We’re sure you’ve seen a fair share of luxury cars cruising on the highway. But have you ever noticed its registration plates? When it comes to exotic vehicles, it’s common to see out-of-state license plates.
Especially in densely populated cities like LA, New York, Chicago, or Miami, you’ll notice that a lot of cars don plates from states like Vermont, Delaware, New Hampshire, or more specifically, Montana.
Is there a legitimate reason why car owners do this? Or do they just slap on a random out-of-state license plate for fun? Of course, the fact that this is such a common occurrence proves that there are several big reasons why everybody wants to register their car in Montana.
Now, this might sound too good to be true …
Registering your luxury car with Montana plates — how can that possibly be legal? While it is illegal to falsify personal information, like your residing address, there is nothing illegal about opening a Montana LLC, purchasing your car through that company, and operating your vehicle in a different state.
However, it’s not quite as simple as it sounds, and many car owners have gotten themselves into legal trouble trying this tactic without assistance from a law firm. That’s why it’s important to hire a professional attorney before taking any action.
You should then consult with your lawyer on setting up a Montana LLC, or what should more appropriately be called a “shell company,” in this case. A shell company is simply a company with no significant assets and no operating business practices. Purchasing and assigning your new car to this company enables you to legally register your vehicle with Montana license plates and drive it in another state.
Of course, that begs the next question: Why Montana?
It’s worth mentioning that not all vehicles are suited for out-of-state registration. When a wealthier person purchases a multi-million dollar supercar like a Ferrari or McLaren, the taxes and fees can be quite cumbersome.
And when we say cumbersome, we mean hundreds of thousands of dollars. But what if there was a way where you only had to pay a few thousand dollars in taxes and fees? Enter, Montana Car Registration. The biggest reason why people register their car in Montana is that the state requires no sales tax on personal property — which includes your luxury vehicle.
Of course, this benefit only significantly impacts supercar-owners; if you own a $20,000 vehicle, it would cost more to set up and manage the LLC — or your “shell company” — than it would be in saving you in taxes and fees. For Montana car registration to even work, you have to have a valuable enough vehicle, which is why many people see this tactic as reserved for wealthier car owners.
Above, we mentioned that avoiding sales tax is the biggest motivation for car owners registering their car in Montana. Sales tax is the amount of money local and state governments will charge upon the sale of goods or services. While each state’s sale tax rate differs, an overall rule is that the higher the price of an item, the higher its sales tax.
It’s no secret that the taxes and fees that come with the purchase of a luxury car can be a burden. Say you live in New York City, which has a sales tax rate of 8.875%. Purchasing a luxury car like a $1.2 million McLaren P1 would mean you would have to pay $106,500 in taxes and fees — and it doesn’t take a genius to figure out that that’s no small sum.
But, suppose you purchased that car through your newly established LLC in Montana — you’d only have to pay a couple of thousand dollars in licensing and registration fees.
Of course, it should come as no surprise that some people don’t approve of this Montana LLC tactic, but many Montana-based lawyers will say this is a smart move for wealthy car owners looking to cut back on those extra payments. However, it’s worth keeping in mind that Montana is the only state that doesn’t demand sales tax on its residents’ vehicles.
Another huge benefit to registering your car in Montana is there are no annual inspections — including smog/emissions tests. While the cost for these test varies from state to state, a standard car inspection should cost anywhere between $150 to $250, which can additional $60 for a smog or emissions test. A thorough inspection of more complex (aka, luxury) cars could cost an upwards of $300 or more, and the same goes for a smog or emissions test.
And that doesn’t even cover all inspections. There are several factors that weigh into the total cost of a car inspection, and rolling up to a mechanic shop with a multi-million dollar supercar car will only result in a higher inspection cost. Then, once you consider that this is an annual requirement for most states, that total cost quickly accumulates.
Fortunately, Montana does not require car owners to conduct yearly inspections or emissions tests because the state doesn’t have enough metropolitan areas where the air quality does not meet the federal government’s standards, as outlined in the 1990 Clean Air Act.
Buying a car isn’t just about the cost of the car itself — you also have to factor in the licensing and registration fees. In addition to no sales tax and no annual inspection requirements, Montana also has the benefit of low licensing and registration fees.
The cost of your licensing and registration fee will depend on the age of your newly purchased car. As a general rule of thumb, the older the age of the car, the less expensive the registration fee.
Vehicles aged 0-4 years have a registration fee is $217, and for cars 5-10 years old, the registration fee is $87.50. Any vehicle that is 11 years or older requires a one-time flat fee registration of just $28.
Secondly, there are three renewal and registration variations. The 12-month registration states that the car owner must pay the registration fee, county option tax, and all other registration and special plate fees for the period of 12 months.
The 24-month registration is essentially the same as the 12-month registration option, minus the 12-month licensing fee and adding any special plate fees for the two-year period.
The permanent registration option is available only for car owners of smaller vehicles that are over 11 years old. Since this is a permanent registration, there is no renewal required unless you decide to change the car title.
The fees for a permanent registration are slightly different, including $10 Montana Highway Patrol Salary, Retention fee, county tax, a $9 optional state parks support, registration rate, and a $5 insurance verification fee.
Unfortunately, not everyone is keen on out-of-state Montana car registration — especially lawmakers. Back in 2017, Montana legislators tried proposing a sales tax of .08 to 1 percent on cars and recreational vehicles worth over $150,000.
“Up until now, many exotic car owners have gotten around sales tax by simply registering their vehicles with law firms that create special Limited Liability Companies,” states an article from April of 2017. “Now, as a part of House Bill 650, owners of exotic cars valued at over $150,000 may soon have to pay a one percent annual tax.”
Dubbed by some legislators as the “Ferrari Tax,” this proposed tax was targeted specially at out-of-state car owners looking to benefit off the no sales tax rule in Montana. However, a conference committee of legislators decided to scale back after car and RV dealerships became vocal about their strong objection to the newly proposed tax.
Since then, no real action has been taken against out-of-state Montana car owners, and people continue to register their vehicles in Montana.
Now that you’re aware of all the benefits of registering your car in Montana, you probably want to know how to obtain a Montana license plate of your own. Though we briefly touched on the process at the beginning of this article, we still advise that you seek advice from a professional attorney before taking any action. Your lawyer should walk you through the necessary steps to legally obtain a Montana license plate for your car.
Then, you can consult them as you set up your Montana LLC and go about purchasing your vehicle through the LLC. It’s also worth noting that like lawmakers, not all insurance companies are keen on this tactic, either.
It’s possible that your insurance company won’t accept any claims you make because they’ll notice that you’re operating your Montana registered vehicle in a completely different state. However, when it comes to luxury cars, the chances of this happening are low, and auto insurance companies should have no qualms about accepting any claims.
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