How to get a California dealer license
California licenses used-car dealers through DMV Occupational Licensing under Vehicle Code section 11701. It is a sequence with two gates most applicants underestimate: a dealer education course you must finish before you can sit the DMV exam, and a background check that has to clear before the licence is released. Here is the order that works.
Form your entity and register with the Secretary of State
Choose an LLC, corporation or sole proprietorship and file with the California Secretary of State. You submit your most recent Statement of Information (SI 550 or LLC 12) with the application. File a fictitious business name statement too, unless your surname is part of the business name.
SI 550 / LLC 12
Get a CDTFA seller’s permit
You must attach a copy of your California Department of Tax and Fee Administration resale permit to the application, so get it before you apply. The permit itself is free, though CDTFA may ask for a security deposit. Losing it later can cancel your dealer licence under Vehicle Code sections 11617(a)(6) and 11721(f).
CDTFA · no fee
Complete the dealer education programme
Vehicle Code section 11704.5(b) requires a preliminary programme of not less than four hours before you can first sit the exam. DMV approves the providers but does not run the course or publish its price, so shop the approved list. Your certificate of completion is valid for one year, and the original goes in with your application.
VC 11704.5(b) · 4 hours minimum
Pass the DMV written examination
You sit the exam with your local Occupational Licensing Inspector, bringing a California driver licence or ID card. The pass mark is 70%. You get three attempts, each costing $16, with a one-week wait between tries. Fail all three and you retake the education programme and start the three attempts again.
VC 11704.5(a) · $16 · 70% to pass
Live Scan fingerprinting for every owner
Everyone listed under ownership on form OL 12 must be fingerprinted through Live Scan using form DMV 8016, and must also file an OL 29B personal history questionnaire and an ADM 9050 appointment of the Director as agent for service of process. Prints go to the California DOJ and cost $32 per person. DMV cannot release the licence until DOJ clears you, and it cannot accept prints you sent to another agency, so schedule this early.
DMV 8016 · $32 per person
Secure a compliant business location
You need an established place of business under Vehicle Code section 320, where your books and records are kept, and it cannot be temporary, transitory or mobile. A trailer coach office is acceptable if it is not part of your sale inventory. A retail used dealer also needs a permanent exterior sign and a display area for the exclusive use of the dealership.
- The sign must be at least two square feet per side and readable from 50 feet (VC 11709(a)).
- Extra display areas within 1,000 feet of the main lot need no separate licence (13 CCR 270.08).
- Wholesale-only dealers are exempt from the sign and display area, and photograph only the office and location.
- Zoning and the city or county business licence are local matters. DMV publishes nothing on them, so check with your city before you sign a lease.
VC 320 · VC 11709 · 13 CCR 270.00
Post the $50,000 surety bond
Vehicle Code section 11710(b) sets the dealer bond at $50,000, and you must file it again at every renewal. File it on form OL 25, or use OL 25E with an STD 204 to deposit cash in lieu. The bond must come from an admitted surety insurer on a form approved by the Attorney General. If the bond lapses, your licence and plates are cancelled automatically under section 11721(b).
- The $10,000 tier you may have read about is not available to a retail used dealer. It covers only motorcycle or ATV-exclusive dealers, and wholesale-only dealers moving fewer than 25 vehicles a year (VC 11710.1).
- You pay a premium, not the $50,000. California publishes no premium figures, because sureties price it on your credit.
VC 11710(b) · Form OL 25
Submit the OL 248U packet and pay the fees
The used dealer packet is OL 248U and the checklist is OL 248B. The core forms are OL 12 (Part C, ownership), OL 21A (the application), OL 25 (bond) and OL 53 (authorisation to release financial information), plus an OL 29B, ADM 9050 and DMV 8016 copy for each owner. Attach your education certificate, exam evidence, Secretary of State filing, resale permit and location photographs.
OL 248U · OL 248B checklist
Pass the business location inspection
After DMV processes the application it emails you to self-schedule an inspection. The inspector visits the main business office, checks the sign and display area, and reviews the books and records kept there.
Wait out the investigation
Vehicle Code section 11704(b) gives DMV up to 120 days from receipt of a complete application with fees to investigate what you filed, including your character, honesty, integrity and reputation. That clock only starts once the application is complete, which is why the education, exam, prints, bond and premises all come first.
VC 11704(b) · up to 120 days
At a glance
- Application fee
- $175 (+ $1 Family Support)
- Written exam
- $16 per attempt
- DOJ background check
- $32 per owner
- Surety bond
- $50,000 (OL 25)
- Pre-licensing education
- 4 hours minimum
- Dealer plate
- $92 + county fees
- Branch location
- $70 each
- Investigation window
- up to 120 days
Estimated cost
Estimated timeline
Titling & registering a vehicle in California
California runs on electronic reporting. Since 1 January 2019 every dealer must report the sale electronically and attach printed temporary licence plates, and handwritten reports of sale are no longer accepted. Two deadlines govern the paperwork: five days to release the seller from liability, and 30 days to file the application and fees.
The workflow
- 1
Report the sale electronically before delivery
Vehicle Code section 4456(a) requires you to report the sale through the section 4456.2 reporting system before the car leaves. For a used retail sale the form is the REG 51 Report of Sale, which is a controlled form ordered from Occupational Licensing on OL 395U, not a download.REG 51 · VC 4456(a)
- 2
Attach the temporary licence plates
If the vehicle has no plates from DMV, attach the temporary licence plates issued by the reporting system. They are valid for 90 days from the date of sale. TLP stock must come from an authorised provider, must be fastened through all four perforations rather than put in a window, and cannot have its font or layout altered. No temporary plates go on a car that already has permanent California plates, even expired ones. The buyer’s temporary identification copy of the REG 51 goes in the lower rear window.VC 4456(a)(9) · valid 90 days
- 3
Give notice of transfer within five days
Vehicle Code section 5901(a) requires electronic notice to DMV no later than the end of the fifth calendar day after the sale, not counting the day of sale. This is what releases the previous owner from liability, and it is a separate deadline from the 30-day filing.VC 5901(a) · 5 calendar days
- 4
Capture the odometer disclosure
California has no standalone odometer form. The disclosure lives on the title itself, or on the REG 397 for a new vehicle. The REG 262 is the fallback, used only when the title is noncomplying or unavailable, when a REG 227 is needed, when the disclosure has an error or alteration, or when there are multiple transfers. A REG 135 bill of sale is not a substitute.REG 262 (secure form)
- 5
Provide the smog certificate at or before delivery
Vehicle Code section 24007(b)(2) puts the obligation on the seller, so you obtain it. You may charge the buyer up to $50 for emission testing plus the actual certificate fee, and you may exclude that from the advertised total price. Never present it as a government fee.- Exempt on transfer: petrol vehicles four or fewer model years old (DMV charges an $8 smog transfer fee instead), anything built before the 1976 model year, and transfers between close family members.
- Battery-electric vehicles sit outside the programme entirely, because Health and Safety Code section 44011 applies to internal combustion engines.
- Do not confuse the four-model-year transfer exemption with the eight-model-year exemption for biennial renewals. Both exclude diesel.
VC 24007(b) · VC 4000.1(d)
- 6
Pay off the trade-in lien within 21 days
Vehicle Code section 11709.4(a) gives you 21 calendar days from taking a vehicle in trade to tender the agreed payoff to the lienholder or lessor. You may not sell, consign or transfer that trade-in until you have tendered the payoff. A written agreement can shorten the 21 days but never lengthen them.VC 11709.4(a) · 21 calendar days
- 7
File the application and fees within 30 days
Submit the application with all fees and penalties within 30 days of a used vehicle sale, or 20 days for a new one. Late penalties are yours: section 4456(a)(2) says the dealer pays them and shall not charge the purchaser. Miss it by 50 days on a used car and you are into licence discipline territory. Keep your book copy of the REG 51 for four years.VC 4456(a)(2) · 30 days used
- 8
Delivering title to the buyer
For an ordinary retail sale, filing on time is the delivery. Vehicle Code section 5753(b) says a licensed dealer satisfies the delivery requirement by submitting the documents and fees to DMV, and DMV then issues the title. There is no separate deadline to hand the buyer a title. If a buyer demands the title in writing, mark the REG 51 accordingly and follow the demand procedure.- The widely quoted 15 business days at $25 a day rule binds the lienholder releasing a title after payoff. It is not a dealer obligation to the buyer.
VC 5753(b)
Key DMV forms
Application for Replacement or Transfer of Title
Transfer title when the title is lost or otherwise unavailable.
Vehicle/Vessel Transfer and Reassignment
Fallback odometer disclosure and reassignment. A secure form: not downloadable, collect it from a DMV field office.
Report of Sale, Used Vehicle
Reports a used retail sale. A controlled form, ordered from Occupational Licensing on OL 395U.
Bill of Sale
Records a sale where no odometer disclosure is required. Not an odometer substitute.
Notice of Transfer and Release of Liability
Releases the seller from liability after a transfer.
Title & registration fees
| Registrationincludes the $3 alternative fuel/technology fee | $76 |
| California Highway Patrol | $34 |
| Title transferplus a $15 penalty if late | $15 |
| Title only / replacement title | $28 |
| Vehicle licence feeof market value, depreciated over 11 years; trade-in is not deducted | 0.65% |
| Transportation improvement feeby vehicle value; CPI-adjusted every 1 January | $33 to $231 |
| Smog transfer fee | $8 |
| Smog abatement fee | $20 |
| Road improvement feezero-emission vehicles, model year 2020 and newer | $121 |
| California tire feeper new tire, including the spare | $1.75 |
| Document processing chargecap: $85 as a DMV business partner, $70 if not (VC 4456.5) | $85 / $70 |
| Electronic filing chargenever more than your provider actually charges you | up to $33 |
How a California vehicle sale is taxed
California charges 7.25% state sales tax plus a local district tax, and two rules trip up dealers from other states. There is no trade-in credit here, so tax is calculated on the full selling price. And the district rate follows where the buyer registers the vehicle, not where your lot sits. Estimate a deal below, then read how it works.
The sale
Estimated sales tax
State tax + surtax (excludes title & registration fees)
- Taxable base (price + fee)
- $30,999.00
- 7.25% state tax
- $2,247.43
- District tax (2.5%)
- $774.98
- Total sales tax
- $3,022.40
Estimate only. Government title, licence and registration fees are added separately and are not taxed. The district rate follows the buyer’s registration address, so confirm the exact rate on the CDTFA address lookup for the sale date. California district rates change several times a year, not only in January.
How it works
- The statewide base rate is 7.25%. District taxes sit on top, individually ranging from 0.10% to 2.00%, and more than one district can apply in the same place. Combined rates currently run from 7.25% to 11.25%.
- District tax follows registration, not your address. CDTFA is explicit that whether you owe a district tax depends on where the vehicle is registered. A dealer inside a district selling to a buyer who registers outside all districts charges only 7.25%.
- City district taxes apply only inside incorporated city limits, so a customer in an unincorporated area may owe a lower rate even with a city mailing address. Countywide districts can still apply.
- There is no trade-in credit in California. CDTFA Publication 34 states the allowance for a trade-in cannot be excluded from the amount on which tax is based. Sell a car for $20,000 and take a $4,000 trade, and tax is on the full $20,000.
- A genuine discount is different and does reduce the taxable price. If both a discount and a trade-in are on the same deal, your records must show each separately, or CDTFA treats the discount as an over-allowance and taxes the whole price.
- Taxable: your document processing charge, dealer-installed accessories including the installation labour, and mandatory factory warranties.
- Not taxable when separately stated: optional extended warranties and service contracts, finance and interest charges, insurance, DMV fees you pass through, the smog certificate fee and the California tire fee. Collect more than the actual DMV, smog or tire amount and the excess becomes taxable.
- From 1 October 2026 the CARS Act rewrites Revenue and Taxation Code section 6012.3 so restocking fees under the new three-day right to cancel sit outside gross receipts, replacing the old exclusion for the contract cancellation option price.
- Watch 1 October 2026 for a second reason: Los Angeles County rises from 9.75% to 10.25% under Measure ER, and around 70 LA County cities move with it. That is the same day the CARS Act becomes operative.
Worked example
| Vehicle price | $20,000.00 |
| Document processing charge (taxable) | $85.00 |
| Trade-in allowance | $5,000.00 (no tax reduction) |
| Taxable measure | $20,085.00 |
| Sales tax at 9.75% (Los Angeles) | $1,958.29 |
| Same deal registered in Ventura (7.25%) | $1,456.16 |
| Cost of the missing trade-in credit | $487.50 |
Dealer doc fees
California dealer FAQ
Licensing, titling, taxes, and fees: the questions dealers ask most.
What licence do I need to sell used cars in California?
A Vehicle Dealer License from DMV Occupational Licensing, in the used retail or wholesale-only category. You apply with the OL 248U packet under Vehicle Code section 11701, after finishing a dealer education programme and passing the DMV written exam.
How much is the California dealer bond?
$50,000 for a used retail dealer, filed on form OL 25 and renewed every time your licence renews. The $10,000 bond you may have read about is only for dealers handling motorcycles or ATVs exclusively, or wholesale-only dealers selling fewer than 25 vehicles a year.
Does California give a trade-in tax credit?
No, and this is the biggest difference from states like Texas or Florida. CDTFA Publication 34 says the trade-in allowance cannot be excluded from the taxable amount, so sales tax is calculated on the full selling price. On a $10,000 trade at a 9.75% rate, that costs your customer $975 more than it would in a trade-credit state.
Which sales tax rate do I charge?
The rate for where the buyer registers the vehicle, not where your dealership is. If you are inside a district and the buyer registers outside all districts, you charge only the 7.25% state rate. Use the CDTFA address lookup against the registration address on every deal.
How much can I charge for document processing?
$85 if you have a business partner agreement with DMV under Vehicle Code section 1685, and $70 if you do not. Both caps are in Vehicle Code section 4456.5, and both are taxable. A separate electronic filing charge of up to $33 is allowed, but only if you do the filing yourself.
How long do I have to report and file a sale?
Report the sale electronically before delivery, give DMV notice of transfer by the end of the fifth calendar day after the sale, and submit the application with all fees within 30 days for a used vehicle. Late penalties are yours to pay and cannot be charged to the buyer.
How long do I have to pay off a customer’s trade-in loan?
21 calendar days from taking the vehicle in trade, under Vehicle Code section 11709.4. You cannot sell, consign or transfer the trade-in before you have tendered the payoff, and a written agreement can only shorten that window, never extend it.
Does the CARS Act change California dealer licensing?
No. SB 766 is a conduct and disclosure statute, not a licensing one. It leaves the licence type, forms, fees, bond amounts, education requirement and place-of-business rules untouched. What it changes from 1 October 2026 is how you advertise prices, sell add-ons, quote payments and handle used-vehicle returns, plus a new 36-point notice in your sales offices.
How long does it take to get licensed in California?
DMV publishes no end-to-end figure. The one official duration is up to 120 days for the investigation under Vehicle Code section 11704(b), and that clock starts only when a complete application arrives. Add the education course, exam attempts, DOJ background clearance, bond and premises before it. Anyone quoting a firm 60 to 90 days is estimating.
Sources
- CA DMV - Vehicle Dealer License
- CA DMV - Used Dealer Application Checklist (OL 248B)
- Vehicle Code 11710 - Dealer surety bond
- Vehicle Code 11704.5 - Education and examination
- Vehicle Code 4456 - Report of sale and temporary plates
- Vehicle Code 4456.5 - Document processing charge cap
- Vehicle Code 11709.4 - Trade-in payoff (21 days)
- CA DMV - Registration fees
- CDTFA Publication 34 - Motor Vehicle Dealers
- CDTFA - Sales and use tax rates by city and county
- CDTFA - Tax rate address lookup
- SB 766 - California Combating Auto Retail Scams (CARS) Act
As of September 2026. This is general information, not legal or tax advice. Requirements, fees, and county surtax rates change. Always confirm current details with the California authorities linked above, or your attorney, before acting.
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