Because taxes are triggered when you go to the DMV and apply for a new title, you don’t have to go through CDTFA if you sell to a dealer that is able to accept the lessor released title. The problem (which I learned the hard way) is that many of the online dealers (Vroom, Carvana, etc.) will not process the lessor released title and will require you to go to the DMV for a fresh title, despite what front line salespeople might tell you (the acquisitions team at those online companies are the folks behind the curtain making the decisions). In my case, My Car Auction had no problem taking the lessor released title. When I told them I was having trouble with CDTFA, they looked at me funny and said, “you don’t owe sales tax on cars you buy in order to sell.” Well, if you’re a dealer, yes, but for us individual consumers, it’s more complicated. But finding a dealer who can take the lessor released title means no trip to the DMV, no new title, no tax collection. I was attempting to get a CDTFA tax clearance so I could get a fresh title and sell to Vroom or an individual buyer, but finding My Car Auction solved my problem.
I suppose it’s possible someone at the DMV takes a close look at the lessor released title and sees that Volvo signed it in June and I signed it in July, but the odometer mileage didn’t change and dealers are allowed to hold on to cars while they wait to sell them.