What property could reduce the Texas sales-tax base or motor vehicle tax base as a trade-in?

Plain-English summary

The Texas Comptroller distinguished trade-ins against ordinary taxable property from trade-ins against a motor vehicle.

When the dealer sold tangible personal property, it could allow a trade-in credit for either a motor vehicle or dismantled vehicle parts received from the customer. When the dealer sold a motor vehicle, however, other tangible personal property taken in trade did not reduce the motor vehicle tax base. Only another motor vehicle taken by the seller toward the vehicle sale qualified.

What this means for you

Vehicle dealers, repair shops, and parts retailers

Identify what is being sold before calculating the credit. The motor vehicle tax base had a narrower trade-in rule than the sales-tax transactions described here.

Common questions

Q: Could dismantled vehicle parts reduce the price of taxable parts or fluids?

A: Yes, the Comptroller allowed a trade-in credit in that situation.

Q: Could nonvehicle property reduce the tax base on a vehicle sale?

A: No. Only a motor vehicle taken in trade qualified for motor vehicle tax purposes.

Citations and references

• The letter cites no numbered statute or rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/200002099L

Original ruling text

February 29, 2000

Thank you for your recent correspondence concerning the imposition of sales and
use taxes in regards to trade-in situations.

Company A is a registered motor vehicle dealer and sells motor vehicles.
Company A also is a provider of motor vehicle repair services. In addition,
Company A is a retailer of replacement parts and fluids that are considered
tangible personal property. In certain situations, Company A may accept a motor
vehicle as trade-in from a customer to whom Company A sold tangible personal
property. In addition, Company A may accept dismantled parts from a motor
vehicle as trade-in from a customer to whom Company A sold tangible personal
property. Company A is located in Texas.

Issue: First, COMPANY B would like a determination as to whether a motor
vehicle can be accepted by Company A as trade-in against the customer's
purchase of tangible personal property to reduce the purchase price for sales
tax purposes.

Response. A trade-in credit may be allowed in the above situation.

Second, COMPANY B would like a determination as to whether motor vehicle parts
which had been dismantled by the customer can be accepted by Company A as
trade-in against the customers purchase of tangible personal property to reduce
the purchase price for sales tax purposes.

Response. A trade-in credit may be allowed in the above situation.

Third, COMPANY B would like a determination as to whether tangible personal
property can be accepted by Company A as trade-in against the customers
purchase of a motor vehicle to reduce the purchase price for motor vehicle
sales tax purposes.

Response. Tangible personal property taken as trade against the sale of a
motor vehicle does not reduce the motor vehicle sales tax base. Valid
trade-ins for motor vehicle tax purposes only include other motor vehicles
taken by the seller for sale of another motor vehicle.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

You may call me toll free at 1-800-531-5441, ext. 5-0613. The direct line is
512/475-0613. You may also write to Tax Policy Division, Comptroller of Public
Accounts.

Sincerely,

Kevin Koller
Tax Policy Division