How did Texas collect use tax on an out-of-state titled vehicle traded to a Texas dealer without first issuing it a Texas title?

Plain-English summary

Texas could collect any use tax due on an out-of-state titled trade-in during the transfer without first issuing that vehicle a Texas title.

The highway department advised that a Texas-domiciled or Texas business user of an out-of-state registered vehicle on public highways generally faced immediate registration.

When the vehicle was traded, the county assessor-collector could collect and report use tax on the title application. The dealer had to explain the trade-in's nature so the collector could calculate the correct tax, and the collector lacked authority to omit tax once it was found due.

What this means for you

The letter addressed collection mechanics and disclosure for an out-of-state titled trade-in. It did not support STAR's broader suggestion that the trade-in allowance itself was disallowed.

Common questions

Q: Did the taxpayer first need a Texas title for the trade-in?
A: No.

Q: Who disclosed the transaction details?
A: The dealer.

Q: Could the collector waive tax found due?
A: No.

Citations and references

• No statute or rule was cited in the letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/6705L2017C12

Original ruling text

Comptroller of Public Accounts
State of Texas
Austin

May 10, 1967

Mr. E. J. Castille, Director
Field Operations Division
Office

Dear Mr. Castille:

With further reference to our correspondence in regard to a
trade in allowance on a motor vehicle with an out-of-State
title, you are advised that in talking with *** in
the Motor Vehicle Division of the Texas Highway Department,
he advises that a person, firm or corporation who is domiciled
or doing business in Texas would be subject to the immediate
registration when a motor vehicle with an out-of-State re-
gistration or title is used upon the public highways, in
nearly all cases.

On April 17th we mailed Gerald A Rickett a copy of a letter
written to ***, advising the procedure to be followed
in writing an affidavit where a dealer takes a car in trade
with an out-of-State title.

The use tax due on a trade in vehicle could be collected and
reported by the Assessor-Collector on the title application at
the time the vehicle is being transferred without the taxpayer
applying for a Texas title on the trade in vehicle. A dealer
should always advise the Assessor-Collector of the nature of
the trade-in, in order that he may determine the correct amount
of tax due on the transaction. When it is found that a tax is
due under the Motor Vehicle Law, the Assessor-Collector does
not have the authority to omit collecting it.

Yours very truly,
J. B. Craig, Director
Ad Valorem and Intangibles Tax Division