Jay Leno has amassed a legendary car collection and lent his name to a recent California law easing smog-check rules for some classics. But there's one break for wealthy car owners he has little sympathy for: Montana license plates.
The comedian, whose Big Dog Garage in Burbank houses everything from century-old vehicles powered by steam to Bugattis and a McLaren F1 car, is siding with California tax authorities as they tighten the rules on luxury-car enthusiasts who use Big Sky tags to cut their bills.
"If you can afford the car, you probably can afford the tax," Leno said in an interview. "California is ridiculously expensive to live in, but we want to live here."
Leno is lending a prominent voice to a crackdown spreading across the US. States from Utah to Maryland are getting tough with residents who register vehicles elsewhere to avoid taxes and fees at home. Now California is joining the push and setting its sights on the "Montana loophole," which lawmakers say is costing the state $20 million a year in lost revenue.
Evidence of what Leno is talking about was on display last month at Monterey Car Week, when some of the world's rarest and most expensive cars descended on the California coast. Montana plates adorned Koenigsegg supercars, old Land Rover Defenders and Lamborghini Countachs.
Connor Wohl spotted one on a Ferrari 288 GTO, the limited-production 1980s car that now can command prices of more than $6 million.
"Given how rare and valuable those cars are, it certainly stood out," said Wohl, co-founder of Manhattan Beach Cars and Coffee in El Segundo, California.
Montana, a state with about 1.1 million people, had more than 2.4 million registered vehicles for just 879,000 licensed drivers in 2024. That works out to almost three vehicles per driver — the highest in the country and more than twice the U.S. average, according to a Bloomberg analysis of Federal Highway Administration data.
Lawmakers in California, with a population of around 39.5 million, argue that some residents are improperly putting legal ownership of a vehicle in the hands of out-of-state entities often based in Montana. The California legislature passed a
Avoiding the state's base sales and use tax rate of 7.25% would translate into savings of $435,000 on a $6 million car. Montana
"It's a scam in my mind," said California State Senator Jerry McNerney, the author of the bill, which has now gone to Governor Gavin Newsom's desk. "Let's close this loophole and make people pay their share."
The practice is legal under certain circumstances. But with tax authorities bearing down, few owners of collectible cars are keen to discuss their use of Montana plates. Luxury-automobile clubs from Los Angeles to Monterey to Napa Valley didn't respond to requests for comment.
At AutoTalent in Los Angeles County, which sells specialty parts for Ferraris, Lamborghinis, Porsches and other makes, Golan Haiem said the sales tax can make a real difference for those frequently flipping collectible cars.
"These cars are like stocks, going up and down like crazy," Haiem said, adding that many owners buy and sell several cars a year. "The difference maker to break even or even make a little profit is that sales tax."
That rankles gearheads like Leno. The former host of The Tonight Show will often take great expense to restore vehicles and keep them operational, a process displayed on
"It just seems like a real short-term solution, and I find a lot of the real car enthusiasts don't really do it," he said. "It's guys that want to have something fancy, some high-powered car, and they don't use it that much."
Back taxes
The legislation approved last month expands the definition of who counts as a state resident to include a shell company in which at least one member of the business lives in California. It also authorizes the state to impose tax liabilities on the members of such a company.
Other states are making similar moves. In Utah, State Senator Brady Brammer authored legislation targeting Montana plates,
On the East Coast, Maryland is targeting vehicles with Virginia tags, giving residents
In California, Montana-plated vehicles aren't automatically breaking the rules. Residents can generally avoid California tax on vehicles purchased for use elsewhere, including by keeping them outside the state for at least 12 months.
"It really ties our hands," said Dennis David, a technical adviser at the California Department of Tax and Fee Administration.
Montana has a cottage industry for helping out-of-staters form companies to buy vehicles. One such firm, Montana Corporate, has 5,000 active clients, and Chief Executive Officer
Only two clients have been audited by their home state's tax authorities during the 13 years since McCluskey took the business over from her parents, she said, emphasizing the company's care with the legal details. Even with potential new restrictions, she said she sees little risk for car owners who follow the rules to the letter.
"We've had a lot of clients for a lot of years that have been driving around without any sort of problems," McCluskey said. "I don't want to sound cavalier, but I don't take a lot of those threats super seriously."
California has already been investigating luxury cars with plates from Montana, whose state capital of Helena is more than 16 hours by car from San Francisco or Los Angeles.
David's team recently assessed more than $600,000 in unpaid taxes and fees after probing a Montana company with nine high-end vehicles including eight Ferraris valued at a combined $8 million.
"No one's driving a Ferrari or Lamborghini in Montana on those roads, especially when half the year is snow," said Robert Wellman, an investigator at California's Department of Motor Vehicles.
Paying back taxes isn't the only penalty. In March, California brought criminal charges against 14 people they claimed dodged
Leno, whose collection spans more than 300 vehicles, offered some advice for fellow collectors tempted by the savings.
"It's not a smart move," the comedian said. "Sooner or later you're going to get caught."
