Three reasons why state agents think Georgia is losing out on millions of tax dollars each year sat at a Cobb County mansion on a mild October morning.
The first was parked in the driveway: a 2017 Mercedes-Benz G550 luxury SUV that lists for as low as $92,000 — used. The second was the 2015 Cadillac Escalade alongside it, a relative bargain at $40,000 used and in good condition. The third was a pearly white 2018 Rolls-Royce Wraith in the garage. It starts at about $320,000 new.
Each one sported license plates from Montana, a state that accommodates out-of-state luxury car collectors when they register vehicles to duck sales and other taxes in their home states. Neither the cars nor their owners need to touch Montana soil, a Channel 2 Action News and Atlanta Journal-Constitution investigation found. A cottage industry catering to super wealthy, tax-averse auto enthusiasts is eager to handle the process for them.
But what's legal in Montana can result in criminal charges in Georgia, said Josh Waites, director of special investigations for the Georgia Department of Revenue. This state requires Georgia residents who buy a vehicle to pay a tax based on the car's value.
Agents raided the Cobb County home and three other metro Atlanta sites Oct. 19 as part of what they think is the largest criminal investigation ever into the Montana tax scheme. They hope the operation will send a warning to exotic car collectors across the nation.
“Whether it’s a Toyota Corolla or a Porsche, everybody owes their fair share of the tax,” Waites said.
Bugattis per capita
The owners of some of the most expensive cars in the world began titling and registering their rides in Montana when they thought they discovered a legal loophole.
Unlike in other states, Montana residents pay no sales or car ad valorem tax. Some of its counties charge no local vehicle tax, either. Yearly registration is $217 for cars up to four years old, plus $825 for cars worth more than $150,000. That's why out-of-state collectors began setting up limited liability companies, or LLCs, with Montana addresses for the sole purpose of purchasing their exotic cars tax-free.
The savings on a $500,000 Lamborghini can exceed $30,000, Waites said. And if that auto is a rare Shelby Cobra from the 1960s, a car that has sold for more than $1 million, the savings is even bigger, Montana law shows. Owners can pay $87.50 plus fees to keep cars 11 years and older registered permanently in Montana.
The result is an estimated 1,300 cars valued at $150,000 or more are registered in Montana, according to officials. That’s at least $195 million worth of cars.
“I would say in Montana that per capita we probably have more Bugattis registered here than any other state in the nation,” said Sarah Garcia, administrator for the Motor Vehicle Division of the Montana Department of Justice. “And maybe Ferraris and Lamborghinis and McLarens.”
“You probably will never see one of those types of vehicles traveling on a road in Montana,” Garcia added. “Especially in the winter time.”
Montana state legislators have been eager to capitalize on the state’s status as an exotic car owner’s haven. In 2017, it levied the yearly registration fee on cars worth more than $150,000. The revenue helps them avoid steep hikes on the state’s gas tax.
“I don’t know that it’ll go away anytime soon,” Garcia said of the state’s car title and registration rules.
Montana’s long-distance car registration businesses appear to be flourishing. A quick online search finds more than a dozen companies advertising to out-of-state owners. Exotic car magazines are packed with similar ads.
Jennifer McCluskey is a manager at MontanaCorporate.com, which is known in Montana’s capital city of Helena as among the busiest of these companies locally. She stresses that it follows the state’s laws.
“We don’t involve ourselves in any of the business that happens outside our state,” McCluskey said. “Our business is in the state of Montana.”
Montana’s gain is Georgia’s loss. Dustin Farthing, a champion jet ski racer and owner of the Cobb County mansion, and his friend Ryan Hardwick, an owner of a chain of motorcycle dealerships, bought about 50 exotic cars between them in the past four years, Waites said. Together, their Montana registrations lost the state of Georgia more than $1 million in revenue in the past four years.
Agents served search warrants on their mansions and an airplane hangar rented by Hardwick on Oct. 19. Neither faces criminal charges. Waites said his goal is to bring Georgia’s exotic car owners with Montana tags in compliance with state law.
Farthing declined comment, although his attorney said he doesn’t think his client is breaking the law.
Hardwick said he intended to follow the rules and and checked with lawyers in Georgia and Montana before registering his cars out of state.
Now he’ll register his cars here.
“I’m not going to argue with it,” Hardwick said.
‘Nothing for the work’
The state’s tax raids were a long time coming, said Ed Bolian, ‘Cannonball Run’ speed record holder and a former sales director for an Atlanta Lamborghini dealership. Bolian said he would remind clients who sought to register their cars using a Montana LLC that they may run afoul of state law.
“We’ve always known that a day like this would come at some point,” Bolian said. Within hours of the Oct. 19 raid, car collectors began barraging him with phone calls seeking advice.
The registration scheme has grown so popular that even some Montanans are complaining.
In recent years, the ranks of long-distance car registration companies have grown so much that Lewis and Clark County’s motor vehicle office in Helena imposed a three-car limit on how many a single person can register at one time. Once their turns are up, representatives go back to the end of the line to register three more.
All the extra work takes a toll on county motor vehicle offices, said county Treasurer Paulette DeHart. On a busy day, out-of-state registrations can increase the wait to as long as two hours. What little revenue that trickles down to her county comes nowhere close to making up for processing costs.
“There are counties in the state of Montana that are getting nothing for the work,” DeHart said.
And the registrations keep on coming. Her office registered a $2.5 million out-of-state car just recently, she said.
The make and model?
“I can’t pronounce it,” DeHart said.
It’s just another one of those exotic cars you don’t see on the roads of Montana.
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Credit: Ben Hendren for the Atlanta Journal-Constitution