2021 is looming as another year full of challenges, proof of this is the recent changes implemented by the California Department of Tax and Fee Administration (CDTFA) that affect all used vehicle dealers and vehicle auction houses beginning January 1, 2021. Dealers must file monthly returns & pay sales tax directly to DMV.
What changes as of January 1, 2021?
Three key changes will take effect as of January 1, 2021:
- Changes regarding the sales tax paid to the DMV. Starting January 1, 2021, the Department of Motor Vehicles (DMV) will require some used car dealers to pay sales tax on their retail sales of vehicles at the same time they submit each vehicle registration application.
- Sales return filing frequency with the CDTFA. Starting January 1, 2021, all used car dealers and/or vehicle auction houses must fill their sales returns on a monthly basis with the Department of Tax and Fee Administration.
- Additional information that will be required with your sales statement. Beginning January 1, 2021, the CDTFA will require that you provide your dealer license number along with your sales returns. Instructions will be sent to dealers accordingly.
As expected, with every change doubts and concerns arise. Below we will clarify the most frequently asked questions in relation to the changes implemented by the CDTFA.
What is the deadline for submitting the first sales declaration report?
The deadline for filing the first declaration corresponding to the sales made during the month of January 2021 will be March 1, 2021.
What information should be included in the details of used car sales transactions?
Return instructions will have information on how to provide your vehicle sales transaction detail.
How do I know if I was selected to pay sale taxes to the DMV?
The change process will be gradual, implemented by DMV in multiple phases. Phase one, beginning January 1, 2021 includes all used vehicle dealers who:
• Were licensed by DMV in the last 2 years
• Had a finding of underreporting in the last 2 years
• Reinstated their seller’s permit in the last 2 years
• Are not in the Business Partner Automation (BPA) program.
By January 1, 2023, all used vehicle dealers will be required to pay sales tax to DMV.
Should I continue to report the taxes due to the CDTFA?
Yes, you must continue reporting and remitting the taxes due to the CDTFA until you are completely transitioned to the new DMV payment process. Furthermore, you must provide your seller’s permit number on your Report of Sale to ensure your sales tax payment is correctly applied to your CDTFA return when you start paying to the DMV directly.