Hey, that's a nice bubble. It would be a shame if someone burst it. Sorry if you thought you could go buy a car in a state with low to no taxes, then bring it to your home state and avoid paying the piper, but you have to pay sales tax in the state where you live. You're probably aware of the Montana loophole, where there's no sales tax, registration fees are cheap, state inspections and emissions testing don't exist, and there are zero residency requirements. Just register as an LLC in Montana and you're
golden!
Okay, it's not quite that simple, and California and Utah are cracking down on supercars that register in Montana to avoid paying taxes. For now, let's assume you're looking for a car-friendly state to move to or enjoy bringing up car purchase trivia. Five states charge zero sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Wait, isn't this article about the states with the lowest taxes? Well, there are more taxes than just sales tax, such as excise taxes and title taxes. There are also various fees, including DMV fees, document fees, title fees, and registration fees, which are just taxes going by a friendly nickname.
Cities and counties may have their own fees, too. When factoring in all of the various taxes you might pay, the three states with the lowest overall taxes are Alaska, Oregon, and, of course, Montana.
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Collecting And Sifting Through The Data
In addition to the taxes and fees you're probably used to, there's a few things you may not count on. For example, Alaska's DMV can charge an extra $10 walk-in fee because how dare you come into the office when you could just register your vehicle online. As for vanity plates, in New Hampshire, that'll be $40, please and thank you. In Montana, vanity plates are only $25. If you "live" in Montana, maybe you could snag "CHEAPR" if it's not already taken.
You'll spend even fewer pennies in Delaware because that state hasn't allowed vanity plates since May 2024. Nothing saves money like reducing choices. Looking at Alaska again, the tax you pay can differ wildly depending on your city. In Juneau, the tax on registering a new non-commercial passenger car is $70. That price must be a privilege for living in the capital, because if you live in Afognak, the more fun city name to say, your tax is $300.
In Delaware, you'll pay a 4.25% doc fee based on the purchase price or the NADA book value, and you better believe they'll go by whichever one is higher. Spend $2.5 million on a high performance 2,107-hp Rimac Nevera R and be prepared to spend $106,250 just on the doc fee alone.
The Law Of Averages
To calculate the registration fee, let's pretend we're going to buy the same car in each state. The car in question will be a 2025 BMW 330i, which Kelley Blue Book says has an MSRP of $44,113. We'll also pretend we're buying it straight up with cash, so we don't have to accommodate for fees associated with a potential loan.
If you register your car as Non-Commercial/Taxicab in an Alaskan city like, say, Chickaloon -- which kind of rolls off the tongue nicely -- it's $150, which is a good average for Alaska city taxes. Going with a Standard Plate-No Renewal Fee, it comes out to a total of $265.
According to Oregon's DMV info, the registration cost for the hypothetical BMW will be $277. Oh, but if you live in Multnomah County, that'll be an extra $112, although Washington and Clackamas County residents only pay an extra $60.
We're Almost To The Montana Stuff, Just Hang In There
In Delaware, our fiction Bimmer would cost $1,969.80 to register, mostly thanks to a hefty $1,874 doc fee. New Hampshire makes it easy, thanks to the registration estimate calculator. For a 12-month registration, the estimate is $877.20.
As for why New Hampshire registration costs as much as it does, it's because city permit fees are based on model year. Current model year vehicles cost owners $18 per thousand. If the BMW were only one year older, it would be $15 per thousand, so it pays to buy used in New Hampshire. So, for the BMW 330i with its $44,113 MSRP, that comes out to over 794 hard-to-part-with dollars.
Look on the bright side -- New Hampshire voted to eliminate annual car inspections next year, so you'll make it up on the back end. After perusing your car inspection horror stories, this will probably come as a relief to any of our New Hampshire-based readers.
Let's Talk About Montana
Let's begin discussing Montana by assuming that you actually live in Montana. Registration for our 2025 BMW is just $223.51. According to the County Option Tax rules, we'll also add $198.51 for a total of $422.02. Interestingly, Big Horn, Deer Lodge, Flathead, Granite, and Richland have no local option tax.
In the Legislative Fiscal Division's 2021 Montana Motor Vehicle Fees, there's a chart in a section titled The Luxury Vehicle/Motorhome Fee and Tax Incentives, which shows how many luxury vehicles are registered in each county. Whoa -- the absolute front runners are Flathead, Granite, and Deer Lodge. Shocking. Flathead alone had more than 2,000 registered luxury vehicles at the time of the study. Montana also has the highest percentage of Pontiac owners, probably because the newest Pontiac is 15 years old and there's no state inspection or emissions testing.
The best part is the opening line of the conclusion, which reads, "Vehicle registration fees will likely continue to make up a significant portion of total general fund revenue, particularly as the population grows within the state." Yeah, population "within the state" needs some industrial-strength quotation marks.
So Many Montana Supercars, So Few In Montana
The reason so many exotic cars have Montana plates is that out-of-state owners can avoid sales tax by setting up a limited liability corporation (LLC). Pay one of the many Montana LLC agents to register your vehicle with your so-called corporation, give Montana its Luxury Vehicle Fee of $825 -- for cars worth more than $150,000 -- and go back to your home state to enjoy that Montana-based asset. California residents have to wait 12 months, but what's a year when you've got the gift of a McLaren to look forward to?
You won't be shocked to learn that Montana has some sweet rides registered, but actually spotting one in Montana carries the same chances as spotting Elvis kissing Bigfoot. Bloomberg reports that neighboring Washington State, which has 7.81 million residents to Montana's 1.1 million, has zero Paganis or Bugattis registered, while Montana has 31 and 131, respectively.
None of this is to pass judgment on those who use this loophole, but to explain the phenomenon. Though neighboring states such as Utah and California are starting to go after Montana loophole cars hard, Montana sure loves the revenue. Also, it's hard to watch C4 Corvette owner Wayne Bickley tear out a supercharged 396 and replace it with an electric motor powered by 18 16-volt batteries because it was too hard to pass emissions tests in California anymore. Just don't be shocked when the law finally catches up in Montana's neighboring states.
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