How did Texas determine leasing-company status, tax rebuilt vehicles from parts, and review transfer affidavits in this field FAQ?

Plain-English summary

This field FAQ addressed leasing-company qualification, vehicles built from parts, and county affidavit review.

A leasing firm had to regularly and actively lease vehicles as a primary function and lease at least five different vehicles in 12 months.

No motor vehicle sales tax arose merely from assembling a vehicle from out-of-state parts without a retail vehicle sale. The component parts were subject to Limited Sales, Excise and Use Tax.

The Comptroller did not audit the affidavits filed in Huntsville; it checked Form 31 receipts derived from them. Field examiners finding incomplete county affidavits were to explain the error, advise the assessor-collector, and note the issue on the assignment.

What this means for you

Entity qualification, taxable retail sales, component purchases, and document-review systems were distinct issues.

Common questions

Q: What was the leasing threshold?
A: Five different vehicles within 12 months, plus regular active leasing as a primary function.

Q: Did assembling parts itself trigger vehicle sales tax?
A: No without a retail sale.

Citations and references

• Former Rule .038; former art. 6.01(1)
• Limited Sales, Excise and Use Tax Ruling 68
• Former Motor Vehicle Sales and Use Tax Rule .040

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/7907L2024E08

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN 78774

How can you tell when a firm is a leasing firm?

In order to determine whether a company is a leasing firm and therefore
eligible to take fair market value deductions, the requirements of Motor
Vehicle Sales and Use Tax Rule .038 must be met. Rule 38 states that
"any person is engaging in the business of making rentals or leases
of motor vehicles if the person regularly and actively engages in renting
or leasing of motor vehicles as a primary function of his business and
rents or leases at least five different motor vehicles within any given
twelve month period."

Would motor vehicle sales tax be due on a vehicle built from parts
shipped into
Texas from out of State?

According to the law, Article 6.01(1), tax is due on every "retail sales"
of a motor vehicle in the state. As long as not motor vehicle is sold,
no motor vehicle sales tax is due. When component parts are purchased,
they are subject to Limited Sales, Excise and Use Tax. See Limited Sales
Excise and Use Tax Ruling 68, and Motor Vehicle Sales and Use Tax Rule
40,
"Accessories added to Motor vehicles."

Are Seller, Donor Affidavits audited by the comptroller?

No. The affidavits are forwarded to Huntsville by the County Tax
Assessor/
Collectors and filed by inmates. They are not audited by the
Comptroller.
Copies of Form 31 Tax Receipts, which are completed from information on
the
Affidavits, are sent to Motor Vehicle Division by the Tax Assessors along
with their monthly report. The Form 31 Receipts are checked.

In the smaller counties where EOs check County Tax Assessor/Collectors
records,
what should be done when an incomplete Affidavit is found?

The EO should show the error to the Tax Assessor, advise the TAC on
proper
completion procedures and make a note of the problem on the assignment
which
is returned to Motor Vehicle Division.