What Texas motor vehicle tax applies when federal surplus vehicles go to public agencies, 501(c)(3) charities, or other nonprofits?

Plain-English summary

The Texas Comptroller ruled that the recipient's legal status determines the motor vehicle tax on federal surplus vehicles distributed through the Texas Facilities Commission.

• A public agency received the vehicle exempt from motor vehicle tax under § 152.082.
• A nonprofit exempt under Internal Revenue Code § 501(c)(3) owed the fixed $10 motor vehicle gift tax.
• A nonprofit without § 501(c)(3) status, or another nonexempt recipient, owed ordinary motor vehicle sales tax, even when the vehicle transferred without consideration and therefore did not qualify as a statutory gift.

The federal government, not the Commission, owned the vehicles until transfer and conveyed title directly to the donee. The Commission's handling fee did not change that ownership chain.

For title and tax processing, the county tax office should accept the federal government's completed Standard Form 97 instead of the donor signature on Texas Forms 130-U and 14-317. The recipient had to complete the remaining portions and submit all three documents to the County Tax Assessor-Collector.

What this means for you

Public agencies

Confirm that you fit the Texas definition of a public agency. The definition covers specified state and local governmental bodies and an unincorporated U.S. agency or instrumentality; qualifying transfers are exempt.

Nonprofit organizations

General nonprofit eligibility for the federal surplus program is not the same as Texas gift-tax eligibility. The $10 result requires federal income-tax exemption under § 501(c)(3). A nonprofit qualifying under another category can face Texas motor vehicle sales tax.

County tax offices and title staff

The federal Standard Form 97 supplies the donor documentation. The recipient completes Form 14-317 and Form 130-U and presents them with Form 97 at title transfer; the ruling says the Commission need not provide separate motor vehicle tax documentation.

Common questions

Q: Did the Texas Facilities Commission ever own the vehicles?

A: No. Federal regulations kept ownership with the federal government until direct transfer to the recipient.

Q: Does every nonprofit pay only $10?

A: No. The $10 gift tax applied to a nonprofit exempt under IRC § 501(c)(3). Other nonprofits and nonexempt recipients were subject to motor vehicle sales tax.

Q: What documents must the recipient take to the county tax office?

A: Federal Standard Form 97, Texas Form 14-317, and Texas Form 130-U, with the recipient completing the required portions of the Texas forms.

Q: Did the Commission's 5% to 25% handling fee make it the seller?

A: No. The ruling described the fee as supporting the self-funded surplus program and treated the federal government as the entity selling or donating the vehicle.

Citations and references

• Tex. Tax Code §§ 152.001(1), (7), 152.021, 152.025, 152.082
• Tex. Gov't Code ch. 2175, subch. G
• 40 U.S.C. § 549(b)(1)
• 41 C.F.R. §§ 102-37.25, .130, .205, .280

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/201804002L

Original ruling text

April 5, 2018

Texas Facilities Commission

Surplus Property Program

P.O. Box 13047

Austin, Texas 78711-3047

RE: Private Letter Ruling No. 2017010162

Texas Facilities Commission

Dear **:

We issue this private letter ruling in accordance with Rule 3.1, [ENDNOTE 1]1 Private Letter Rulings and General Information Letters. We are responding to your request dated April 4, 2017. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.

You requested guidance as to the taxability of motor vehicle donations to eligible recipients, such as public agencies and nonprofit organizations, made through the Texas Facilities Commission’s (Commission) Federal Surplus Property Program (FSPP).

You also requested guidance as to what documentation the Commission should provide the donee of a motor vehicle for tax purposes.

Facts Presented

The Federal Administrative Services Act of 1949, as amended, authorizes the federal government to dispose of surplus property through a state agency designated by law to distribute the property within that state. See 40 U.S.C. Section 549(b)(1). The Texas Legislature designated the Commission as the state agency responsible for distribution in Texas. See Texas Government Code, Chapter 2175, Subchapter G (Federal Surplus Property).

The Commission’s responsibilities include requesting, warehousing, and transferring federal surplus property to eligible organizations in Texas. The Commission uses federal management regulations to determine and certify organizations eligible to receive and use federal surplus property. See 41 C.F.R. Section 102-37.130. Donees include public agencies, non-profit organizations exempt from federal income tax under Internal Revenue Code Section 501(a), and veterans’ organizations. See 41 C.F.R. Section 102-37.25. These organizations may contact the Commission to request certification as an eligible donee of surplus property. The Commission may not certify private citizens or members of the general public as donees.

The distribution process begins when a donee contacts the Commission requesting a motor vehicle. The Commission then searches federal surplus inventories to find an appropriate motor vehicle and notifies the federal government of the donee’s request. The federal government then approves or denies the request. If approved, the federal government will authorize the transfer of the motor vehicle through the Commission’s FSPP. Only the federal government can approve a request and convey the motor vehicle. To convey a motor vehicle, the federal government completes the United States Government Certificate to Obtain Title to a Vehicle (Standard Form 97). Under federal regulations, the motor vehicles are owned by the federal government until transferred to the donee. 41 C.F.R. Section 102-37.205. At no time does the Commission own the motor vehicles.

The Commission’s FSPP is a self-sustaining program that does not receive funding from the state or the federal government. The Commission recovers the cost of managing surplus property distributions by charging donees a transfer/handling fee. This fee ranges from 5% to 25% of a vehicle’s value. Federal regulations control the Commission’s use of the fee. It can only be used to support the Commission’s FSPP. See 41 C.F.R. Section 102-37.280.

To fulfill a transfer, the Commission completes Texas Form 130-U, (Application for Texas Title and/or Registration) and, if necessary, Texas Form 14-317 (Affidavit of Motor Vehicle Gift Transfer). The donee is responsible for titling and registering the motor vehicle using Texas Form 130-U and Texas Form 14-317, provided by the Commission, and Standard Form 97, provided by the federal government. The donee is also responsible for any tax due on the transfer and must pay the tax to the appropriate County Tax Assessor-Collector.

Questions, Rulings, and Analysis

Our restatements of your questions are shown below, followed by our responses and analysis.

Question One: Is the transfer of a federal surplus motor vehicle to a public agency under the Commission’s FSPP subject to Texas motor vehicle sales tax or gift tax, or is the transfer exempt?

Ruling One: The transfer of a motor vehicle to a public agency, as defined by Section 152.001(7) (Definitions), is exempt from motor vehicle tax. See Section 152.082 (Sale of Motor Vehicle to or Use of Motor Vehicle by Public Agency).

Question Two: Is the transfer of a federal surplus motor vehicle to a non-profit organization under the Commission’s FSPP subject to motor vehicle sales tax or gift tax, or is the transfer exempt?

Ruling Two: The transfer of a motor vehicle to a non-profit organization exempted from federal income tax under Internal Revenue Code Section 501(c)(3) is subject to motor vehicle gift tax of $10.00. Section 152.025 (Tax on Gift of Motor Vehicle). The transfer of a motor vehicle to a non-profit organization not exempt under Section 501(c)(3), or to another nonexempt party, is subject to motor vehicle sales tax. Section 152.021 (Retail Sales Tax).

Question Three: What documentation should the Commission provide the donee for motor vehicle tax purposes?

Ruling Three: The Commission is not responsible for providing the donee with documentation for motor vehicle tax purposes. County Tax Assessor-Collectors should accept the completed Standard Form 97 provided to the donee by the federal government donor in lieu of a donor signature on Texas Form 130-U and Texas Form 14-317 . The donee is required to complete the remaining portions of Form 14-317 and Form 130-U, and provide those along with the Standard Form 97 to the local County Tax Assessor- Collector at the time of title transfer.

Analysis:

Many types of surplus property pass through the Commission’s FSPP. Our rulings and analysis are limited to the transfer of motor vehicles subject to Tax Code Chapter 152 (Taxes on Sale, Rental, and Use of Motor Vehicles).

Section 152.021 imposes motor vehicle sales tax on every retail sale in this state. A “sale” includes an installment and credit sale, an exchange of property for property,

services, or money, and “a transaction in which a motor vehicle is transferred to another person without payment of consideration and that does not qualify as a gift under Section 152.025.” Section 152.001(1).

Federal regulations provide that the Commission never owns the motor vehicles that it transfers through the FSPP. Title to the motor vehicles passes directly from the federal agency to the donee. 41 C.F.R. Section 102-37.205. For purposes of the motor vehicle sales tax, the federal government sells or donates the motor vehicles transferred under the Commission’s FSPP.

Section 152.082 exempts the sale or use of a motor vehicle by a public agency from motor vehicle taxes. Section 152.001(7) defines a “public agency” as a “department, commission, board, office, institution, or other agency of the state or of a county, city, town, school district, hospital district, water district, or other special district or authority or political subdivision created by or under the constitution or the statutes of this state; or an unincorporated agency or instrumentality of the United States.”

A gift tax of $10.00 applies to the transfer of a motor vehicle to certain recipients when no consideration is paid. Eligible recipients include organizations exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. Section 152.025 . Transfers to other organizations are not “gifts” and are subject to motor vehicle sales tax.

In the instance of an eligible gift transfer, the donee should provide the following documents to the local County Tax Assessor-Collector at the time of title transfer: (1) Standard Form 97, completed by the federal government donor; (2) Form 14-317, completed by the donee; and (3) Form 130-U, completed by the donee. We intend to amend Rule 3.80 (Motor Vehicles Transferred as a Gift or for No Consideration) to implement this guidance.

The Texas Tax Code and Texas Administrative Code are accessible at www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 2017010162.

Sincerely,

Tax Policy Division – Indirect Taxes

Texas Comptroller of Public Accounts

ENDNOTE

1. Unless otherwise indicated, references to “Section” are to the Texas Tax Code, and references to “Rule” are to Title 34 of the Texas Administrative Code.