Here is the regulation: 6277. Presumption on sale to lessee. There shall be a presumption that a transfer of a vehicle to a lessee by a lessor, as defined in Section 372 of the Vehicle Code, was a sale for resale if the lessee transfers title and registration to a third party within 10 days from the date the lessee acquired title from the lessor at the expiration or termination of a lease. The presumption may be rebutted by evidence that the sale was not for resale prior to use.
The third party would pay the tax when they register it. Now, if you sell it to a blood relative, you can get an exemption form from California Department of Tax and Fee Administration. CDTFA-106 along with a birth certificate and registration. If you sell to a family member within 10 days, nobody pays the tax. Little known loophole.