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

Legislative Background

What does the new legislation (Assembly Bills 85 and 82) require?

On June 29, 2020, California enacted Assembly Bill (AB) 85 (Stats. 2020, ch. 8) and AB 82 (Stats. 2020, ch. 14) 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) when they submit a vehicle registration application.

How does this new legislation affect me as a used vehicle dealer?

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

Also beginning January 1, 2021, certain used vehicle dealers will be required to pay sales tax on their retail sales of vehicles when they submit a vehicle registration application to 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 to CDTFA until the DMV transitions you to the new payment process. Once you are transitioned, please accurately provide your seller's permit number on the Report of Sale that you provide to the DMV to ensure your sales tax payments are correctly applied to your CDTFA sales and use tax return.

I sell used 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 vehicles or new 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 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.

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

Generally, sales tax for retail sales of used vehicles must be paid to the DMV if the vehicle has previously been sold, previously registered for operation, or operated on public roadways. Used vehicles generally include:

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

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.

What is not considered a vehicle for which sales tax, if applicable, is required to be paid to the DMV?

Generally, vehicles that are not operated on public roadways or subject to registration such as off-highway vehicles and snowmobiles are not considered vehicles for which sales tax, if applicable, is required to be paid to the DMV.

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. DMV 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?

The DMV will notify you when your payment method is scheduled to change. Until such notification, you must continue to report and remit the sales tax due to the CDTFA until the DMV transitions you to the new payment process. When you begin paying sales tax to the DMV, you will still be required to timely file your sales and use tax return with the CDTFA. Once you are transitioned, please accurately provide your seller's permit number on the Report of Sale that you provide to the DMV to ensure your sales tax payment is correctly applied to your CDTFA sales and use tax return.

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 your sales tax in the same way you pay other DMV transaction fees, either to the DMV directly or through your service provider. You must continue to report and remit the sales tax due to the CDTFA until you are transitioned to the DMV payment process. Please accurately provide your seller’s permit number on the Report of Sale that you provide to the DMV to ensure your sales tax payment is correctly applied to your CDTFA sales and use tax return.

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 vehicles where sales tax was paid to the DMV, in addition to your other items sold. You will be required to provide your dealer license number and sales transaction detail for your retail sales of vehicles with your sales and use tax returns beginning January 1, 2021, 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, regardless of whether paying sales tax to the DMV or CDTFA, are going to have 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,
  • Selling price reported to DMV, and
  • Sales tax and/or penalty amounts paid to the DMV.
    • 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.

Note: The CDTFA-531-MV, Used Vehicle Dealers – Sales Report, will be available on our website soon. Check back for updates.

Why does my filing frequency have to change to monthly?

Your filing frequency will change 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 will change 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 vehicle with the DMV, how do I pay the sales tax to the CDTFA?

If you are selling a 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 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, if 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.

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, and titling transactions, contact the DMV at 1-800-777-0133.

You may also send an email inquiry to the DMV to verify whether you are required to pay sales tax to the DMV.

For questions related to sales tax, contact the CDTFA Customer Service Center at 1-800-400-7115 (CRS:711). Customer service representatives are available Monday through Friday from 8:00 a.m. to 5:00 p.m. (Pacific time), except state holidays.