Does Texas accelerate seller-finance motor vehicle tax when notes move from one related finance company to a second qualifying RFC?

Plain-English summary

The Texas Comptroller ruled that moving seller-financed motor vehicle notes from one related finance company to a second qualifying related finance company did not accelerate the remaining motor vehicle sales tax.

The seller-finance dealer had already transferred the notes to a registered RFC without acceleration. The second RFC would also register and, like the first, would have at least 80% ownership identical to the selling dealer. On those facts, the Comptroller said § 152.047(g-1) was satisfied.

The dealer remained responsible for collecting and remitting tax on the payment basis as the buyer's installments were received.

What this means for you

Seller-finance dealers

The no-acceleration result depended on both RFCs meeting the ownership and registration facts described in the letter. The transfer did not move the tax collection duty away from the dealer.

Related finance companies

Maintain clear ownership and transfer records. This short 2009 email assumes the statutory related-party conditions are met and does not explain every registration or reporting detail.

Accountants and tax professionals

This is historical, fact-specific guidance. Confirm the current version of §§ 152.047 and 152.0475 before structuring a modern RFC transfer.

Common questions

Q: Did the second transfer trigger immediate tax on the unpaid balance?

A: No, not on the stated facts.

Q: What ownership overlap did the letter describe?

A: At least 80% of each RFC's ownership was identical to the selling dealer's ownership.

Q: Who continued to collect and remit the tax?

A: The seller-finance dealer, on the payment basis.

Citations and references

• Tex. Tax Code §§ 152.047, 152.047(g-1), 152.0475

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/200912534L

Original ruling text

From: "Curt Swenson" [[email protected]]
Date: Thu, 17 Dec 2009 17:03:52 -0600
To: **
Cc: Elias Amaya [[email protected]]; Sun Down Hunter
[[email protected]]; Stefanie Medack
[[email protected]]; Robin Corrigan
[email protected]
Subject: SFS/RFC/2nd RFC

December 17, 2009

**:

We recently discussed whether or not there would be an acceleration of motor
vehicle tax due under Texas Tax Code Sec. 152.047 in the following situation:

A permitted seller-finance dealer has transferred notes on his sales to a
Related Finance Company (RFC) registered under Sec. 152.0475. There was no
acceleration of tax. The dealer has formed or will form a second RFC that will
register with this office. The second RFC, like the first, will have at least
80 percent of its ownership identical to the ownership of the selling dealer.
Notes originally transferred from the related dealer to the first RFC will now
be transferred to the second RFC by the first RFC.

Based upon the facts presented, no acceleration of tax due will occur. The
requirement of Sec. 152.047(g-1) is met. The dealer will continue to collect
and remit the tax on a payment basis.

Please feel free to contact me with any questions.

Sincerely,

Curt Swenson
Tax Policy Division