Did use tax apply when an inoperative vehicle received only a DMV title transfer and was not registered for operation?

Plain-English summary

The memorandum stated that use tax did not apply when a person bought an inoperative vehicle, did not register it for operation, and obtained only a DMV title transfer.

That result did not protect a sham. If the purchaser obtained a title-only transfer and then registered the vehicle shortly afterward, the Consumer Use Tax Section could investigate and impose use tax if the arrangement was not genuine.

Section 6293 did not change the stated result because the memorandum read that section as addressing vehicles subject to identification under the Vehicle Code's off-highway-vehicle division.

Citations and references

• California Revenue and Taxation Code section 6293 (as cited)
• California Vehicle Code division 16.5, commencing with section 38000 (as cited)

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/580-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/580-0406-050.pdf

Original ruling text

State of California

Board of Equalization
Legal Division-MIC: 82
Telephone: 445-6450

Memorandum
To :

Ms. Margaret L. Pennington
Tax Auditor
Audit Review and Refunds - MIC:39

From :

Ronald L. Dick
Supervising Staff Counsel

Subject:

Application of Use Tax to the Use of Vehicles

580.0406.050
Date:

March 21, 1996

Your January 31, 1996 memorandum to Mr. David Levine regarding the application of use tax to purchases of vehicles has been referred to me for reply. You asked, “Is tax due upon purchase of vehicles not requiring registration because they will be inoperative for a period of time?” We understand that the situation to which you refer occurs when a person purchases a vehicle which is not registered for operation, and the person obtains only a title transfer from the Department of Motor Vehicles. It has been our position in such a case that the use tax does not apply. If a person were to purchase a vehicle under those circumstances to obtain a title only transfer and shortly thereafter register the vehicle, we understand the Consumer Use Tax Section would investigate to determine whether the transaction is a sham and, if so, impose use tax. We do not believe Revenue and Taxation Code section 6293 calls for a different result. That section provides the application of tax to the sale of a vehicle subject to identification under Division 16.5 (commencing with section 38000) of the Vehicle Code. (Those vehicles are certain “off-highway vehicles” such as certain motorcycles, snowmobiles, and dune buggy or all-terrain vehicles. If you have further questions regarding this feel free to contact me directly.

RLD:sr