More States Cracking Down on Tax Losses From Montana LLCs

At least four states are developing tougher enforcement strategies against the “Montana loophole,” which encourages drivers to register expensive assets in other states to skirt their in-state sales tax and vehicle registration obligations.

Lawmakers in Indiana and Missouri are advancing legislation cracking down on residents abusing a tax sheltering strategy by which motorists set up Montana limited liability companies to purchase cars, boats, recreational vehicles, and aircraft. Montana has no statewide sales tax and very low vehicle registration and renewal fees, causing thousands of non-Montana residents to plate their vehicles in the Big Sky state each year.

“It is very ...