California authorities say a group of luxury car buyers orchestrated a scheme to avoid more than $1.8 million in state taxes by registering high-end vehicles outside the state while actually driving and storing them in California.
California Attorney General Rob Bonta announced March 6 that 14 individuals have been charged in a 56-count criminal complaint alleging conspiracy, filing false sales-tax returns, failing to file tax returns, perjury and money laundering tied to the purchases of more than $20 million in exotic vehicles, according to the AG's press release from the California Department of Justice.
The case stems from a multi-agency investigation involving the California Department of Justice, the California Department of Motor Vehicles and the California Department of Tax and Fee Administration.
According to the attorney general’s office, the investigation found that beginning in 2018 the defendants allegedly submitted false documents claiming that luxury vehicles were purchased for use outside California. Authorities say those documents included tax forms, DMV paperwork and shipping records intended to make it appear the vehicles had been delivered to other states.
In reality, investigators allege the vehicles were delivered, driven and stored within California while avoiding the state’s sales taxes and registration fees.
Among the vehicles cited in the complaint are some of the world’s most expensive supercars, including a $1.8 million McLaren Elva, a $1.5 million Porsche 918 Spyder and a $1.26 million Ferrari F12tdf, according to the attorney general’s office.
“When bad actors abuse legal loopholes and submit fraudulent documents to evade their obligations, the California Department of Justice will not stand idly by,” Bonta said in announcing the charges. He added that unpaid taxes ultimately reduce funding available for public services such as transportation and schools.
Authorities say the case highlights a broader enforcement effort targeting what has become widely known as the “Montana loophole,” a strategy some owners use to avoid sales tax on expensive vehicles.
The approach typically involves forming a limited liability company in Montana, a state with no statewide sales tax, and registering the vehicle there even if the owner lives elsewhere. The tactic has become especially popular among buyers of exotic or collector vehicles because the potential tax savings can reach tens of thousands of dollars — or far more — depending on the price of the car.
However, California law generally requires residents to pay sales or use tax when a vehicle is purchased for use in the state, even if it is initially registered elsewhere.
According to Road & Track, California officials have intensified enforcement efforts in recent years to identify vehicles that are registered out of state but appear to be operating regularly within California.
Investigators have used a variety of tools, including license-plate readers, DMV data analysis and cross-agency information sharing, to track vehicles that may have been improperly registered outside the state.
State agencies say the crackdown has already produced results. Since 2023, the California DMV has opened more than 80 investigations into suspected fraudulent vehicle registrations and recovered roughly $2.3 million in taxes and fees owed to the state, according to the attorney general’s office.
The California Department of Tax and Fee Administration has also been auditing vehicle transactions and reviewing sales tied to out-of-state registrations, particularly when expensive vehicles are purchased by California residents.
Officials say the effort is aimed not only at vehicle owners but also at dealers who might knowingly facilitate questionable transactions. The tax agency has warned that dealerships could face liability if they fail to maintain proper documentation showing that vehicles sold to out-of-state buyers were actually delivered and used outside California.
For now, the 14 defendants face criminal charges but are presumed innocent unless proven guilty in court.
State officials say the case serves as a reminder that attempts to avoid sales taxes on luxury vehicles by registering them elsewhere are drawing increasing scrutiny, particularly when million-dollar supercars with out-of-state plates are regularly seen driving on California roads.
Photos Courtesy of California AG Rob Bonta/Facebook.
