On June 29, 2020, the California legislature passed and the Governor signed into law Assembly Bill (AB) 85 and AB 82 requiring licensed used vehicle dealers to pay the applicable sales tax on their retail sales of vehicles directly to the Department of Motor Vehicles (DMV) at the same time a vehicle registration application is submitted.
How do these new laws affect used motor vehicle dealers? plus minusUsed motor vehicle dealers must pay tax directly to the DMV for retail sales of used vehicles. Additionally, as a result of this new legislation, used vehicle dealers filing frequency with the California Department of Tax and Fee Administration (CDTFA) is being changed to a monthly reporting basis. These dealers will also be required to provide the CDTFA with dealer license numbers and additional sales transaction details with returns.
Do dealers who sell new and used vehicles need to comply with the new requirements? plus minusLicensed new vehicle dealers will not be required to pay sales tax directly to the DMV, even if they make retail sales of used vehicles.
What is considered a used vehicle in which tax is required to be paid to the DMV? plus minusA used vehicle is a vehicle that has previously been sold, been registered for operation, or has been operated on public roadways. (California Vehicle Code section 665). This includes the following types of personal and commercial vehicles:
Vehicles that are not operated on public roads or subject to registration such as off-highway vehicles, vessels, and snowmobiles are not impacted by these new laws.
How come DMV and CDTFA are making these changes? plus minusThe DMV (and CDTFA) implements the law as passed by the legislature and signed by the Governor.
Tax payments are due to the DMV 30 days from the date the retail sale occurred, and will be paid with the DMV application.
How are sales taxes paid to the DMV? plus minusThose dealers required to pay sales taxes through DMV, will pay sales tax in the same way DMV transaction fees are paid, either through DMV directly or through a service provider.
Do used vehicle dealers need to file sales and use tax returns with the California Department of Tax and Fee Administration? plus minus
Dealers will continue to timely file returns with the CDTFA, reporting total retail sales of vehicles on Line 1. The dealer’s dealer license number must be provided as well as sales transaction detail with sales and use tax returns beginning January 1, 2021, even if the dealer is not currently required to pay tax to the DMV. Sales transaction detail may be uploaded with the return using a template that will be available on the CDTFA Online Services webpage. If the dealer files paper returns, they will submit sales transaction detail by using a provided schedule included with the return package that is mailed to the dealers. A new line will be added to the return to reflect the amount of tax paid (if any) to the DMV. To use this return line, enter the amount of tax paid to the DMV on the sales transaction detail.
What information is required on the sales transaction detail included with the sales and use tax return? plus minus
Beginning January 1, 2021, requirements include: the vehicle identification number, report of sale number, selling price, and tax and/or penalty amounts paid to the DMV, for the retail sales of used vehicles, on the sales transaction detail schedule required to be completed with the sales and use tax returns.
If the due date to pay the sales tax to the DMV is missed, can sales tax be paid to CDTFA along with sales and use tax returns? plus minus
Failing to pay tax on the retail sale of a used vehicle directly to the DMV may result in additional penalties and interest accruing if the used vehicle dealer continues to report and pay tax to the CDTFA with the sales and use tax returns.
DMV will assess the tax as part of the registration and transfer fees. If the registration transaction is not started or completed within the required time frames, the transaction will be subject to penalties, including sales tax penalties.
Why does the filing frequency have to change? plus minusFiling frequency is changing as a result of tax payments being submitted to the DMV within 30 days from the date of the retail sale of a used vehicle. This reporting aligns with the payment to DMV.
What if the sales tax payment is sent directly to CDTFA in error, what happens then? plus minusAny applicable penalties and interest assessed as a result of failing to pay tax directly to the DMV along with the registration application must be paid. Going forward, tax must be paid to the DMV for retail sales of used vehicles.
What happens if tax is paid to the DMV and no sales and use tax returns are filed? plus minusUsed vehicle dealers must continue to file and pay appropriate sales and use taxes and forms with the CDTFA.
Will used vehicle dealers be required to show the CDTFA proof that tax has been paid to the DMV? plus minus
No, the DMV will provide payment information to the CDTFA. When a tax payment is made to the DMV, it is important to provide accurate seller’s permit information to make sure the payment made to the DMV is accurately applied to the dealer’s CDTFA account.
Who does the tax get paid to when the vehicle will be purchased and picked up by a customer in California and registered in another state? plus minus
If a customer purchases and picks up a used vehicle at a California location, tax is due because the customer took possession in California. The tax collected with the Report of Sale document must be mailed to the DMV.
If a dealer receives information about this change, but is not a used vehicle dealer, what should they do? plus minus
If a dealer received a special notice from the CDTFA or other related material indicating they are a used vehicle dealer, but they do not make retail sales of used vehicles, they must update their registration information with the CDTFA. They may do so by contacting the CDTFA office near you. A comprehensive listing of all CDTFA offices is available on our Office Locations & Addresses webpage.
The following information is provided by the CDTFA
Does the new law (AB 85 and AB 82) affect used vehicle auction houses? plus minusUsed vehicle auction houses will be required to make reporting changes when filing your returns with the CDTFA beginning January 1, 2021. In order to properly administer the Sales and Use Tax Law and to increase the efficiency of the CDTFA audit program, the CDTFA is requiring wholesale vehicle transaction detail be provided with returns beginning January 1, 2021. Wholesale vehicle transaction detail may be uploaded with the return using a template that will be available on the CDTFA Online Services webpage. If file paper returns are filed, submit wholesale transaction detail by using a provided schedule included with the return package received in the mail.
What wholesale transaction detail is required to be included with used vehicle auction house sales and use tax returns? plus minus
Beginning January 1, 2021, the following wholesale transaction detail must be provided with the sales and use tax returns:
Auction Purchaser Information
Contact DMV with questions related to vehicle registration and titling transactions. 1-800-777-0133.
Contact CDTFA with tax-related questions at 1-800-400-7115 California relay service – (CRS):711