1. Preheat oven to 350°. Combine sour cream and milk.
2. Beat butter at medium speed with an electric mixer until creamy. Gradually add sugar, beating well. Add eggs, 1 at a time, beating until blended after each addition.
3. Combine flour, baking powder, and salt; add to butter mixture alternately with sour cream mixture, beginning and ending with flour mixture. Beat at medium-low speed until blended after each addition. Stir in vanilla. Pour batter into 2 greased and floured 9-inch round cake pans.
4. Bake at 350° for 30 to 35 minutes or until a wooden pick inserted in center comes out clean. Cool in pans on wire racks 10 minutes. Remove from pans to wire racks, and let cool 1 hour or until completely cool.
5. Spread Caramel Frosting between layers and on top and sides of cake.