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I get asked from time to time about the so-called Montana License Plate Scam: Can you safely register your vehicle in Montana and drive it in your non-Montana home state? There are a couple problems which might crop up if you give it a try.

Montana has no sales or use tax and no vehicle inspections. So, an industry has sprung up to assist people from other states who want to take advantage of Montana’s laws while living elsewhere.

The scam works like this: You hire a Montana law firm to form a corporation or limited liability company (LLC) for you. You own the LLC outright. Your exotic or expensive car or RV is purchased by your LLC. The LLC registers and plates the vehicle in Montana. You pay no sales or use tax and then bring your car to whatever state you live in and drive the vehicle with tax-free impunity. The only downside is that you have to put an ugly Montana plate on your vehicle. But hey – you saved thousands of dollars!

Interestingly, even the websites of the companies that promote this scheme hint that what you are doing is illegal:

Sales tax is generally due in the state of registration. Your vehicles will be registered in Montana which has no sales tax. You will need to understand and comply with use tax laws in the states where the vehicles are located.

*Wink, Wink!*

As the attorney in this relationship, I have to be the one to tell you the bad news, and it’s twofold bad news. As noted, this maneuver is probably illegal in your state. Yes, I know, you are going to argue that “you” don’t own the car – the LLC does. And you are merely driving your “company car.” Even though the company is a sham set up for the sole purpose of evading taxes. Do a quick Google search and see the various people who ended up being audited trying to defend this scheme.

I am not the fun police so I will tell you that in many states, you can probably do the foregoing and skate for quite a while without getting caught. Here’s where I’d be worried even if I thought I could dodge the IRS.

Do you plan on insuring your vehicle? You have a choice: Tell the insurance company the truth (“I live in Michigan, drive the vehicle almost exclusively in Michigan, store it and park it in Michigan, but have Montana plates on it in the name of a sham LLC.”) If you tell them the truth, will they insure the car?

Or you could tell them anything other than the previous parenthetical sentence, which would be a lie.

You might never get in an accident. But if you do, that Montana plate will pop up. Like, in the police report. And an insurance adjuster, scrutinizing your claim might wonder what false statements you made on your insurance application. False statements which form the basis of the denial letter you will receive shortly in the mail.

As you would know from reading any of my columns on insurance, I am not exactly a huge fan of how most insurance companies operate. But I am the first to point out that 1.) they are necessary and 2.) they can rightfully deny a claim in most states if it is shown that the underlying policy was obtained through fraud, even if the underlying fraud has nothing to do with your claim.

Are state sales taxes and use taxes too high? That’s not the point. As I have noted in the past, the solution is to get the law changed. Not break the law because you don’t agree with it.