California has officially closed a controversial loophole that allowed some wealthy residents to avoid state taxes and registration fees by placing expensive vehicles under Montana-based companies. However, the decision has sparked a fierce argument over whether the practice represented legitimate tax avoidance or ordinary people being forced to escape excessive California fees.
Gov. Gavin Newsom signed legislation expanding who California can consider a resident for vehicle-tax purposes. The change targets residents who established limited liability companies in Montana—a state without general sales tax—and registered luxury vehicles through those companies despite keeping and driving them in California.
Under the new rules, the California Department of Tax and Fee Administration could impose liability if at least one company member is a California resident. Officials estimate that the scheme cost California approximately $20 million annually in lost revenue.
Many users responding to the news in the California Reddit thread celebrated the crackdown. “Tax avoiders/evaders should be prosecuted accordingly,” one commenter argued. Another suggested that the state impose a penalty worth “10X the amount of dodged tax.” One person claiming to have worked at a Mercedes dealership said Montana plates were incredibly common on expensive vehicles.
“About 50% of the higher-end Mercedes had the Montana plates,” the commenter recalled. “This is exactly what people say when we ask for rich people to pay their fair share.”
Some Locals Fight Back
Not everyone supported California’s decision. Several commenters argued that the state should examine why motorists were willing to establish companies hundreds of miles away simply to avoid its fees. “CA should lower its taxes,” one person wrote, claiming that annual registration can cost more than $1,000 for some vehicles.
Another commenter shared a more personal example: “Registering my 2005 F150 is still almost $500/yr. That’s ridiculous.” Others questioned whether the law would genuinely stop wealthy owners with access to lawyers and more sophisticated corporate arrangements. Despite that skepticism, supporters maintained that Californians who live, drive, and maintain their vehicles in the state should pay the same required taxes as everyone else.
The argument ultimately became about more than exotic cars. For supporters, closing the loophole represents basic fairness. For critics, it is another reminder of how costly it has become to own almost any vehicle in California.
