Important Tax Information for Used Vehicle Dealers

Certain dealers licensed exclusively to sell used vehicles face changes in the way they pay sales taxes beginning January 1, 2021.  New legislation, Assembly Bills 82 and 85 (Chapters 14 and 8, Statutes of 2020), requires sellers of used vehicles to pay to the Department of Motor Vehicles (DMV) sales tax at the same time they submit the vehicle registration/transfer application. 

Used vehicle sale exemptions from this requirement include vehicles not required to be registered such as off-road vehicles and boats.  Note that the new law does not apply to dealers who sell both new and used vehicles.

Currently under review at the Office of Administrative Law, DMV has proposed regulations to implement this new law in phases.  Phase One, effective January 1, 2021, includes all used vehicle dealers who:

  • were licensed by DMV in the last 2 years.   
  • reinstated their Seller’s Permit in the last 2 years.
  • had a finding of underreporting in the last 2 years.
  • are not in the Business Partner Automation Program.

Beginning in January 1, 2023, all used vehicle dealers will be required to pay sales tax to DMV. 

Dealers submitting sales tax to DMV are still required to file returns with the California Department of Tax and Fee Administration (CDTFA) and will be able to take a credit for the sales tax paid directly to the DMV.  Effective January 1, 2021, tax returns will be required on a monthly basis. Non-vehicle sales that are subject to tax (parts, accessories, etc.) will continue to be reported directly to CDTFA.

To receive credit for the payment of sales tax paid to the DMV, ensure the Report of Sale is complete and includes the full Seller’s Permit Number and the location address for where the sale occurred.

Please direct any questions about sales tax or filing a return to CDTFA at

Watch for more information coming soon.