Does the $10 Texas vehicle gift tax apply when the sole owner of a used-car dealership transfers a dealership vehicle to a brother?

Plain-English summary

The Texas Comptroller ruled that the legal form of a used-car dealership determines whether a vehicle transferred to the owner's brother receives the $10 motor vehicle gift tax.

If the dealer was a sole proprietorship operating under a DBA, the individual and business were legally indistinguishable. The owner's transfer to a brother was therefore treated as a qualifying sibling gift subject to the fixed $10 tax.

If the vehicle belonged to a corporation or limited liability company, the result changed even when one person owned all the stock or was the only LLC member. The entity was separate from the individual, so directing the company to transfer its vehicle was treated as a taxable sale rather than a gift.

Because a dealer was a party to that sale, standard presumptive value did not apply. The letter used the dealership's book value as the taxable consideration.

What this means for you

Sole-proprietor dealers

A DBA does not create a separate legal owner. On the letter's facts, the titled business owner's sibling transfer qualified for $10 gift tax.

Corporation and LLC owners

Personal ownership of the entity does not make you personally own its inventory. A company-titled vehicle transferred to your relative can be a taxable dealer sale even when no cash is exchanged.

County tax offices

Check the titled owner's legal form before accepting a gift claim. The same family relationship produced opposite tax results depending on whether the dealer was an individual DBA or a separate entity.

Common questions

Q: Why did the sole proprietor qualify?

A: The owner and DBA business were the same legal person, and siblings were within the gift-tax exception described in the letter.

Q: Why did the one-owner corporation or LLC not qualify?

A: The entity, not its shareholder or member, owned the vehicle.

Q: Did standard presumptive value apply to the company transfer?

A: No. Section 152.0412(d)(1) excluded a sale involving a dealer from SPV; the letter used dealer book value as consideration.

Citations and references

• Tex. Tax Code § 152.0412(d)(1)
• Texas House Bill 2654, 81st Legislature (2009)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/200912533L

Original ruling text

December 11, 2009

Carmen Lopez
Director of Motor Vehicle Registration & Titling Division
Office of the County Tax Assessor Collector
** County

RE: 09343035

Dear Carmen:

Thank you for your inquiry regarding the gift of a motor vehicle.

BACKGROUND

“I have another question in reference to a gift. If a person is the sole owner
of the used car dealer, can he give a vehicle to one of his brothers?”

RESPONSE

The answer depends upon what is meant by the term “sole owner.”

If the person is a sole proprietor, meaning that he is in business simply using
a “dba” (doing business as), then he and his business are indistinguishable
under the law and his gift to his brother would be the same as if he had given
the vehicle under his own name. The $10 gift tax would apply because a gift to
a sibling is one of the exceptions to the provisions of House Bill (HB) 2654
[81st Legislature- Regular Session (2009)], which treat most private-party
motor vehicle transfers without consideration as taxable sales.

By contrast, if the person is merely the sole stockholder in a corporation or
the single member in a limited liability company (LLC), and the vehicle is
titled to the company, then he may direct the transfer of the vehicle, but it
would be deemed a sale rather than a gift under HB 2654. Although the
transaction would not be subject to SPV (Standard Presumptive Value), since it
would constitute a sale in which a dealer is one of the parties [refer to Tax
Code Section 152.0412(d)(1)], the dealer’s brother would nevertheless owe tax
on the total consideration. In this case, the dealer’s book value of the
vehicle would constitute the consideration.

Complete Texas sales tax information, including rules, statutes, publications,
and frequently asked questions, can be found on the Motor Vehicle Sales and Use
Tax Web page at: http://window.state.tx.us/taxinfo/mtr_veh/mv_su.html .

This opinion is based on the information presented. Other information, though
similar, may yield different results.

I hope this information is helpful. If you have any questions or need more
information, you may email us at [email protected], call me at
1-800-531-5441 (x50647).

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Sincerely,

Tim Pingree
Tax Policy Division

Hi Tim:

I have another question in reference to a gift. If a person is the sole owner
of the used car dealer can he give a vehicle to one of his brothers?

Have a good day.

Carmen Lopez
Director of Motor Vehicle Registration & Titling Division
Office of the County Tax Assessor Collector