follow your state\u2019s laws and regulations.\u201d<\/p>\n
\u201cThe conditions and law vary from state to state. Virtually every state has statutes that can make this available to you. Please contact our office for more information,\u201d the website of Bennett Law Office states.<\/p>\n
Thad Brinkman, an attorney with the firm, said it\u2019s \u201ca big hurdle\u201d that California law requires the vehicle be delivered outside of the state of California and remain outside of the state. <\/p>\n
Therefore, Brinkman said, many clients are people who are buying a car for collection or investment purposes, rather than for use, so they can more easily store the vehicle outside of California. Some, for example, might be purchasing an RV to travel outside of California when they retire, he said.<\/p>\n
If people actually keep the vehicle out of state, Brinkman said, there shouldn\u2019t be any reason for authorities to go after them for tax evasion.<\/p>\n
But California lawmakers are seeking to the tighten rules. <\/p>\n
State Sen. Jerry McNerney, (D-Pleasanton) this year introduced a bill <\/a>that aims to develop criteria to help label an LLC as a shell company involved in a potential tax evasion scheme. If the LLC lacks a specific business activity or purpose, fails to maintain a physical location outside California, fails to employ people, or fails to file federal tax returns in another state, it could be considered as evidence, according to the proposed law.<\/p>\n