Frequently Asked Questions (FAQs) for Used Vehicle Dealers

Legislative Background

What does the law require?

California 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 require certain used motor 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 laws affect me as a used vehicle dealer?

Changes in Sales and Use Tax Returns Filing Frequency

Beginning January 1, 2021, the California Department of Tax and Fee Administration (CDTFA) required all used vehicle dealers (except used vehicle dealers who deal exclusively with wholesale transactions) to file sales and use tax returns along with detailed transaction information, including any retail sales of vehicles, on a monthly reporting basis. This requirement was in effect for both dealers who were required to pay sales tax directly to DMV and for dealers who had not yet had their payment method changed.

Effective July 1, 2024, the sales and use tax reporting basis for certain used vehicle dealers was changed as follows:

Used vehicle dealers who are required to pay sales tax directly to DMV when submitting a registration application now file their sales and use tax returns with CDTFA on a quarterly basis.
Used vehicle dealers who are not yet required to pay sales tax directly to DMV when submitting a registration application will continue to file their sales and use tax returns with CDTFA on a monthly reporting basis.

Changes in Payment Method

Beginning January 1, 2021, newly licensed dealers, dealers whose seller's permits were reinstated during the years 2019 and 2020, and dealers with a previous finding of underreporting during the years 2019 and 2020 were required to pay sales tax directly to DMV when submitting a motor vehicle registration application to DMV.

Beginning January 1, 2023, dealers that made 300 or fewer retail sales of vehicles in calendar year 2021 were required to pay tax directly to DMV.

All other used vehicle dealers will have their direct-to-DMV payment method change postponed until January 1, 2026, unless otherwise notified by DMV. Please note that used vehicle dealers are still required to file sales and use tax returns with CDTFA regardless of whether they pay sales tax to DMV or CDTFA.

DMV will notify you when your payment method is scheduled to change. You must continue to pay the sales tax due directly to CDTFA on time until DMV changes you to the new payment process. Once DMV notifies you that you can begin paying the sales tax directly to them, enter your seller's permit number in the electronic Report of Sale (ROS) system so we can apply your sales tax payment correctly 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, we suggest you confirm with them that your seller's permit number is properly included on each ROS record created. You may also contact DMV to make sure your seller's permit number on file with them is correct by calling them at 1-800-777-0133 or emailing them at DMVTAXINQ@dmv.ca.gov.

I sell used motor vehicles and new motor vehicles. Am I required to pay sales tax to DMV?

No. If you are a licensed new motor vehicle dealer, you are not required to pay sales tax directly to 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 DMV stating that you are required to pay sales tax on your retail sales of motor vehicles directly to DMV, and you believe you received this notice in error, you must contact DMV to correct and verify your licensing information. See the section For More Information below for DMV's contact information.

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

Sales tax due on the sale of used motor vehicles required to be registered under the Vehicle Code must be paid to DMV, except for recreational vehicles that are either truck-mounted or permanently towable on the highways without a permit or a park trailer. “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
Trailers

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

If I sell off-highway vehicles, vessels, or snowmobiles, how do I pay the sales tax?

When you sell vehicles that are not operated on public roads and are not subject to registration, such as off-highway vehicles, vessels, or snowmobiles, you are not required to pay the sales tax directly to DMV. You must pay the sales tax to CDTFA when you file your sales and use tax return.

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

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

Beginning January 1, 2021, newly licensed dealers, dealers whose seller's were reinstated during the years 2019 and 2020, and dealers with a previous finding of underreporting during the years 2019 and 2020 were required to pay sales tax directly to DMV when submitting a motor vehicle registration application to DMV.

Beginning January 1, 2023, dealers that made 300 or fewer retail vehicles in the calendar year 2021 were required to pay sales tax directly to DMV.

All other dealers will have their direct-to-DMV payment method change postponed until January 1, 2026, unless otherwise notified by DMV. Please note that used vehicle dealers are still required to file sales and use tax returns with CDTFA regardless of whether they pay sales tax to DMV or CDTFA.

DMV will notify you when your payment method is scheduled to change. Until then, you must continue to file your returns and pay the sales tax due directly to CDTFA until DMV transitions you to the new payment process. Once DMV notifies you to begin paying them, enter your seller's permit number in the electronic 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. You may also contact DMV to make sure your seller's permit number on file with them is correct. See the section For More Information below for DMV’s contact information.

When is my sales tax payment due to DMV?

Once DMV has notified you that you must pay them the sales tax, 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 the sales tax for my sales of used motor vehicles?

If you are required to pay sales tax to DMV, you will pay in the same manner you pay other DMV transaction fees, either directly to DMV or through your third-party service provider. However, until you have been notified and changed to the new payment process by DMV, you must continue to file your returns and pay the sales tax due directly to CDTFA. Please enter your seller's permit number in the electronic ROS system to ensure your sales tax payment is correctly applied to your CDTFA sales and use tax return. We need your seller's permit number to verify your payment.

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

Yes. You must continue to file your sales and use tax return with CDTFA on time and report your total retail sales of all vehicles, including motor vehicles for which sales tax was paid to DMV, in addition to your sales of other items.

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. The sales and use tax return instructions explain how to provide your vehicle sales transaction detail on CDTFA-531-MV, Used Vehicle Dealers–Sales Report.

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

You are required to provide the following information about your retail sales of vehicles with your sales and use tax returns:

ROS number,
Vehicle Identification Number (VIN)
Selling price reported to DMV, if applicable
Sales tax and/or penalty amounts paid to DMV, if applicable

The selling price reported to DMV generally does not include other taxable 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, of the sales and use tax returns.

This information should be included on the sales transaction detail schedule, CDTFA-531-MV, which you must submit with your sales and use tax returns.

How often should I file sales and use tax returns?

Beginning January 1, 2020, all used vehicle dealers (except used vehicle dealers and used vehicle auctioneers who dealt exclusively with wholesale transactions), regardless of whether they paid sales tax to DMV or CDTFA, were required to file sales and use tax returns on a monthly basis.

However, effective July 1, 2024, the sales and use tax reporting basis for certain used vehicle dealers was changed as follows:

Used vehicle dealers who are required to pay sales tax directly to DMV when submitting a registration application have been changed from a monthly to a quarterly reporting basis.
Used vehicle dealers who are not yet required to pay sales tax directly to DMV when submitting a registration application will continue to be required to file sales and use tax returns on a monthly reporting basis.

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

When you submit a vehicle registration application with DMV, they will assess the sales tax due on the transaction. If you do not submit an application for registration or transfer registration of your vehicle on time, DMV will impose penalties on the transaction, including a 10% penalty based on the sales tax due.

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

If you paid sales tax to DMV but do not file your sales and use tax return with CDTFA, we will contact you to resolve any sales and use tax returns you did not file. If you do not file your sales and use tax returns, we may send you an estimated billing which may include interest and penalties.

Am I required to show CDTFA proof that I paid sales tax to DMV?

No, you are not required to show proof of the sales tax you paid to DMV when you file your sales and use tax return. DMV will provide your sales tax payment information directly to CDTFA. When you make a sales tax payment to DMV, it is important that you accurately provide your seller’s permit number and vehicle sales information on your ROS 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 CDTFA. As a reminder, you generally should keep the 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 ROS date, and not when payment is received for the vehicle. For example, if you made a sale in March, received payment from your customer in April, and registered or paid the tax to DMV in April, you must report the March sale on your sales and use tax return of either the month of April or the first quarter, depending on your reporting basis. Do not report the March sale on your April or the second quarter return.
- You should submit your payments to DMV at the time of registration and they will be applied to your sales and use tax account based on the ROS date. If you do not file your sales and use tax returns in the correct reporting periods, you may receive billings from CDTFA.
Because the amount of sales tax you paid to DMV and the amount you reported to CDTFA is different
- You must enter the sales tax amount paid to DMV for each vehicle sale in the Vehicle Sales Tax Paid to DMV column on CDTFA-531-MV. If the amount you paid to DMV is less than the amount you reported to CDTFA, we may issue a billing.
Because your seller's permit number was not provided correctly to DMV
- You must provide DMV with your seller's permit number along with your tax payment to ensure CDTFA will be able to apply your payment to your sales and use tax account.
- If you use a service provider to electronically report vehicle sales, you must ensure that your provider accurately indicates your seller's permit number on each ROS.
Because the vehicle registration has not been finalized
- DMV will not send CDTFA your sales tax payment information until the vehicle registration is finalized.
- You must promptly submit all documents required by DMV to register the vehicle.

I received a billing from CDTFA for my retail sales of vehicle. What information does CDTFA need to adjust the billing if I already paid the tax to DMV?

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

After reviewing the report, if you determine that the payments you made to DMV were not paid to us, you may send an email inquiry to DMV at DMVTAXINQ@dmv.ca.gov. If you have further questions, please contact CDTFA’s Customer Service Center.

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

If you received a notice from DMV stating that you are required to pay sales tax on your retail sales of vehicles directly to DMV, and you believe you received this notice in error, you must contact DMV to verify and correct your licensing information with 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 CDTFA indicating you are a used vehicle dealer, but you do not make retail sales of vehicles and you already confirmed with DMV that you are not licensed to sell used vehicles, you must update your registration information with CDTFA. You may do so by contacting a CDTFA office near you. A list 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.

Refunds

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

To obtain a refund for overpaid sales tax paid to DMV, you must file a claim for refund with CDTFA. With your claim, you 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, Returns, Defects, and Replacements, 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 confirming DMV is receiving your sales tax payments, contact DMV at 1-800-777-0133 or send an email inquiry to DMV at DMVTAXINQ@dmv.ca.gov.

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