Did registering a dealer demonstrator with DMV automatically create sales or use tax or prevent demonstration-and-display treatment?

Plain-English summary

An Attorney General ruling was expected to require dealers to register many vehicles that previously used dealer plates. California said registration in the dealer's name did not itself create sales or use tax.

Registration also did not prevent the dealer from proving that a vehicle was used solely or frequently for demonstration and display, or for qualifying accommodation loans. Depending on the actual use, the historical letter contemplated no use tax or tax measured by the then-applicable fair rental value.

The dealer retained the burden of proving actual use. That burden was especially heavy when claiming a registered vehicle was used solely for demonstration and display because registration appeared unnecessary for that limited use.

Common questions

Did DMV registration automatically make the vehicle taxable?

No.

Did registration bar demonstrator treatment?

No.

Who had to prove the vehicle's actual use?

The dealer.

Citations and references

• Revenue and Taxation Code §§ 6094, 6244 — dealer demonstration and display provisions cited in the letter
• Historical Sales and Use Tax Regulation 1699 — vehicle-use regulation cited in the 1975 source
• Certified public accountants' March 5, 1975 letter and recent telephone call — request letter and call record not reproduced in the official PDF

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/215-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/215-0470.pdf

Original ruling text

215.0470

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

March 18, 1975

Mr. B--- W. N----- and --Certified Public Accountants
--- --- Center
--- ---, CA XXXXX
Dear Mr. N---:
Upon further consideration of your letter of March 5 and your recent telephone call, we see no reason to delay our reply any further. You state that the Attorney General has recently issued a ruling that restricts the use of dealer plates by automobile dealers and will require the registration of many vehicles previously operated on dealer plates. The mere registration of these vehicles in the name of the dealer will not result in sales or use tax. Even though a vehicle is so registered, we will recognize the possibility that it is used solely for demonstration and display, or frequently for demonstration and display or for accommodation loans, so as to qualify under Section 6094 or 6244 of the Revenue and Taxation Code and Regulation 1699 for operation either free of use tax or with tax based on fair rental value (1/60 method), as the case may be. The dealer, however, should be prepared to establish the actual facts by adequate evidence. In the case of a claim that a vehicle is used solely for demonstration and display, the burden of proof on the dealer is especially heavy, since there is no apparent reason for registering a vehicle so used.

Very truly yours,

T. P. Putnam
Assistant Chief Counsel
TTP:lb