South Dakota rakes in some extra cash by allowing out-of-staters to license their cars in South Dakota and avoid their higher home-state fees. In 2024, Senator Randy Deibert (R-31/Spearfish) pushed Senate Bill 112 through the Legislature to impose a $100 fee on folks licensing cars and boats but not possessing a South Dakota driver license or physical address in state. That extra $100 likely makes a South Dakota plate more expensive for non-residents than their home-state plates in most states, with the notable exceptions of Hawaii, Alaska, Montana, New York, and California.
But Wwe may see fewer fancy cars from out of state with SD plates thanks to a new push from California to crack down on what they call the “Montana loophole”, which unscrupulous buyers use to avoid paying California tax on their luxury cars:
The practice typically involves establishing a limited liability company in a state like Montana, which does not levy sales or vehicle property taxes. Buyers purchase exotic or luxury vehicles through these corporate entities to avoid paying high home-state levies, prompting regional authorities like Utah and California to coordinate cross-border enforcement audits.
State investigations have revealed thousands of questionable dealership transactions tied to remote entities. According to tax officials, exotic car owners have collectively skirted millions in registration fees and local sales taxes through these arrangements.
To address the issue legislatively, a proposed bill (SB 1406) by Sen. Jerry McNerney (D) specifically targets the Montana loophole, which accounts for approximately $20 million annually in lost tax revenue for California according to state estimates. Californians taking advantage of the loophole purchase and register vehicles through limited liability companies formed in Montana to avoid sales tax and registration fees at home. Reviewing the Montana loophole shows that while forming an out-of-state company remains permissible for vehicles legitimately garaged elsewhere, prosecutors argue that utilizing these corporate shells for cars permanently housed in California constitutes tax evasion [Leroy Marion, “California Just Closed the Montana License Plate Loophole,” Autoblog, 2026.10.02].
South Dakota’s business filings are not out of proportion to its population the way Montana’s are. Still, South Dakota receives thousands of LLC filings each year; it would be interesting to see how many of them might turn up in California’s audit of Ferrari and Lamborghini registrations.