California Passes Assembly Bills No. 82 and 85
Summary of the New Sales Tax Law for Car Dealerships:
On June 20, 2020, the California Legislature passed Assembly Bills 82 and 85 (Bills) to assist in addressing California’s budget deficit caused by the Covid pandemic. Some changes are scheduled to take effect January 1, 2021. These changes require that some used vehicle dealerships pay sales and use tax directly to the California Department of Motor Vehicles (DMV). Further, as a result of the Bills, used vehicle dealers filing frequency with the CDTFA is being changed to a monthly reporting basis.
California’s used vehicle dealers, as well as just about all other merchants in the State of California, must pay a “sales and use tax” on the sale of merchandise within the State of California or on out-of-state items purchased without paying California tax, which includes used vehicles. California’s sales and use tax applies to the use, storage, or other consumption of items in the State of California. Sales and use tax, as it is currently codified, is paid directly by the Seller to the California Department of Tax and Fee Administration (CDTFA). Currently, the easiest way to report and pay the sales and use tax is online at the CDTFA website by creating a username and password. Beginning January 1, 2021, a used vehicle dealer will be required to report and submit the sales tax to the DMV within thirty (30) days from the date the retail sale occurred and will be paid with the DMV application.
The Bills impose penalties and interest if the used vehicle dealer makes an application to the DMV that is not timely, fails to pay the sales tax, or fails to timely file the return required by the Sales and Use Tax Law with CDTFA.The Bills also require the DMV to withhold the registration or the transfer of registration of any vehicle sold at retail on and after January 1, 2021, to any applicant by any used vehicle dealer holding a license issued pursuant to the Vehicle Code until the used vehicle dealer pays the sales tax and any penalties.
Used vehicle dealers will continue to file sales and use tax returns with the CDTFA reporting total retail sales of vehicles. The used vehicle dealer’s license number must be provided as well as sales transaction details within the sales and use tax returns even if the used vehicle dealer is not required to pay tax to the DMV.For a more detailed description on the rollout of the Bills, please see the DMV’s Express Terms on Article 4.2.
Beginning January 1, 2021, sales and use tax returns must contain the vehicle identification number (VIN), report of sale number, selling price, and tax and/or penalty amounts paid to the DMV for the retail sales of used vehicles.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.
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The amendment to Section 6295 of
SEC. 9.Section 6295 of the Revenue and Taxation Code, as
proposed to be added by Assembly Bill 85 of the 2019–20 Regular Session, is
(a) When a vehicle required to be registered
Department of Motor Vehicles that is not timely, and is subject to penalty
the dealer shall not relieve the dealer of the obligation to file a return with
Department of Motor Vehicles, fails to pay the amount of sales tax due, or
3.5 (commencing with Section 11600) of Division 5, and subject to the provisions of Section 11615.5.(f) The Department of Motor Vehicles shall, through the adoption of regulations, establish any additional requirements for the implementation of this section.
(g) This section shall apply to sales of vehicles occurring on and after January 1, 2021.