New Legislation Affecting Used Vehicle Dealers – Frequently Asked Questions (FAQs)

California recently enacted Assembly Bill (AB) 85, (Stats. 2020, ch. 8), AB 82 (Stats. 2020, ch. 14), AB 176 (Stats. 2021, ch. 256), and Senate Bill 1496 (Stats 2022, ch 474). Together, these bills phase in a requirement for licensed used vehicle dealers to pay the applicable sales tax, including district taxes, on their retail sales of motor vehicles directly to the Department of Motor Vehicles (DMV) when they submit a vehicle registration application.

How do these new laws affect me as a used vehicle dealer?

On January 1, 2021, the California Department of Tax and Fee Administration (CDTFA) changed the filing frequency for all used vehicle dealers to a monthly reporting basis and required detailed transaction information including any retail sales of vehicles to be submitted with the sales and use tax returns.

On January 1, 2021, newly licensed dealers, dealers whose seller's permit were reinstated within the last two years, and dealers with a previous finding of underreporting within the last two years were required to pay sales tax directly to the DMV when submitting a motor vehicle registration application to the DMV.

Beginning January 1, 2023, dealers that currently do not pay sales tax to the DMV and did not make more than 300 retail vehicle sales in calendar year 2021, will be required to pay their tax directly to the DMV.

All other dealers will have their payment requirement postponed until January 1, 2026, unless otherwise notified by the DMV.

The DMV will notify you when your payment method is scheduled to change. You must continue to timely remit the sales tax due directly to CDTFA until the DMV transitions you to the new payment process. Once you are transitioned, please accurately enter your seller's permit number in the electronic Report of Sale (ROS) system to ensure your sales tax payment is correctly applied to your CDTFA sales and use tax return. Your seller's permit number is essential to making sure we receive your payment.

If you use an ROS service provider, processes may differ among providers. We suggest you confirm your seller's permit number is properly included on each ROS record created in the electronic ROS system with your service provider. You may also contact DMV to make sure they are receiving your seller's permit number by calling them at DMV at 1-800-777-0133 or emailing them at DMVTAXINQ@dmv.ca.gov.

I sell used motor vehicles and new motor vehicles. Does this legislation affect me?

No. If you are a licensed new motor vehicle dealer, you are not required to pay sales tax directly to the DMV, even if you make retail sales of used motor vehicles. Additionally, your filing frequency will not be changed.

If you received a notice from the DMV stating that you are required to pay sales tax on your retail sales of motor vehicles directly to the DMV, and you believe you received this notice in error, you must contact the DMV to correct and/or verify your licensing information. See the section For More Information below for DMV's contact phone number.

Which retail sales of vehicles require sales tax to be paid to the DMV?

Sales tax due on the sale of used motor vehicles required to be registered under the Vehicle Code, except for recreational vehicles that are either truck-mounted or permanently towable on the highways without a permit or a park trailer, must be paid to the DMV. “Used” generally means the vehicle has previously been sold, previously registered for operation, or operated on public roadways. Used motor vehicles generally include:

• Cars
• Motorcycles
• Trucks
• Recreational vehicles/motor homes

See California Vehicle Code section 665 for more information on the definition of a used vehicle or contact the DMV with questions on the specifics of which vehicles require registration. The DMV’s contact information may be found in the section For More Information below.

Filing and Reporting Information for Dealers Required to Pay Sales Tax to the DMV

When do I need to start paying sales tax to the DMV?

On January 1, 2021, newly licensed dealers, dealers whose seller's permit were reinstated within the last two years, and dealers with a previous finding of underreporting within the last two years were required to pay sales tax directly to the DMV when submitting a motor vehicle registration application to the DMV.

Beginning January 1, 2023, dealers that currently do not pay sales tax to the DMV and did not make more than 300 retail vehicle sales in calendar year 2021, will be required to pay their tax directly to the DMV.

All other dealers will have their payment requirement postponed until January 1, 2026, unless otherwise notified by DMV.

The DMV will notify you when your payment method is scheduled to change. Until such notification, you must continue to file, report, and remit the sales tax due directly to CDTFA until the DMV transitions you to the new payment process. Once you are transitioned, please accurately enter your seller's permit number in the electronic Report of Sale (ROS) system to ensure your sales tax payment is correctly applied to your CDTFA sales and use tax return. Your seller's permit number is essential to verify we receive your payment.

If you use an ROS service provider, please confirm with them that your seller's permit number is properly included on each ROS record created in the electronic ROS system. Processes may differ among providers. You may also contact the DMV to ensure they are receiving your seller's permit number by calling them at DMV at 1-800-777-0133 or emailing them at DMVTAXINQ@dmv.ca.gov.

When is my sales tax payment due to the DMV?

Once the DMV has notified you that your payment method is changing, your sales tax payment is due when you submit a vehicle registration application, generally, within 30 days from the date of the retail sale.

How do I pay my sales tax to the DMV?

If you are required to pay sales tax to the DMV, you will pay in the same manner you pay other DMV transaction fees, either directly to the DMV or through your third party service provider. However, please note that you must continue to file, report, and remit the sales tax due directly to CDTFA until you have been notified and transitioned to the DMV payment process by the DMV. Please accurately enter your seller's permit number in the electronic Report of Sale (ROS) system to ensure your sales tax payment is correctly applied to your CDTFA sales and use tax return. Your seller's permit number is essential to verify we receive your payment.

If you use an ROS service provider, please confirm with them that your seller's permit number is properly included on each ROS record created in the electronic ROS system. Processes may differ among providers. You may also contact the DMV to ensure they are receiving your seller's permit number by calling them at DMV at 1-800-777-0133 or emailing them at DMVTAXINQ@dmv.ca.gov.

Do I still need to file sales and use tax returns with CDTFA?

Yes. You must continue to timely file your sales and use tax return with CDTFA and report your total retail sales of all vehicles, including motor vehicles where sales tax was paid to the DMV, in addition to your other items sold. Beginning January 1, 2021, you are required to provide your dealer license number and sales transaction detail for your retail sales of vehicles with your sales and use tax returns, even if you are not currently required to pay sales tax to the DMV, as indicated above. The sales and use tax return instructions will explain how to provide your vehicle sales transaction detail. A new line will be added to your sales and use tax return to reflect the amount of sales tax and penalty paid (if any) to the DMV.

Additionally, all used vehicle dealers (except used vehicle dealers and used vehicle auctioneers who deal exclusively with wholesale transactions), regardless of whether paying sales tax to the DMV or CDTFA, had their filing frequency changed to a monthly reporting basis beginning January 1, 2021.

What sales transaction details do I need to provide for my retail sales of vehicles on my return?

Beginning January 1, 2021, you are required to provide the following information about your retail sales of vehicles with your sales and use tax returns:

• Report of Sale number,
• Vehicle Identification Number (VIN),
• Selling price reported to DMV, if applicable, and
• Sales tax and/or penalty amounts paid to the DMV, if applicable.
  • Note: The selling price reported to DMV generally does not include other charges related to the vehicle (including, but not limited to document fees, smog certification fees, and mandatory warranties). These other charges must be reported on line 1, Total Sales.

  This information should be documented on the sales transaction detail schedule, CDTFA-531-MV, Used Vehicle Dealers – Sales Report, which is required to be submitted with your sales and use tax returns.

  Why did my filing frequency change to monthly?

  Your filing frequency changed to monthly filing beginning January 1, 2021, to mirror your sales tax payments which will be submitted to the DMV on a monthly basis (generally, sales tax and registration is due within 30 days from the date of the retail sale).

  Note: Effective January 1, 2021, the filing frequency for all used vehicle dealers (except used vehicle dealers and used vehicle auctioneers who deal exclusively with wholesale transactions) was changed to a monthly filing basis.

  If I missed the due date to pay the sales tax to the DMV, will the DMV assess a penalty?

  At the time you submit a vehicle registration application with the DMV, the DMV will assess the sales tax due on the transaction. Failure to timely submit an application for registration or transfer registration of your vehicle with the DMV will result in the DMV imposing penalties on the transaction, including a 10% penalty based on the sales tax due.

  If I do not have to submit an application for registration or transfer or registration of the motor vehicle with the DMV, how do I pay the sales tax to the CDTFA?

  If you are selling a motor vehicle that does not require you to submit an application for registration with the DMV, you must pay the sales tax directly to the CDTFA when you file your sales and use tax return.

  I sent the sales tax payment directly to the CDTFA in error, what should I do next?

  If you have been notified by the DMV that you should make sales tax payment(s) directly to the DMV and you mistakenly sent the sales tax payment(s) to the CDTFA, you may be required to pay applicable penalties and/or interest imposed as a result of not timely paying the sales tax. You do not need to notify the DMV that you made payment to the CDTFA. We will assess penalties and/or interest on your sales tax payment made to the CDTFA, if applicable. In the future, you must pay sales tax to the DMV for your retail sales of motor vehicles when you submit your registration applications to the DMV.

  What happens if I pay sales tax to the DMV and I don’t file my sales and use tax returns?

  If you paid sales tax to the DMV and do not file your sales and use tax return with the CDTFA, we will contact you to resolve any sales and use tax returns you failed to file. If you do not file your sales and use tax return(s), an estimated billing may be issued to you which may include interest and penalties.

  Will I be required to show the CDTFA proof that I paid sales tax to the DMV?

  No, you will not be required to show proof of the sales tax you paid to the DMV when you file your sales and use tax return. The DMV will provide your sales tax payment information directly to the CDTFA. When you make a sales tax payment to the DMV, it is important you accurately provide your seller’s permit information and vehicle sales information on your Reports of Sale to ensure the payment is properly applied to your CDTFA account.

  You should still maintain records to show proof of payment in case this information is ever requested by the CDTFA. As a reminder, you generally should keep required records for at least four years. Please see Publication 116, Sales and Use Tax Records, for more information.

  Why did I receive a billing from CDTFA after paying tax to DMV?

  The most common reasons you may have received a billing even though you paid tax to DMV are:

  • Because of timing differences
    • You must report your sales in the period the sale occurred, based on the Report of Sale (ROS) date, and not when payment is received for the vehicle. For example, if you made a sale in February, received payment from your customer in March and registered or paid the tax to DMV in March, you must report the February sale on your February sales and use tax return, not on your March return.
    • Your payments should be submitted to DMV at the time of registration and will be applied to your sales and use tax account based on the ROS date. If you do not report your sales in the correct reporting periods, you may receive billings from us.
    • You must provide DMV your seller's permit number along with your tax payment to ensure we are able to apply your payment to your sales and use tax account.
    • You must ensure that if you use a service provider to electronically report vehicle sales, that your provider is providing your seller's permit number accurately on each ROS.
    • DMV will not send CDTFA your sales tax payment until the vehicle registration is finalized.
    • You must make sure that all documents required by DMV to register the vehicle are submitted promptly.

    What information does CDTFA need to adjust the billing if tax was already paid to DMV?

    We need confirmation that the payments related to the billing were made to DMV. You may request a report from us, of the payments we have received from DMV that are for the period that the billing was issued. To request the report of payments, please contact our Customer Service Center at 1-800-400-7115 (CRS:711). Customer service representatives are available Monday through Friday from 7:30 a.m. to 5:00 p.m. (Pacific time), except state holidays.

    If you determine, after reviewing the report that payments you made to DMV were not paid to us, you may send an email inquiry to the DMV with information regarding the payments not received by CDTFA.

    How do I update my records to indicate I am not a used vehicle dealer?

    If you received a notice from the DMV stating that you are required to pay sales tax on your retail sales of vehicles directly to the DMV, and you believe you received this notice in error, you must contact the DMV to correct and/or verify your licensing information with the DMV. See the section For More Information below for DMV's contact phone number.

    If you received a special notice or other related material from the CDTFA indicating you are a used vehicle dealer but you do not make retail sales of vehicles and you already confirmed with the DMV that you are not licensed to sell used vehicles, you must update your registration information with the CDTFA. You 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.

    Our Customer Service Center is also available to assist you with registration updates, you may find their contact information below under the heading For More Information.

    Refunds

    I overpaid tax to the DMV. How do I claim a refund?

    To obtain a refund for overpaid sales tax paid to the DMV, you must timely file a claim for refund with the CDTFA. With your claim, you will need to include supporting documents, including amended sales and use tax returns, if applicable. For more information, see Publication 117, Filing a Claim for Refund.

    How do I recoup sales tax on a vehicle that was returned by my customer?

    In general, when you refund the full sales price of the vehicle, including sales tax, to your customer, you may claim a Returned Taxable Merchandise credit on your sales and use tax return or timely file a claim for refund with the CDTFA. For more information on how to file a claim for refund, see Publication 117, Filing a Claim for Refund. Regulation 1655, Exchanges, Returns, Defects, also provides additional guidance.

    For More Information

    Who do I contact if I have questions?

    For questions related to licensing, vehicle registration, titling transactions, and/or confirming they are receiving your sales tax payments, contact the DMV at 1-800-777-0133 or send an email inquiry to the DMV.

    For questions related to sales tax, contact CDTFA Customer Service Center at 1-800-400-7115 (CRS:711). Customer service representatives are available Monday through Friday from 7:30 a.m. to 5:00 p.m. (Pacific time), except state holidays.