Does Texas motor vehicle tax apply when an interstate bus carrier buys or rents charter buses from a foreign manufacturer?

Plain-English summary

The Texas Comptroller gave an interstate bus carrier different answers for buying and renting buses from a manufacturer in Mexico.

A rental contract beginning in Texas for 31 days or more was subject to 6.25% motor vehicle rental tax, even though the bus would operate in interstate service. The letter said the motor vehicle tax statute contained no interstate-operation exemption for that Texas rental.

The purchase discussion is partially superseded. The 2001 letter said a purchased interstate charter bus could be exempt without apportioned International Registration Plan registration. STAR later states that, effective January 1, 2016, all charter buses purchased for interstate use must obtain apportioned registration to qualify for the exemption.

What this means for you

Interstate charter-bus operators

Do not assume interstate operation eliminates Texas tax. A long-term rental starting in Texas was taxable under this letter, and a purchased bus now needs the apportioned registration identified in STAR's supersession notice.

Fleet purchasing teams

Separate purchase and rental contracts. The letter's favorable purchase treatment changed by statute, while its rental answer turned on the contract beginning in Texas and lasting at least 31 days.

Tax professionals

The source does not cite specific code sections or rules. Because it is old and partially superseded, confirm current charter-bus exemption and rental provisions before applying it.

Common questions

Q: Did buying from a manufacturer in Mexico itself avoid Texas tax?

A: No. The letter focused on the interstate charter-bus exemption, and STAR later added the apportioned-registration requirement.

Q: Was a long-term Texas rental exempt because the bus traveled interstate?

A: No. The letter imposed 6.25% rental tax on a contract beginning in Texas for 31 days or more.

Q: What part of the letter was superseded?

A: The statement that apportioned registration was unnecessary for a purchased interstate charter bus.

Citations and references

• The letter cites no specific statute or administrative rule.
• STAR supersession notice effective January 1, 2016 (apportioned registration required for interstate charter-bus purchase exemption).

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/200106284L

Original ruling text

STAR SUPERSEDED INFORMATION

Accession No. —
Supersede type - Partial
Document superseded on — 09/27/2016

Issue(s) that caused the document to be superseded — exemption for charter buses
and apportioned IRP registration requirements

Reason(s): Statutory change — Effective 01/01/2016, all charter buses purchased for
interstate use must obtain apportioned registration to be exempt from the motor vehicle tax.

200106284L

June 8, 2001

Dear **:

Thank you for your inquiry regarding motor vehicle sales tax

You state that your company is an interstate bus carrier and a member of the
International Registration Plan. Your company will be purchasing or leasing
buses from a manufacturer that is located in Mexico. You ask if these buses
are subject to Texas sales tax.

The purchase of a charter bus operated interstate is exempt from motor vehicle
sales tax. Unlike trucks and truck tractors, apportioned (International
Registration Plan) registration is not required on a charter bus for the bus
purchase to be exempt.

However, if you lease a motor vehicle from the manufacturer, the contract is
considered a rental. There is no provision in the motor vehicle tax statute to
exempt the Texas rental of a vehicle that is operated interstate. Therefore,
any rental contract that begins in Texas and is for a period of 31 days or more
is subject to 6.25% motor vehicle rental tax.

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

If you have any questions, please do not hesitate to call one of our tax
specialists toll free at 1-800-252-1382. The local number is 512/463-4600.
You may also write to the Tax Policy Division.

Sincerely,

Joan Hale
Tax Policy Division