California Use Tax Audits of Vehicles Not Paying DMV Fees

If you purchase an item out of state without paying sales tax, California can impose an use tax if the item is used in California. Under state law, residents owe California sales tax on vehicles that are not first used and kept out of state for at least 12 months. 

In addition, if the car is used in CA, the car should pay the CA DMV registration.

California and the DMV are cracking down on autos. The penalties for Californians fraudulently registering a car out of state are not insignificant. Buyers who use the Montana loophole and fraudulently claim their vehicles are being used outside California can face substantial financial penalties, including 50% of the tax on the purchase price.

CDTFA has opened more than 400 investigations into high-end automobile purchasers and begun nearly 300 audits of dealers related to vehicle sales to no-tax states, including Montana.

The DMV has pursued 81 criminal investigations dating back to June 2023, identifying 601 fraudulently registered vehicles and recovering $2.3 million in registration and taxes for the state. DMV investigators are continuing to pursue those who are evading the law by filing criminal charges, assessing penalties and collecting past-due registration fees.

The top city in Northern California that CA has identified fraud is mill Valley with 99 cases. The top city was Beverly Hills with 416 cases