How do car dealerships pay taxes in California?

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May 20, 2025 at 7:57 pm #2099 Reply
Jon
Hello, I’ve been flipping cars for about 1-2years, both FB marketplace finds and also under my uncles’ dealership, but recently I’ve been thinking about getting my own dealers license and getting an office and lot.

I’ve had this idea for a while now, and the only thing I worry about is the taxes part of it and how does that work.

I know when I sell a car through a dealer, the buyer pays sales tax and registration, but how does the dealership itself pay taxes? I am in California.

Any information, I would much appreciate it.

The only reason I plan on getting my own dealership is because my uncle takes a $300 fee for every car I buy through him and over the past year I realized the money I gave him I could’ve just got my dealer license and office and do it myself.
May 20, 2025 at 7:57 pm #2100 Reply
Vick
$300 fee is not bad.
May 20, 2025 at 7:57 pm #2101 Reply
Ryan
300 is nothing compared to insurance lot rent utilities and much more liability.

Remember, the grass isn’t always greener on the other side.
May 20, 2025 at 7:58 pm #2102 Reply
John
If you plan to sell less than 25 cars per month, 300 per year, the $300 per car, thru your uncle, is DEFINITELY the cheapest, and easiest way to do it.

I made more profit selling 6 per month with no license, than I do selling 12-15 per month at the lot.

My overhead, and income taxes, averages about $1,300-$1900 PER CAR, after all deductions.

Your current $300 per unit is much better than if you have your own lot.
May 20, 2025 at 7:59 pm #2103 Reply
Jess
$300 fee is not bad at all. I would rather pay that than the marriage of having a lot.

Just know that you have to have to have at least two cars in inventory to open a storefront and an approved location.

A signed lease, Sign, posted business hours you must keep.

Office space, retail space, locked file cabinet and computer helps unless you’re doing docs by hand.

Take a Dealer Education class, get a bond for $50k either on credit or cash, then apply for license and wait for DMV inspection usually 4–8 weeks depending on location.

Remember, DMV Inspectors will open you up for business and DMV Investigators will close you down.

Keep in mind if it’s a solo project then you keep more of your profit, but if you end up needing outside help that opens up a whole other realm of responsibilities.

You run a report from your DMS, and it will tell you how much you owe in taxes, and you can pay that online quarterly.

Ton more of necessities I’m not listing.

So yeah $300 per flip is a great deal.
May 20, 2025 at 7:59 pm #2104 Reply
Thomas
300 is just nothing comparing what you have to deal with – I am sure you will gave up when you find out how many paperwork you would need and how much expenses you gonna have, I am not even telling about post-sale management, title rebuilds, insurance, bonds, Strate Lot Inspections, Sales Tax monthly payment, Advertising, workers payment W2, 1099 and etc

I would rather buy your uncle’s Lot instead of opening your own with all the mess, time, money and efforts.
May 20, 2025 at 8:00 pm #2105 Reply
Daniel
The tax you charge the customer must be paid back to the state. Miss one and you get a surprise audit. And you pay a lot of taxes from what you profited. Stay with your uncle for now. Save up more money because the overhead for even a small dealer is high. Many dealers have been closing down lately. Not a good time but NFA and DYOR.
May 20, 2025 at 8:00 pm #2106 Reply
Jennifer
Look up the state laws for CA. Dealer license – there’s also brokers- a small yearly fee. 300 per car is absurd. A broker is 400-500 yearly. Your uncle is screwing you with no lube.
May 20, 2025 at 8:00 pm #2107 Reply
Jess
Not trying to discourage, but just being transparent.

Life expectancy of a new car lot is on average less than two years.

Per DMV and Financial Institutions.
May 20, 2025 at 8:00 pm #2108 Reply
Warren
I would pay the 300 bucks, especially if it includes the use of a dealer plate. The cost of insurance and rent is fixed regardless of how many cars you do or don’t sell.
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How do car dealerships pay taxes in California?

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