Who owed Texas motor vehicle tax on a 36-month lease, and was the lessee legally required to reimburse the lessor?

Plain-English summary

The lessor, not the lessee, owed the historical purchase tax on a vehicle bought in Texas for a 36-month lease.

Former article 6.03(F) defined a motor vehicle lease as giving another person exclusive use for consideration for more than 180 days. The 36-month agreement met that definition.

The lessor paid historical tax on purchase price to the county tax assessor-collector at title and registration. The statute imposed no tax on lease payments and did not require the lessee to repay the lessor's tax expense.

If the lessee did reimburse the lessor, the obligation came from their contract. The letter therefore said the tax statute did not govern whether the lessor properly retained that payment.

What this means for you

The letter separated public tax liability from private cost allocation. A contract could shift the economic burden without changing who was statutorily liable for the tax.

Common questions

Q: Did the 36-month agreement qualify as a lease?
A: Yes.

Q: Was tax imposed on the lease payments?
A: No.

Q: Did the tax statute require lessee reimbursement?
A: No. Any reimbursement was contractual.

Citations and references

• Texas Tax-General Annotated art. 6.03(F)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/7904L2024E03

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

BOB BULLOCK
Comptroller April 4, 1979

Dear *:

Your letter on behalf of ***, requesting information
about a possible refund, has come to me for reply. I hope that the
following
discussion will clarify the application of the Motor Vehicle Retail Sales
and
Use Tax Law to the situation you have outlined. I have enclosed a copy
of the
statute for your further reference.

A motor vehicle lease is defined by TEX. TAX.-GEN. ANN. art. 6.03(F) as:

"the agreeing by the owner to give exclusive use of a motor
vehicle to another for a consideration and for a period of
time exceeding 180 days under such agreement..."

According to the copy of the agreement you furnished us, the lease
agreement
between *** and ***, with its lease term of
36 months, fits within the definition above. If ***,
purchased this vehicle in Texas for lease, it is statutorily liable for
4%
Motor Vehicles Sales Tax based on the purchase price. The tax is paid by
the
purchaser to the County Tax Assessor-Collector at the time of titling and
registration. There is no statutory obligation on the lessee to
reimburse the
lessor for this expense, nor is there a statutorily imposed tax on the
lease
payments. Therefore, if ***** reimbursed the leasing company of
their tax
expense, he did so under a contractual rather than a statutory
obligation, and
the propriety of the leasing company's retention of this payment is a
matter in
which the statute has no application.

If you have any further questions, I will be glad to discuss them with
you.
You may write the Motor Vehicle Sales Tax Division or call toll free
1-800-252-5555.

Sincerely,
Patricia Brockway
Division Attorney
Motor Vehicle Sales Tax Division