Sales and Use Tax
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Seller’s Permits and the California Department of Tax and Fee Administration (CDTFA)
All Dealers and Auto Brokers must obtain a “Seller’s Permit” from the CDTFA before you can collect sales or use tax and file your State Returns.
As of January 1, 2023, Used Vehicle Dealers with 300 or fewer retail vehicle sales in the previous calendar year, must pay the sales tax they collect from customers to the DMV, not the CDTFA as they did in the past.
There is no fee to obtain the Permit, and you can apply online or at a nearby CDTFA office.
Collection of Taxes
You must collect Sales or Use Tax whenever you sell a vehicle to a Consumer and remit this to the CDTFA.
How to compute tax
The Tax rate is based on the county and city where the vehicle will be primarily located and registered.
- For most Buyers, this would be their home address
- For commercial Buyers, this would be the address of their business
- For out-of-state buyers (taking possession within California), use the Dealer’s address
What is taxable and non-taxable?
Taxable portions of the Conditional Sales Contract include:
- The selling price of the vehicle
- Accessories installed and not included in the vehicle’s selling price (parts and labor)
- The labor portion of the Smog Fee
- Document Preparation Service Fee
Non-taxable items on the Conditional Sales Contract include:
- DMV fees (license & registration)
- California State Smog Certificate
Sales to Out-of-State Purchasers are generally exempt from DMV fees and Sales Tax provided there is proof the delivery did occur outside of California.
You must arrange the transportation and keep documentation (a shipping invoice, tow bill, bill of lading, etc.) to prove the vehicle left California.
Dealers should hire a commercial transporter and obtain a Bill of Lading that confirms the delivery to the out-of-state address. Otherwise, have an out-of-state Notary complete a BT-448 form during the delivery.
When a Dealer sells a vehicle that will be registered in another state, the Dealer must:
- Complete a Report of Sale, REG 51, and mark it “For registration in another state”
- Complete a Statement of Facts, REG 256, explaining how the vehicle was moved
- Mail the DMV copy of the REG 51 and REG 256 to:
Department of Motor Vehicles
Incoming Mail MS A235
PO Box 944292
Sacramento, CA 94244-2920
Other Tax-Exempt Sales
- Manufactured Homes (formerly known as Mobile Homes) that have a HUD Data Plate, not a VIN.
- Commercial Coaches, designed and equipped for human occupancy for used for industrial, professional, or commercial purposes. It may only be moved under a temporary permit.
- Sales to other Licensed Dealers when they are purchasing for the purpose of resale
Frequently Asked Sales Tax Questions
Q: Do licensed dealers pay sale tax on vehicles they purchase?
A: No. Licensed California dealers do not pay sale tax, provided the vehicle is purchased for resale.
Q: How much is the sales tax on a car in California?
A: The California state sales tax rate is 7.25%. However, after adding district taxes, Consumers could be charged anywhere from 7.75% to 10.75% depending on where their purchased vehicle will be registered.
Valuable Reference Links
- Obtaining a Seller’s Permit
- California City & County Sales & Use Tax Rates
- Senate Bill 1496, Chapter 474 Sales Tax