Could California DMV legally round a vehicle purchaser's use-tax payment to whole dollars?

Plain-English summary

The memorandum concluded that DMV could legally account for a vehicle purchaser's use-tax liability in whole dollars if it followed Vehicle Code sections 4750.5(d) and 9559.

Section 4750.5(d) directed DMV to disregard dollar fractions using section 9559 and treated payment on that basis as full compliance with the Sales and Use Tax Law for the covered vehicles. Section 9559 disregarded a fraction unless it exceeded 50 cents, in which case it became a full dollar; a fee or penalty totaling 50 cents or less was deemed one dollar.

The memorandum raised a separate concern about DMV allowing banks and finance companies that were not dealers to collect and report a purchaser's use tax. It said Revenue and Taxation Code section 6292 prohibited that collection and identified purchaser-agent status as the only legal basis the author could see.

Common questions

Did the Sales and Use Tax Law itself authorize the rounding?

No. The memorandum located the authority in the Vehicle Code.

Did the memorandum approve every lender collection arrangement?

No. It questioned collections by nondealer banks and finance companies unless they were acting as the purchaser's agent.

Citations and references

• Cal. Veh. Code § 4750.5(d) — vehicle use-tax fraction rule and full-compliance provision
• Cal. Veh. Code § 9559 — whole-dollar computation method quoted
• Cal. Rev. & Tax. Code § 6292 — nondealer collection concern identified

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/570-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/570-0425.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

570.0425

To:

Mr. P. M. Fiorino

From:

Glenn L. Rigby

Subject:

DMV Accounting for Use Tax

Date:

June 24, 1976

In your memo of June 16 you asked our opinion as to whether or not DMV’s proposed procedure of rounding off a purchaser’s use tax liability to the nearest dollar is legally correct. Although there is no statutory provision under the Sales and Use Tax Law which allows such a procedure, there is such authorization under Section 4750.5(d) of the Vehicle Code. This section provides: “In computing any use tax or penalty thereon under the provisions of this section dollar fractions shall be disregarded in the manner specified in Section 9559 of this code. Payment of tax and penalty on this basis shall be deemed full compliance with the requirements of the Sales and Use Tax Law insofar as they are applicable to the use of vehicles to which this section relates.” Section 9559 provides: “In computing any registration or weight fee or penalty imposed by this code, whether on a proration or otherwise, a fraction of a dollar is disregarded, unless it exceeds fifty cents ($.50), in which case it is treated as one full dollar ($1). Computation of any penalty shall be made from the fee after the same has been computed as provided in this section. Any fee or penalty in an amount of fifty cents ($.50) or less shall be deemed to be one dollar ($1).” Assuming DMV follows the above referenced statutory provisions concerning rounding off, such a procedure would be legally correct. The only item that gives us some pause is that DMV allows banks and financial companies, i.e., nondealers, to collect and report the purchaser’s use tax directly to DMV. Under Section 6292 of the Revenue and Taxation Code such a collection is prohibited. The only legal base we can see for such a collection procedure would be a finding that the banks and financial companies were acting as the purchaser’s agent.