Sales Tax Savings With Montana LLCs? Don’t Do It

By Louis Vlahos on February 18, 2026

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LLCs Run Through It

What do you think of when someone mentions Montana? Is it the seemingly boundless landscape from which the largest land-locked state[i] derived its nickname, Big Sky Country?[ii] What about its Rocky Mountain national parks, like Glacier or Yellowstone?[iii]

Until recently, I had always equated Montana with rugged landscapes, honest outdoor living,[iv] flyfishing,[v] and my grandfather.[vi]

Of late, however, Montana, or more accurately, the use of Montana LLCs, has become synonymous with sales tax avoidance (or worse).

Before considering this apparent taint on Montana’s reputation, and to better understand how certain states are responding to their residents’ use of Montana LLCs, let’s briefly review the operation of sales taxes, generally.

The Sales Tax

The sales tax is generally imposed on the “retail sale” of tangible personal property.[vii]

In general, a sale at retail means any sale of tangible personal property to any person for any purpose other than for resale.

The sales tax is essentially a transaction tax, with the liability for the tax arising at the time of the transaction. The time[viii] or method[ix] of payment of the consideration is immaterial.

The tax is a “consumer tax” in that the person selling the property is required to collect the sales tax from the purchaser when collecting the sales price for the transaction (the retail sale) to which the tax applies.

The seller collects the tax as a trustee for, and on account of, the State; in other words, the sales tax is a “trust fund tax.” The tax is imposed on the sale of taxable property, but it is collected from the purchaser by the seller, and then held by the seller in trust for the State, until the seller remits the tax to the State.

Finally, the tax is a destination tax. The point of delivery or the point at which possession of the subject property is transferred by the seller to the purchaser determines the tax to be collected.

Specifically, when tangible personal property sold in one state is delivered to a purchaser in another state, the sale is generally exempt from the sales tax imposed by the state in which the seller is located.

However, because the out-of-state purchaser did not pay sales tax to the seller’s state, they may be required to pay use tax to the state in which the purchaser takes delivery of the property; typically, the purchaser’s state of residence.

Which brings us back to Montana, which is one of a small number of states that does not have a statewide general sales tax, the others being Alaska (for now),[x] Delaware, New Hampshire, and Oregon.[xi]

Can I Interest You in a Montana LLC?

It was reported last month that a large automobile dealer in Minnesota was charged with criminal tax evasion of the state’s motor vehicle excise tax.[xii]

According to law enforcement, the dealer in question allegedly was engaged in a scheme by which Minnesota residents acquired expensive automobiles from in-state dealers without paying the state’s applicable excise tax.

It appears that these “indirect” purchasers accomplished this “sleight of hand” by taking title to the vehicles in Montana LLCs – which were described as shell companies – and then registering the vehicles in Montana.

Of course, the beneficial owner of such an LLC enjoyed driving the vehicle in Minnesota.

A Destination Tax

You’ll recall that the sales tax is a destination tax and that Montana does not impose a sales tax on the purchase and sale of automobiles.

Thus, a sale and delivery of a vehicle by a Minnesota dealer to a Montana LLC appears on its face to be exempt from Minnesota’s sales or excise tax.

Unfortunately, Minnesota is not the only jurisdiction the residents of which have used Montana LLCs to acquire high-end automobiles without paying their state’s applicable sales tax (or other fee).

Just consider the number of vehicles registered in Montana.

Something’s Rotten

You’ll recall that Montana’s population is just over one million; of these individuals, approximately 880,000 are licensed drivers.

As of 2023, however, there were over 2.3 million vehicles registered in Montana.[xiii] In other words, the state had a vehicle-to-driver ratio of 2.68-to-1, the highest in the country;[xiv] the national average was 1.18-to-1.

Worse still, according to Bloomberg:[xv]

“Last year, [Montana] reported 10,757 registrations of vehicles made by Aston Martin, Bentley, Bugatti, Ferrari, Lamborghini, McLaren, Pagani, and Rolls Royce, according to Montana Motor Vehicle Division data obtained through an open records request. The nearby state of Washington has seven times the population but registered only 2,479 of the same high-end car brands, according to online data from its licensing department.”

Just think about the Fortune 500 companies that are headquartered in the Seattle metro area; by contrast, there are none in Montana.

“Accomplices”

Bloomberg also notes there are “nearly 200 Montana agents helping out-of-state owners create limited liability [companies] to shelter assets from sales taxes, registration fees, and environmental rules in the other 49 states.”[xvi]

Then there are other Montana-based businesses, like Dirt Legal, which urges the prospective buyer of an expensive vehicle to “Dive into the world of tax savings and hassle-free registration with our Montana LLC expertise.”[xvii] Dirt Legal even explains how it can guide the buyer through “the process” when dealing with a private seller instead of a dealership.[xviii]

Gotcha

In response to what, initially, was anecdotal evidence and blatant on-line solicitations, like the one described above, states that believe their sales tax revenues are being adversely affected by their residents’ use of Montana LLCs are launching data-sharing and enforcement campaigns in an effort to clamp down on the practice, and to collect what they claim are back taxes (plus interest and penalties) owing by those residents who have used Montana LLCs to acquire vehicles.[xix]

For example, California’s Department of Motor Vehicles is using surveillance systems and plate readers to search for Montana license plates and find tax violators.[xx] It has warned in-state dealers to accurately report sales, especially when vehicles are delivered out of state. It has also reminded consumers of their obligation to report and remit the state use tax for vehicles that were “acquired” outside California but that are operated within the state.[xxi]

Other states are targeting sham, or shell, Montana LLCs – entities that are owned by residents of such states, but which engage in no business within, and have no other nexus to, Montana beyond the registration of title to the vehicle in question.

Because the only apparent purpose for such an entity is to avoid the payment of sales tax, a state’s taxing authority may challenge the validity of such an LLC as having been formed for other than a bona fide business purpose and seek to collect the sales tax from the LLC’s member as the true or beneficial owner of the vehicle.

Enough is Enough

As if fancy automobiles weren’t bad enough, I’ve read stories about Montana LLCs being used to acquire RVs, boats, and aircraft, and I have heard solicitations for their use in the acquisition of jewelry and other luxury items (even designer clothes).[xxii]

C’mon already.

I remember a time, as a young associate, when New York State had employees visiting popular marinas and other public slips or docks in search of Delaware-registered yachts. As I recall, there were plenty of boat owners who may have avoided New York’s sales tax on the acquisition of their boat but never considered the state’s use tax notwithstanding they used their boats exclusively in New York.[xxiii]

The use of Montana LLCs may have only recently become the “fashionable” way to go to avoid the payment of sales tax on the purchase of expensive items, but there’s nothing new, or defensible, in the underlying concept.[xxiv]

This is just one of those situations for which one does not need a law degree to figure out that something is amiss. Indeed, any luxury retailer who sells otherwise taxable items to a Montana LLC without at least questioning the entity’s beneficial ownership is probably being complicit in the taxpayer’s improper avoidance of a tax obligation.

In any event, it was recently reported[xxv] that Montana may be considering the adoption of a 4 percent sales tax.[xxvi]

Stay tuned.

The opinions expressed herein are solely those of the author(s) and do not necessarily represent the views of the firm.

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[i] Most of the 41^st state is prairie land, even though its official name is derived from the Spanish word, montaña (mountain), for its rugged western topography.

Although it is the fourth largest state, it has a population of only just over one million people. The latter figure is significant, as we shall see shortly.

[ii] Actually, the title of a 1947 novel by American author A.B. Guthrie Jr. The same man who wrote the screenplay for the 1953 movie, Shane, starring Alan Ladd and Van Heflin. The cast also included Ben Johnson (one of my favorites – he had his breakout role as Sergeant Tyree in She Wore a Yellow Ribbon, starring The Duke) and Jack Palance.

[iii] Not the cable series featuring the Dutton family and its ranch. That said, we could sure use more John Duttons and Rip Wheelers in this country.

[iv] There is no cheating Mother Nature.

[v] If you haven’t read Norman Maclean’s novella, A River Runs Through It, please do. It’s set in Missoula, Montana, in the 1920s. Here’s a taste:

“Of course, now I am too old to be much of a fisherman, and now of course I usually fish the big waters alone, although some friends think I shouldn’t. Like many fly fishermen in western Montana where the summer days are almost Arctic in length, I often do not start fishing until the cool of the evening. Then in the Arctic half-light of the canyon, all existence fades to a being with my soul and memories and the sounds of the Big Blackfoot River and a four-count rhythm and the hope that a fish will rise.
Eventually, all things merge into one, and a river runs through it. The river was cut by the world’s great flood and runs over rocks from the basement of time. On some of the rocks are timeless raindrops. Under the rocks are the words, and some of the words are theirs.
I am haunted by waters.”

[vi] He was among the Greek immigrant laborers – mostly young, single men – who were recruited through the “padrone system” to work on building railroads in Montana during the turn of the 20^th Century.

[vii] Tangible personal property does not include real property or intangible personal property. The tax is also imposed with respect to certain services, with which we are not concerned in this post.

[viii] When a sale is made for which payment is not received at the time of delivery, the sale must still be reported on the sales tax return covering the period in which the sale is made, and the full amount of the tax must be remitted with the return. There is no installment reporting.

[ix] The consideration may take many forms, including money, notes, other property, and the assumption of liabilities.

[x] Alaska’s governor recently proposed legislation to enact a sales tax. SB 277. https://www.akleg.gov/basis/Bill/Detail/34?Root=SB%20227#tab2_4 . States continue to look for new sources of revenue.

[xi] https://archive.legmt.gov/content/Committees/Interim/2023-2024/Revenue/Meetings/September-2023/Montana-Taxes-%20Comparisons-2022.pdf#:~:text=Montana%20imposes%20taxes%20on%20property%2C%20natural%20resources%2C,items%2C%20but%20has%20no%20general%20sales%20tax.

[xii] https://news.bloombergtax.com/daily-tax-report-state/minnesota-auto-dealer-allegedly-used-montana-llcs-to-evade-taxes

[xiii] https://news.bloomberglaw.com/us-law-week/got-montana-plates-states-ramp-up-the-scrutiny-on-tax-dodgers

[xiv] https://www.fhwa.dot.gov/policyinformation/statistics/2023/mv1.cfm

[xv] https://news.bloomberglaw.com/us-law-week/got-montana-plates-states-ramp-up-the-scrutiny-on-tax-dodgers

[xvi] https://news.bloombergtax.com/daily-tax-report/got-montana-plates-states-ramp-up-the-scrutiny-on-tax-dodgers

[xvii] https://www.dirtlegal.com/blog/purchasing-a-vehicle-with-a-montana-llc-from-a-private-seller

[xviii] Hmm.

[xix] https://www.jalopnik.com/1849063/california-utah-cracking-down-montanta-registration-loophole/

[xx] According to California, approximately 10,000 vehicles worth almost $2 billion have been sold by California dealers to Montana LLCs since 2022. https://www.autoblog.com/news/utah-and-california-are-cracking-down-on-supercar-owners-skirting-taxes-with-loophole

[xxi] https://www.jalopnik.com/1849063/california-utah-cracking-down-montanta-registration-loophole/

[xxii] Check the internet – you can’t make this up.