Did California's vehicle family exemption cover transfers between stepparents and stepchildren?

Plain-English summary

Counsel listed the family vehicle transfers exempt under the 1967 version of section 6285, including sales between parents and children, grandparents to grandchildren, and spouses, when the seller was not in that property-selling business.

A direct sale between a stepparent and stepchild did not qualify. The same applied across combinations of stepmother, stepfather, stepson, and stepdaughter.

Some joint transactions could qualify. A stepchild could sell to the natural parent and stepparent jointly if the vehicle was re-registered to both as evidence of joint ownership. Conversely, a natural parent and stepparent could jointly sell to the natural parent's child if the vehicle had been jointly owned by both sellers before the sale.

The letter recommended keeping the DMV procedure that required stepfamily transferees to obtain a Board exemption certificate.

What this means for you

Families transferring a vehicle

The historical exemption followed the exact legal relationships between seller and buyer. A step relationship alone did not qualify, while participation by the natural parent could change the result.

Accountants and tax professionals

Verify title and registration both before and after the transfer. Joint ownership had to be real and documented, not merely asserted for the exemption.

Common questions

Q: Was a direct stepchild-to-stepparent sale exempt?

A: No, under the 1967 rule.

Q: Could a stepchild sell jointly to the natural parent and stepparent?

A: Yes, if the vehicle was registered to both buyers as joint owners.

Q: Could the natural parent and stepparent jointly sell to the child?

A: Yes, if both jointly owned the vehicle before the sale.

Q: Was a Board exemption certificate still recommended?

A: Yes, for stepfamily transactions.

Citations and references

• California Revenue and Taxation Code § 6285, as then in effect

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 585.0020
• Original supporting opinion: 585.0020 PDF

Original ruling text

585.0020

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001
TELEPHONE (916) 445-6450

July 26, 1967

A--- C--- S--- C--XXXX --- ----- ---, CA XXXXX
Attention:

Mr. R--- L. T---, Manager
License Department

Gentlemen:
Reference is made to your letter of July 19, 1967, regarding automobile use tax exemptions under section 6285 of the Sales and Use Tax Law relating to family transfers. The section reads: There are exempted from the taxes imposed by this part the gross receipts from the sale of and the storage, use or other consumption in this state of a vehicle required to be registered under the Vehicle Code, or of a vessel or an aircraft, when the person selling the property is either the parent, grandparent, child or spouse of the purchaser and the person selling is not engaged in the business of selling the type of property for which the exemption is claimed. Under the exemption the following sales would be exempt: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Father sells to son or daughter
Mother sells to son or daughter
Parents jointly sell to son or daughter
Grandfather sells to grandson or granddaughter
Grandmother sells to grandson or granddaughter
Grandparents jointly sell to grandson or granddaughter
Son sells to father or mother or both
Daughter sells to father or mother or both
Husband sells to wife
Wife sells to husband

A--- C--- S--- C---

-2-

July 26, 1967
585.0020

Under the statute, we have an opinion that the exemption does not apply where a grandson or granddaughter sells a car to his or her grandparents. It is also our opinion that the exemption does not extend to or include a sale by a stepson to a stepfather, stepfather to a stepson. The same would apply to stepdaughter, stepmother, or any combination of stepchild and stepparent. Under certain circumstances, transfers involving stepparents and stepchildren may be exempted. We would consider the case where a stepchild sold a car to his natural parent who was remarried and the sale was to both the natural and stepparent jointly. Also, we would consider a sale made jointly by a stepparent and a natural parent to a child of the natural parent. In the first example, the vehicle would have to be registered to the natural and stepparent jointly as evidence of joint ownership. In the second, the vehicle, before sale, would have to be shown to have been owned jointly by the selling parents. In the case of stepparent and stepchild relationships, we would not recommend changing the Department of Motor Vehicle procedure of requiring the transferee to obtain an exemption (BT-111) from the board. Very truly yours,

Robert Anderson
Tax Counsel
RHA:dse
cc:

--- – Subdistrict Administrator (Donald L. Hethcote)
Headquarters – Occasional Sales (Lee Roberts)