GoKawiilCalifornia enacts SB 1406, ending Montana LLC car-registration tax dodge
California's SB 1406, which took effect September 30, 2026, closes a loophole that let wealthy residents register vehicles to out-of-state shell companies—often Montana LLCs—to avoid paying California sales and use tax. The law expands the 'California-ness' test, previously applied only to corporations and LLCs, to also cover partnerships and limited partnerships used to shield vehicle ownership from taxation.
GoKawiil's interpretation of the reporting above, not reported fact.
The change targets a long-standing workaround where Californians avoided sales tax and smog/inspection requirements by registering cars to Montana entities with no real business presence there. By broadening which business structures must prove their out-of-state legitimacy, the state could make it significantly harder to legally dodge vehicle taxes through shell companies, though enforcement details remain to be seen.
- SB 1406 became law in California on September 30, 2026.
- It expands tax rules to cover partnerships and limited partnerships, not just corporations and LLCs.
- The law targets the practice of using out-of-state shell entities, often in Montana, to avoid California vehicle sales tax.
Source: thedrive.com — Byron Hurd, 2026-10-06
Published there as: “California Closed the Montana License Plate Loophole”
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