Auto Dealership

Responsible Person Liability for California Auto Dealerships and Repair Shops

When your dealership or shop falls behind on taxes, the CDTFA may come after you personally.

California’s auto industry operates in one of the most highly regulated and closely audited environments in the state. Vehicle sales, lease transactions, and even repair invoices are subject to strict sales and use tax rules. When a dealership or repair shop fails to properly collect or remit those taxes, the California Department of Tax and Fee Administration (CDTFA) can pursue the individuals behind the business—not just the company itself—under California’s Responsible Person Liability laws.

If you’ve received a CDTFA Dual Determination Notice or Responsible Person Letter, you may already be facing personal exposure for your company’s tax obligations.

How Responsible Person Liability Works

When a dealership or shop falls behind on sales or use taxes, the CDTFA looks beyond the business name to identify who had control over tax reporting and financial decisions. That can include owners, general managers, controllers, finance and insurance (F&I) managers, or anyone with authority to sign returns or checks. The agency doesn’t have to show fraud—it only needs to prove you had the authority to pay and failed to do so. Once deemed a “responsible person,” you can be personally assessed for the full tax balance, including penalties and interest.

Why Auto Dealerships and Repair Shops Are Targeted

Auto businesses are prime enforcement targets for several reasons:

• Heavily taxed sales – Vehicle transactions involve large taxable amounts, and small reporting errors can trigger major liabilities.
• Complex paperwork – Dealers often struggle with use tax, trade-ins, and off-book sales documentation.
• Resale permit misuse – The CDTFA aggressively audits misuse of resale certificates for parts and vehicles.
• Frequent audits – Auto dealers are among the CDTFA’s most consistently audited industries due to the size and frequency of sales.

Even small repair shops are at risk if they fail to properly report parts sales or service labor that is taxable under California’s sales tax laws.

Common Scenarios That Lead to Personal Liability

• The dealership underreported vehicle sales or lease transactions.
• Collected sales tax was used for operational expenses instead of being remitted.
• Resale certificates were used improperly for vehicles or parts.
• A repair shop failed to separate taxable parts from labor on invoices.
• The company dissolved, leaving unpaid CDTFA assessments behind.

Once the business can’t pay, the CDTFA often issues Dual Determinations against the people it believes were in charge.

How to Protect Yourself

1. Respond quickly. CDTFA notices carry strict protest and appeal deadlines.
2. Document your role. Identify who actually handled financial and tax decisions.
3. Keep thorough records. Sales reports, invoices, and remittance records are your best defense.
4. Seek experienced counsel. These cases involve technical tax issues that require specialized legal strategy.

Defending California Dealerships and Auto Shops

Attorney Steve Baghoomian has extensive experience defending business owners, general managers, and F&I personnel from CDTFA responsible person assessments. He understands how dealership accounting works and how CDTFA auditors interpret transactions—often incorrectly.

His mission is simple: to prevent the state from turning a dealership’s tax issue into a personal financial crisis. Whether you’re facing a Dual Determination, a CDTFA audit, or a collection notice, early legal action is critical to protecting your assets and your career.

If you’ve received a CDTFA notice or believe you’re being targeted for your company’s tax issues, contact Baghoomian Law today for a confidential consultation. Don’t wait until the state turns your dealership’s problem into your own.