California enacted Assembly Bill (AB) 85, (Stats. , ch. 8), AB 82 (Stats. , ch. 14), AB 176 (Stats. , ch. 256), and Senate Bill (Stats. , 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.
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Changes in Sales and Use Tax Returns Filing Frequency
Beginning January 1, , 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, , the sales and use tax reporting basis for certain used vehicle dealers was changed as follows:
Changes in Payment Method
Beginning January 1, , newly licensed dealers, dealers whose seller's permits were reinstated during the years and , and dealers with a previous finding of underreporting during the years and were required to pay sales tax directly to DMV when submitting a motor vehicle registration application to DMV.
Beginning January 1, , dealers that made 300 or fewer retail sales of vehicles in calendar year 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, , 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- or emailing them at .
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.
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:
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.
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.
Beginning January 1, , newly licensed dealers, dealers whose seller's were reinstated during the years and , and dealers with a previous finding of underreporting during the years and were required to pay sales tax directly to DMV when submitting a motor vehicle registration application to DMV.
Beginning January 1, , dealers that made 300 or fewer retail vehicles in the calendar year 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, , 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.
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.
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.
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.
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.
You are required to provide the following information about your retail sales of vehicles with your 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.
Beginning January 1, , 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, , the sales and use tax reporting basis for certain used vehicle dealers was changed as follows:
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.
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.
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.
The most common reasons you may have received a billing even though you paid tax to DMV are:
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- (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 inquiry to DMV at . If you have further questions, please contact CDTFA’s Customer Service Center.
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 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.
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.
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 , Returns, Defects, and Replacements, also provides additional guidance.
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For questions related to licensing, vehicle registration, titling transactions, and confirming DMV is receiving your sales tax payments, contact DMV at 1-800-777- or send an inquiry to DMV at .
For questions related to sales tax, contact CDTFA's Customer Service Center at 1-800-400- (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.
Most car dealers who sell used vehicles must comply with the Federal Trade Commission's (FTC's) Used Car Rule. In fact, car dealers who sell, or offer for sale, more than five used vehicles in a 12-month period must comply with the Rule. Banks and financial institutions are exempt from the Rule, as are businesses that sell vehicles to their employees, and lessors who sell a leased vehicle to a lessee, an employee of the lessee, or a buyer found by the lessee.
The Used Car Rule applies in all states except Maine and Wisconsin. These two states are exempt because they have similar regulations that require dealers to post disclosures on used vehicles. The Rule applies in the District of Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, and American Samoa.
This booklet defines the Rule's requirements, explains how to prepare and display the Buyers Guide, and offers a compliance checklist.
You must post a Buyers Guide before you display a vehicle for sale or let a customer inspect it for the purpose of buying it, even if the car is not fully prepared for delivery. You also must display a Buyers Guide on used vehicles for sale on your lot through consignment, power of attorney, or other agreement. At public auctions, dealers and the auction company must comply. The Rule does not apply at auctions that are closed to consumers.
Previously titled or not, any vehicle driven for purposes other than moving or test driving is considered a used vehicle, including light-duty vans, light-duty trucks, demonstrators, and program cars that meet the following specifications:
Exceptions to the Rule are:
A disclosure document that gives consumers important purchasing and warranty information, the Buyers Guide tells consumers:
If you conduct a used car transaction in Spanish, you must post a Spanish language Buyers Guide on the vehicle before you display or offer it for sale.
The Buyers Guide must be displayed prominently and conspicuously on or in a vehicle when a car is available for sale. This means it must be in plain view and both sides must be visible. You can hang the Guide from the rear-view mirror inside the car or on a side-view mirror outside the car. You also can place it under a windshield wiper. The Guide also can be attached to a side window. A Guide in a glove compartment, trunk or under the seat is not conspicuous because it is not in plain sight.
You may remove the Guide for a test drive, but you must replace it as soon as the test drive is over.
At the top of the Guide, fill in the vehicle make, model, model year, and vehicle identification number (VIN). Write in a dealer stock number if you wish.
On the back of the Guide, fill in the name and address of your dealership. Also fill in the name (or position) and the number of the person the consumer should contact with complaints. You may use a rubber stamp or preprint your Guide with this information.
You may include a signature line on the Guide and you may ask the buyer to sign to acknowledge that he or she has received the Guide. If you opt for a signature line, you must include a disclosure near it that says: "I hereby acknowledge receipt of the Buyers Guide at the closing of this sale." This language can be preprinted on the form. The signature line and the required disclosure must appear in the space provided for the name of the individual to be contacted in the event of complaints after the sale.
State Law. In some states, use of the "As Is-No Dealer Warranty" Buyers Guide may be legally sufficient to eliminate implied warranties. In other states "as is" sales are allowed only if specific action is taken or certain language is used. For example, some states may require you to eliminate implied warranties by using special language and/or a document other than the Guide.
If you're not sure which version of the Buyers Guide you should use or if you have questions about state requirements, contact the FTC or your state Attorney General's office.
For a warranty to be considered "full:"
The warranty is considered "limited" if any of these conditions doesn't apply.
Fill in the percentage of parts and labor costs covered by the warranty in the spaces provided. If a deductible applies to repairs made under the warranty, put an asterisk next to the number and explain the deductible in the "systems covered/duration" section. For example, "*A $50 deductible applies to each repair visit."
There's one column to list the systems covered, and another to list the length of the warranty for each system. In the left hand column, you must specify each system that's covered by the warranty. The Rule prohibits the use of shorthand phrases such as "drive train" or "power train" because it's not always clear what specific components are included in the "power train" or "drive train."
In the right hand column, you must state the length of the warranty for each system. If all systems are covered for the same length of time, you may state the duration once.
If the manufacturer's warranty hasn't expired, you may disclose this fact by checking the box, "MANUFACTURER'S WARRANTY STILL APPLIES. The manufacturer's original warranty has not expired on some components of the vehicle,” in the Non-Dealer Warranties for this Vehicle section of the Buyers Guide.
If the consumer must pay to get coverage under the manufacturer's warranty, you may not check the "Warranty" box. Such coverage is considered a service contract. However, you may check the "Warranty" box if you pay for coverage from the manufacturer and the consumer doesn't have to pay anything more than the price of the vehicle to get the coverage. If you provide a warranty in addition to the unexpired manufacturer's warranty, explain the terms of your warranty on the Buyers Guide.
If you and the consumer negotiate changes in the warranty, the Buyers Guide must reflect the changes. For example, if you offer to cover 50 percent of the cost of parts and labor for certain repairs, but agree to cover 100 percent of the cost of parts and labor after negotiating with the customer, you must cross out the "50 percent" disclosure and write in "100 percent." Similarly, if you first offer the vehicle "as is" but then agree to provide a warranty, you must cross out the "As Is-No Dealer Warranty" disclosure and complete the "Warranty" section of the Buyers Guide properly.
If you offer a service contract for repairs, check the box next to the words "Service Contract." However, if your state regulates service contracts as the "business of insurance," you don't have to check this box. Check with your Attorney General or state insurance commissioner to find out if your state regulates service contracts as insurance.
You must give the buyer the original or a copy of the vehicle's Buyers Guide at the sale. The Guide must reflect all final changes. If you include a signature line on your Buyers Guides, make sure the buyer signs the Guide that reflects all final changes.
If you offer a written warranty, or if the manufacturer's warranty still applies, you also must comply with the Magnuson-Moss Warranty Act and other FTC Rules, including the "Warranty Disclosure Rule." The Warranty Act contains provisions that establish consumers' rights with respect to written warranties. For example, the Act prohibits you from eliminating implied warranties when you provide a written warranty.
The Warranty Disclosure Rule requires that you disclose certain information about the coverage of your warranty and consumers' rights under state law. This information must be included in a single document that is clear and easy to read.
The warranty information you provide on the Buyers Guide is not sufficient to meet the requirements of the Warranty Disclosure Rule. Therefore, your written warranty and the Buyers Guide must be two separate documents.
Another federal rule — the FTC's Rule on Pre-Sale Availability of Written Warranty Terms — requires that you display written warranties in close proximity to the vehicle or make them available to consumers, upon request, before they buy.
You also may be interested in A Businessperson's Guide to Federal Warranty Law. It explains the Magnuson-Moss Warranty Act, the federal law governing warranties on consumer products.
Split cost warranties are those under which the dealer pays less than 100% of the cost for a warranty repair. This type of warranty includes 50/50 warranties where the dealer pays 50% of the cost for a covered repair and the buyer pays the remaining 50%. Another type of split cost warranty is one under which the buyer pays a deductible amount and the dealer pays the remaining cost for the repair.
If you offer a split cost warranty that requires you to pay a percentage of the repair cost for covered repairs, you should include the following disclosures in your warranty document:
If your warranty requires buyers to pay a deductible, your warranty document should disclose the deductible amount and the details as to when and under what circumstances the deductible must be paid.
Dealers offering split cost warranties can require that buyers return to the dealer for warranty repairs. If your warranty includes this restriction, however, you should provide an estimate of the total repair cost before work is started. This will allow the buyer to decide whether to approve the repair or have the work done elsewhere.
You can download the Buyers Guide from the FTC's Business Center, or you can get Buyers Guides from business-form companies or trade associations. You also can generate them yourself on a computer. However, you must use the wording, type style, type sizes, and format specified in the Rule. You are not allowed to place any other wording or symbols (including logos) on the Buyers Guide. The Guides must be printed in 100% black ink on white paper cut to at least 11" x 7 1/4." These requirements cannot be modified in any way. You may use colored ink to fill in the blanks.
Dealers who violate the Used Car Rule may be subject to penalties of up to $53,088 per violation in FTC enforcement actions. Many states have laws or regulations that are similar to the Used Car Rule. Some states incorporate the Used Car Rule by reference in their state laws. As a result, state and local law enforcement officials may have the authority to ensure that dealers post Buyers Guides and to fine them or sue them if they do not comply.
If you have questions about the Used Car Rule, contact the FTC and request a free copy of the Rule or staff compliance guidelines for the Used Car Rule; both documents explain some aspects of the Rule in more detail.
The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-); TTY: 1-866-653-. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
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