Did a vehicle dealer include smog-certificate charges and state inspection fees in California taxable gross receipts?

Plain-English summary

When a vehicle dealer charged a customer separately for the dealer's work of transmitting a required smog certificate, the charge remained part of taxable gross receipts. The memorandum treated it as reimbursement for the dealer's cost of doing business, not as an excludable government fee.

The result differed for the inspection fee that the Department of Consumer Affairs was statutorily required to charge and deposit in the State's Vehicle Inspection Fund. When a retailer paid that state fee and passed it to the purchaser, the memorandum said the amount could be excluded under Revenue and Taxation Code section 6012(c)(8).

Citations and references

• California Revenue and Taxation Code section 6012(c)(8), quoted as excluding a qualifying motor-vehicle fee or tax imposed by and paid to California (as cited in the supporting memorandum) — the live annotation cites section 6012(c)(9) without supplying an amendment or other reconciliation record
• Unidentified statute requiring the Department of Consumer Affairs to make or authorize specified motor-vehicle pollution-emission inspections, charge an inspection fee, and deposit the fees in the State's Vehicle Inspection Fund — statute, inspection rules, fee schedule, and fund record not identified or supplied in the supporting memorandum
• Applications to the Department of Motor Vehicles for initial registration or transfer of registration, dealer-transmitted pollution-control device certificates, South Coast Air Basin inspections, and dealer charges — applications, certificates, inspection reports, invoices, fee receipts, and tax records not reproduced in the official PDF
• May 29, 1980 Philip R. Dougherty memorandum to Donald J. Hennessy revising and expanding the then-present Annotation 295.1410 — prior annotation, request, review record, and publication instruction not reproduced in the official PDF
• Official Annotation 295.1410's certificate-of-compliance wording, usually-$7 inspection fee, section 6012(c)(9) attribution, two charge treatments, and May 29, 1980 date — supporting memorandum instead prints 'certificate or compliance,' currently-$11-or-$7 fees, and section 6012(c)(8); no amendment, correction, fee-change record, or other reconciliation source is supplied
• The memorandum's revised-annotation recommendation — no dealer transaction, tax return, audit, assessment, refund claim, formal adoption record beyond the live annotation, appeal, or later outcome supplied

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/295-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/295-1410.pdf

Original ruling text

State of California

Board of Equalization

Memorandum
To:

Mr. Donald J. Hennessy

From:

Philip R. Dougherty

Subject:

Revised Annotation to Replace Present 295.1410

295.1410
Date:

May 29, 1980

Gross Receipts
(f)
Costs and Expenses
Smog Control Certification
With each application to the DMV for initial registration or transfer of registration of certain motor vehicles, a dealer must also transmit a valid polution control [smog] device certificate or compliance. There is no requirement that the dealer charge the purchaser for transmitting the certificate, but a dealer may choose to make a separate charge for the transmittal and so be specifically reimbursed for that cost of doing business. Such a charge to the purchaser may not be excluded from the amount upon which the sales tax is computed. The Department of Consumer Affairs is required to make or authorize certain motor vehicle pollution emission inspections of motor vehicles in the South Coast Air Basin. The Department is required by statute to charge a fee for the inspection. These fees must be deposited in the State’s Vehicle Inspection Fund. Revenue and Taxation Code Section 6012(c)(8) excludes from the amount subject to sales tax any motor vehicle fee or tax imposed by and paid to the State of California that has been added to or is measured by a stated percentage of the sales or purchase price of a motor vehicle. Accordingly, when the fee (currently $11 or $7) [charged by the Department of Consumer Affairs] is paid by a retailer of a motor vehicle and charged to the purchaser, that amount may be excluded from the computation of sales tax due.

This revises and expands on annotation 295.1410. PRD

PRD:ba