AB 85 – Used Vehicle Dealer Sales Tax FAQS

Used Motor Vehicle Dealers and Motor Vehicle Auction Houses Face New Requirements January 2021 —
Impact of Assembly Bills 85 and 82

Background

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.

Used 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 number and additional sales transaction detail with returns.

Licensed new vehicle dealers will not be required to pay sales tax directly to the DMV, even if they make retail sales of used vehicles. 

A 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:

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

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.

The DMV (and CDTFA) implements the law as passed by the legislature and signed by the Governor. 

Filing and Reporting Information

Tax payments are due to the DMV 30 days from the date the retail sale occurred, and will be paid with the DMV application. 

Those 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.

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.

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. 

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.  

Filing 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.

Any 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.

Used vehicle dealers must continue to file and pay appropriate sales and use taxes and forms with the CDTFA.

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. 

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 received a special notice from the CDTFA or other related material indicating they are a used vehicle dealer and 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.

Motor Vehicle Auction Houses

The following information is provided by CDTFA

Used 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. 

Beginning January 1, 2021, the following wholesale transaction detail must be provided with the sales and use tax returns:

Auction Purchaser Information

  • CDTFA Seller’s Permit Number 
  • Dealer Number
  • Name
  • DBA (Doing Business As)
  • Street
  • City
  • State
  • Zip Code
  • Vehicle Identification Number
  • Vehicle Year
  • Vehicle Make
  • Vehicle Model
  • Selling Date
  • Selling Price  

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