When diving into the world of used car, there’s no shortage of questions, curiosity, and discoveries. This article aims to unpack key insights while offering practical perspectives and fresh thinking.
You must report your purchase of a vehicle subject to use tax. In general, use tax applies to purchases of vehicles for use in this state when an amount for sales tax is not paid to a California dealer. This includes purchases from out-of-state sellers, private parties, or California dealers when delivery of the vehicle is taken out of state. Unless an exemption or exclusion applies, you must pay use tax on your vehicle purchase. Generally, you will pay the use tax when you register your vehicle with the Department of Motor Vehicles (DMV).
However, if you purchased a vehicle without completing registration and paying the use tax to the DMV, you must pay the use tax directly to the CDTFA. You can report your purchase of a vehicle and pay the use tax by using the CDTFA's online services and selecting the option to File a Return or Claim an Exemption for a Vehicle, Vessel, Aircraft, or Mobile Home under the Limited Access Functions.
Your tax payment is due on or before the last day of the month following the month of purchase.
Penalty and interest charges will begin to accrue once the due date has passed.
Determining the Use Tax Rate
The use tax rate is the same as the sales tax rate and is based on the address where you register your vehicle.
Determining the Amount Subject to Tax
The total purchase price of your vehicle is subject to tax. The total purchase price includes any type of payment, such as cash, checks, the payment or assumption of a loan or debt, and the fair market value of any property and/or services traded, bartered, or exchanged for the vehicle.
Credit for Tax Paid to Another State
If you paid tax to another state when purchasing your vehicle, you may be entitled to claim a credit for the tax previously paid to another state.
Incorrect tax amount paid at the DMV
If you believe you were charged and paid the incorrect amount of use tax at the DMV, please contact the CDTFA.
Lease Buyout
If you purchased a vehicle you were leasing at the end of the lease agreement (lease buyout), the purchase is subject to tax.
Claiming an Exemption or Exclusion from the Use Tax
If you claim that your vehicle purchase is exempt or nontaxable, the DMV may ask you to obtain a use tax clearance certificate from the CDTFA before allowing you to register the vehicle without paying tax.
Gifts
If you receive a vehicle as a gift, you are not required to pay use tax on the vehicle.
Family Transaction
If you purchase your vehicle from a qualifying family member who is not engaged in the business of selling vehicles, you are not required to pay use tax on the purchase.
Involuntary Transfers
If you have received a vehicle as the result of an involuntary transfer of ownership, you are not required to pay use tax on the vehicle.
Military Personnel
If you are an active duty service member and your vehicle is brought into California because of an official transfer to this state, you may not owe use tax on the vehicle.
Not Purchased for Use in California
If you purchase your vehicle for use outside of California, your purchase may not be subject to use tax.
Interstate or Foreign Commerce
If you purchase a vehicle for use in interstate or foreign commerce, your purchase may not be subject to use tax.
Sales and Use Tax Exemption Requirements for Trucks and Trailers Used Exclusively in Interstate or Foreign Commerce
Beginning January 1, , Assembly Bill 321 (Stats. , ch. 226), amends the sales and use tax exemption for trailers and semitrailers provided by Revenue and Taxation Code (R&TC) section .5 to also apply to certain new, used, or remanufactured trucks. The exemption applies to trucks delivered to both California residents and non-residents in California that are removed from the state within a specified time, and thereafter used exclusively out-of-state or in interstate or foreign commerce. The expanded sales and use tax exemption is operative from January 1, , through December 31, .
Purchased by an American Indian for Use on a Reservation
If you are an American Indian who resides on a reservation, your vehicle purchase may qualify as exempt from use tax.
Farm Equipment
You may be eligible for a partial tax exemption if you purchase a vehicle that will be used exclusively in producing and harvesting agricultural products.
Purchases for Use Outside of California
You may not be required to pay California use tax if the only use of the vehicle in California is to remove it from the state and it will be used solely thereafter outside this state, and you do not register the vehicle in California with the DMV.
Use Tax Verification for Other States
If you have moved out of California, and you need to register your vehicle in a different state, you may be asked to provide verification of the tax you paid to the State of California.
used car can inspire deeper thinking, we hope the ideas shared here sparked your interest and offered a new lens to look through.
