Was taking over a vehicle and its unpaid note taxable consideration even when no cash was paid to the prior owner?

Plain-English summary

The son's assumption of the prior owner's vehicle note was taxable consideration even though no cash was paid to that owner.

The historical tax applied to consideration paid or to be paid regardless of who received it. The taxable amount was the unpaid debt assumed when the 1973 Cutlass changed hands in fall 1976.

Texas allowed a $4.80 credit documented on the cited receipt. The additional amount needed to clear the transaction was payable to the county tax assessor-collector.

What this means for you

The letter treated relief from a vehicle debt as value exchanged in the transfer. Describing the arrangement as informal or without consideration did not overcome the assumed note.

Common questions

Q: Did the prior owner need to receive cash?
A: No.

Q: What amount was treated as consideration?
A: The vehicle debt assumed in fall 1976.

Q: Was prior tax payment credited?
A: Yes, the letter allowed the documented $4.80 credit.

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/7803L2013C01

Original ruling text

ALERT: The tax rates cited in this article are no longer the current motor vehicle sales tax
or motor vehicle rental tax rates.

March 7, 1978

Dear ***:

Thank you for your letter dated February 20, 1978. It has helped me understand the transaction between your son, **** and yourself.

Texas Motor Vehicle Law requires a tax to be paid on every retail sale in this state. The tax is 4% of the consideration paid or to be by the purchaser of that vehicle regardless who received the consideration. I realize *** did not receive any consideration other than his note was assumed by your son. The assumed amount in the fall of 1976 would be the taxable amount due on the 1973 Cutlass.

A credit of $4.80 paid on Receipt #* would be allowed to offset the tax due on the fall, 1976 taxable transaction. Additional payment must be made to the County Tax Assessor Collector in order to clear up this transaction.

Any correspondence in this matter should be directed to the attention of the Motor Vehicle Sales Tax Division or call toll free, 1-800-252-5555.

Yours very truly,

Tom Gay

Motor Vehicle Sales Tax Division

February 20, 1978

Mr. Tom Gay

c/o Motor Vehicle Sales Tax Division

Comptroller of Public Accounts

Austin, Texas 78774

Dear Sir:

In regard to your letter of February 13, 1978 I wish to reply.

My son, ***, and ** are friends. * had terminated his job in the fall of 1976 and was going to Europe for an extended period of time. He had purchased a 1973 Cutlass Oldsmobile from CORP X and was financing through the * Finance Plan. Without any consideration and paperwork, he turned this car over to my son, *, to make the payments. Upon completion of the payments the car would be transferred to the name of ****.

In November 1977 my son called me and asked if I would help him meet the payment due on this auto, as *** wanted to buy another car and needed to clear this previous note with *****.

I withdrew $*** from FEDERAL CREDIT UNION where I work, purchased a cashier's check from BANK of ** made out to * Finance Corp. * signed the title over to me for no consideration. At this time the title should have been signed over to my son, ****, as this is what I fully intended to do. However, the title was not being transferred in my name. I secured the necessary title transfer forms from my credit union office and proceeded to the County Court House to effect the transfer of this automobile to my name.

Being unfamiliar with title transfers and motor vehicle sales tax affidavits, and determining no sale had been made, I set the price of $*** to effect the transfer.

Yours truly,