In the state of California, vehicle license fees (VLF) are a type of annual tax that is assessed on the ownership of a vehicle. The fee is based on the vehicle's current market value and is typically paid when the vehicle is registered or when the registration is renewed. The VLF is collected by the California Department of Motor Vehicles (DMV).

As a car dealership, it is important to calculate vehicle license fees (VLF) correctly when selling a vehicle in order to avoid violations of the law. Here are a few steps to follow when calculating VLF:

Understand the VLF rate and calculation: The VLF is listed on line 2A of the LAW553 Retail Installment Sales Contract. The proper way to calculate the VLF on a Retail Installment Sales contract is SIMPLE: just calculate 0.65% of the cash price of the vehicle. THAT’S IT! You should familiarize yourself with this simple formula to make sure you are using the correct rate for each vehicle you sell. You can also contact your DMS/CRM software and have the automatically calculate this amount on every contract.

Check for exemptions: Some vehicles may be eligible for exemptions or reductions in the VLF, such as those that are used for farming or are owned by low-income individuals. Be sure to check for any exemptions that may apply to the vehicles you sell.

Keep accurate records: Keep records of the VLF calculation for each vehicle you sell, including the vehicle's sale transaction (the contract), the VLF rate used, and any exemptions that were applied. This will help you to ensure that you are calculating VLF correctly and will also be useful in case of any audits or lawsuit claims.

Consult with a lawyer: For any doubt or question about VLF calculation and the correct application of the law, you should contact an experienced auto dealer lawyer.

TAKE THIS VERY SERIOUSLY! There are a number of consumer lawyers that pursue lawsuits against car dealers for this exact claim: miscalculation of VLF. In some cases, you may have listed the VLF amount as only $10 or $15 higher than it should have been. In this case, a consumer lawyer may still claim that you have violated the law and pursue a lawsuit asking for tens of thousands of dollars in damages and attorneys fees.