KSL INVESTIGATE
UPDATED: FEBRUARY 20, 2023 AT 10:14 PM
SALT LAKE CITY — Have you ever played the license plate game with the kids, where you count the out-of-state plates?
Well, we drove along the Wasatch Front and saw more than a few Montana plates. Of course, these vehicles could belong to people in Kalispell, Billings or Deer Lodge. But not all the dishes we’ve seen can be on the up and up.
For some, it can be a loophole to avoid taxes.
Skip the sales tax
“Montana doesn’t actually have a sales tax on vehicles,” said Jayce Watkins, an Uber driver who registered two new vehicles he bought in Utah with Montana plates.
“This is a money saver, it’s all about money,” Watkins said.
Watkins said he paid $125,000 in Utah for the two cars. In Salt Lake County, the combined state, county and local sales tax rate is 7.25%. Multiply $125.00 by 7.25% and the total tax comes to $9,063. He said the Montana registration cost him $400 to $600 more for the combined vehicles than what he would have paid in Utah, but he still saved more than $8,000.
“I run that system really well,” Watkins said.
He has since lost one car in an accident and registered the other in Utah.
Shell companies and other loopholes
“Whoa, that’s a trap! Isn’t that a trap?” we challenged Watkins.
“You know what? If the shoe fits,” he replied.
Watkins argued that he followed Montana law and believes he did nothing wrong.
“I did have a residence [in Montana]. I had legal formalities, went into the DMV, showed them my lease, they let me register a vehicle,” Watkins explained.
But not everyone who does this maneuver has a place in Montana. Some open a shell company, an LLC in Montana. In fact, we’ve found a bunch of companies that will do it for you. Your Montana LLC then buys the car, registers it, and drives it around Utah as your company car.
“The tax laws and the tax loopholes that are there are very big,” Watkins said.
But is any loophole legal for Utahns to use to get Montana plates?
Jason Gardner of the Utah Division of Motor Vehicle Enforcement says the law is clear. “It creates the illusion that they are actually domiciled in another state, but the law does not.”
“The law specifically says that if a business entity owns a vehicle and operates that vehicle primarily in Utah, the same standard applies,” he explained. “This business entity is also considered a Utah domicile or Utah resident for registration purposes.”
Okay, maybe not clear, unless you’re fluent. Basically, Utah law says that if you or your Montana LLC buys a car that is primarily used and resides in Utah, the sales tax must be paid in Utah and must also be registered here.
Gardner admits it’s a law that’s frequently broken.
“There’s a lot of money that’s being lost to the state in sales tax that would otherwise be collected on these vehicles,” he said.
Not just about sales tax
And it’s not always just about avoiding sales tax.
You’ll usually see Montana plates on high-end cars, big, expensive trucks, or RVs, but not always. We spotted an older model Toyota RAV 4 with a Montana plate locked in a license plate frame at a Utah car dealership.
Because Montana doesn’t have emissions testing, a car bought in Murray can be put 530 miles away in Missoula without ever leaving Utah.
The lack of emissions testing is another reason some Utah drivers get Montana plates. A car deemed too polluting for Utah’s emissions-requiring counties can skip smog tests but still be registered through the Montana DMV.
And there is another potentially broken law. Once you are considered a Utah resident, you have 60 days to get Utah plates.
Get caught breaking Utah registration law and you might really wish you were in Montana.
“If a person is found to have . the amount of sales tax that has not been paid.” Gardner said. “So basically double sales tax.”
Execution Traffic Tables
But the government cannot specify the magnitude of this scheme, because it is very difficult to apply.
“These are people who have no interaction with the (Utah) DMV, because by nature, they’re interacting with the Montana DMV, not with us,” Gardner said. “And so we don’t really know what’s out there.”
Also, how can a traffic cop know if a car he sees with Montana plates is primarily used in Utah or a bona fide Montanan passing by?
“One hundred percent. That’s exactly one of the challenges we have in enforcing this law,” Gardner said.
As for Jayce Watkins, he doesn’t think the app is the answer.
“Get them to change the sales tax,” he told us, saying that with the average car selling for $50,000, sales taxes in Utah are too high.
“These vehicles are our second biggest expense, and for some, their biggest expense. We don’t tax houses other than property taxes. So why shouldn’t we just do a property tax on sales tax accounts?’ he argued.
Insurance implications
Many insurers aren’t fans of drivers who get out-of-state plates. Some may refuse to pay a claim if they find the car resides in a different location than stated on the policy.