How did Texas calculate and document fair-market-value deductions for retired business or personal vehicles?

Plain-English summary

A retired vehicle had to leave business or personal use and be sold or held exclusively for resale before supporting a fair-market-value deduction.

The deduction used actual depreciated book value at retirement. A fully depreciated vehicle produced no deduction until sale; its actual sale price could then offset a replacement bought within the following 12 months.

Rental and leasing companies received the provision effective September 1, 1977. A green dealer/lessor affidavit documented current claims. Omitted deductions could support a written refund request identifying each vehicle, purchase price, deduction and replaced vehicle, original tax, and county receipt details.

What this means for you

Disposition, book value, timing, title and registration, and detailed records all mattered. A custom bill of sale did not replace the required affidavit.

Common questions

Q: Could a fully depreciated vehicle create a deduction before sale?
A: No.

Q: What value applied after sale?
A: The actual selling price.

Citations and references

• Former Rule .022 — Determination of Fair Market Value for Replaced Vehicles

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/7907L2021D09

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.

COMPTROLLER OF PUBLIC ACCOUNTS

STATE OF TEXAS

AUSTIN, 78774

BOB BULLOCK

Comptroller

July 2, 1979

Dear ***:

I appreciate the opportunity to respond to your questions concerning fair market value deductions which may be used to reduce the motor vehicle tax liability on qualified vehicles by dealers, rental companies, and lessors.

Your understanding of this deduction appears basically correct. I have enclosed several copies of a brochure which further describes the deduction and the specific requirements which must be met in order to qualify for it. Please note that the retired vehicle must be taken out of business or personal use and either sold or held exclusively for resale before being claimed as a deduction.

You indicated in your letter that CORP A has designed a special bill of sale to be used for vehicles purchased in Texas when a fair market value deduction is claimed. However, a copy of this bill of sale was not included with your letter. In order to document the purchase of a motor vehicle in Texas by a dealer or leasing company claiming a fair market deduction, a green Seller, Donor or Trader's Affidavit for Dealers and Lessors (Form 2C00-2. 11) must be completed. I have enclosed several of these affidavits for your reference. Additional copies of the affidavit may be obtained from any county tax office or Texas dealer. A special bill of sale is not necessary, although you may use one if you wish.

You also asked for clarification on three particular issues. These are discussed in order below.

(1) You must use the actual depreciated value on your books at the time the vehicle is retired as the fair market value deduction. Thus, once you have fully depreciated a motor vehicle, it cannot be claimed as a deduction until it is sold. Once it is sold, the actual selling price can be used as a deduction on any replacement vehicle purchased within the twelve months following the sale. For your reference, I've enclosed a copy of our Rule .022, Determination of Fair Market Value for Replaced Vehicles.

(2) The provision in our law allowing rental and leasing companies to claim fair market value deductions on business or personal vehicles became effective September 1, 1977.

(3) You may request a refund on sales tax paid on vehicles registered in Texas since September 1, 1977, based on all eligible fair market value deductions that were not claimed at the time of registration. Only vehicles titled and registered in Texas for business or personal use can be claimed as fair market value deductions against replacement vehicles titled and registered in Texas for business or personal use. You will need to make a specific request in writing to our division for that refund. Include with your request complete identification on each vehicle registered tax-paid with no deduction claimed. In addition, indicate for each vehicle registered the purchase price, amount of deduction claimed (include a complete description of the replaced vehicle), amount of sales or use tax originally paid, and the county, date and number of the tax receipt.

Once we receive and review this information, we can prepare state claim forms for your signature and process your request for refund.

I hope that I have answered your questions sufficiently. We still anticipate a refund request from CORP A in the near future. In the meantime, if you have any additional questions, please write the Motor Vehicle Sales Tax Division or call 512/475-6897.

Sincerely,

Victoria Bailey

Motor Vehicle Sales Tax Division