http://www.dmv.ca.gov/pubs/dealer_hdbk/ch01/ch01-3.htm

Department of Motor Vehicles

1.010 Completing the Application for Registration of New Vehicle (REG 397)

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Alternative Fuel Vehicles (AFV)--Light duty (up to 6,000 pounds gross vehicle weight), alternative fuel vehicles are assessed a reduced vehicle license fee (VLF) based on a modified sales price. The California Energy Commission (CEC) identifies AFVs and provides dealers with the instructions for calculating the modified VLF. The law requires dealers to:

• Determine the reduced VLF by deducting the amount credited to the AFV.
• State the actual incremental cost in the sales or lease contract for the buyer.
• Report the incremental cost to the CEC on a quarterly basis.

The additional requirements for registering an AFV are:

• Submit a Statement of Facts (REG 256) with the REG 397 which shows the fee breakdown for the cost of a comparable conventional vehicle and the incremental cost of an AFV, the actual incremental cost of an AFV, and how the final cost was determined.
• Show the modified cost of the AFV on the REG 397 and note "S/F attached." Determine the VLF due by exempting the incremental cost of the AFV.

NOTE: Charge sales tax based on the full sales price.

• Complete a Statement of Facts (REG 256) to submit with the Application for Registration of New Vehicle (REG 397) showing:
• the fee breakdown for the cost of a comparable conventional (gas or diesel fuel) vehicle and the incremental cost of an AFV.
• the actual incremental cost of an AFV (the difference between the AFV and the most comparable conventional vehicle).
• how the final cost was derived.

NOTE: Retain a copy of the REG 256 with the dealer's copy of the REG 397.

• Enter the modified sales price on the REG 397 and note "S/F attached." (The REG 397 will not be revised for this purpose.)
• Collect the reduced VLF from the buyer.

NOTE: Sales tax is assessed on the actual full selling price.