Was a federal Cash-for-Clunkers voucher received by a Texas new-car dealer included in the vehicle's motor vehicle sales-tax base?

Plain-English summary

The Texas Comptroller told a new-car dealer that the federal Car Allowance Rebate System, commonly called Cash for Clunkers, did not increase the amount subject to Texas motor vehicle sales tax.

The dealer was to put the voucher amount on the trade-in line of Form 130-U and identify the surrendered vehicle. If the customer also provided another trade-in, the dealer combined the two amounts on that line.

The dealer also had to keep ordinary records showing that the funds came from the federal program.

What this means for you

Dealers reviewing 2009 transactions

This letter documents Texas's treatment of the temporary federal program. Preserve the federal voucher records and the corresponding Form 130-U treatment for any historical review.

Tax professionals and auditors

The letter is program-specific, cites no statute or rule, and addresses a federal program that is no longer operating. It should not be generalized to a different rebate without current authority.

Common questions

Q: Was the federal voucher taxed as part of the vehicle price?

A: No.

Q: Where did the dealer report it?

A: On line 21(b), the trade-in line, of the then-current Form 130-U, with the vehicle identified on line 20.

Q: What if the customer also traded another vehicle?

A: The letter instructed the dealer to combine the voucher and other trade-in amount on the trade-in line.

Citations and references

• The letter cites no specific statute or administrative 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/200906353L

Original ruling text

From: Curt Swenson
Sent: Tuesday, June 30, 2009 12:30 PM
To: *
Subject: FW: "Cash for Clunker"

June 30, 2009

Dear *****:

We spoke concerning the new federal Car Allowance Rebate System (“Cash for
Clunkers’).

It has been determined that the amount of the rebate/voucher received by the
selling new car dealer through the Car Allowance Rebate System, is not subject
to Texas motor vehicle sales tax.

The dollar amount should be shown on the “trade-in” line 21(b) of the
Application for Certificate of Title (form 130-U) and the vehicle should be
identified on line 20. If an additional motor vehicle is traded in to the
dealer, the amounts should be combined and the total indicated on line 21(b).

Dealers should retain documentation in their usual records showing that the
funds were received through this program.

Please give me a call with any questions.

Sincerely,
Curt Swenson
Tax Policy Division