When did the Texas Motor Vehicle Division treat an interstate vehicle transaction as a Texas sale versus a Texas use?

Plain-English summary

This internal Texas Motor Vehicle Division memo used the vehicle's location at the time of sale to distinguish sales tax from use tax.

If a Texas seller sold a vehicle located in Texas to an out-of-state buyer, the memo treated it as a Texas sale even when the dealer delivered it out of state. If that vehicle later returned to Texas, the memo still characterized the liability as sales tax and allowed no credit for use tax paid to another state.

If the vehicle was outside Texas, was delivered from another out-of-state location, and never entered Texas, the memo found no Texas sales tax.

If that buyer later brought the out-of-state vehicle into Texas for highway use and was a Texas resident, domiciliary, or business, the memo imposed Texas use tax and allowed credit for motor vehicle sales or use tax paid to another state.

What this means for you

Motor vehicle dealers and interstate buyers

Under the historical memo, out-of-state delivery did not change a sale of a Texas-located vehicle into an out-of-state sale.

Audit and tax professionals

The memo allowed other-state tax credit in its use-tax scenario, not its Texas-sales-tax scenario.

Common questions

Q: Did out-of-state delivery eliminate tax on a vehicle located in Texas?

A: No, under the memo.

Q: Was a vehicle located and delivered outside Texas a Texas sale?

A: No.

Q: Could later Texas use trigger use tax?

A: Yes, when the buyer had the Texas connections described.

Citations and references

• TEX. TAX.-GEN. ANN. art. 6.01(1) — historical sales-tax citation in the memo.
• TEX. TAX.-GEN. ANN. art. 6.01(2) — historical use-tax citation in the memo.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/8010L0197D08

Original ruling text

INTEROFFICE BOB BULLOCK
MEMORANDUM COMPTROLLER OF
PUBLIC ACCOUNTS

Date: October 30, 1980

TO: Dan Linn, Field Operations-Audit
Carlton Bell, Field Operations-Enforcement

From: Richard Montgomery, Motor Vehicle Division

Subject: Motor Vehicle Sales vs. Use Tax

The Motor Vehicle Division would like to confirm its position on when a
taxpayer
is liable for motor vehicle sales tax as opposed to use tax.

Situation A

A Texas seller sells a motor vehicle located in Texas (either on his own
or
another Texas dealer's lot) and delivers it to a purchaser located
out-of-state.

Sales or Use Tax Due?

This is a Texas sale: Texas sales tax is due based on TEX. TAX.-GEN. ANN.
art.
6.01(1), regardless of whether the vehicle is delivered out-of-state to
the
buyer or the buyer takes delivery in Texas and immediately drives it
out-of-
state.

The Texas seller is responsible for furnishing the buyer with all the
documents necessary to register the car. If the buyer by-passes the
court
house and takes the car directly out-of-state, he still owes the Texas
tax
although it may not be cost effective to pursue collection.

However, for enforcement or audit purposes, if it is determined that the
vehicle has been brought back into Texas, sales tax is due as opposed to
use
tax. No offsetting credit will be allowed for use tax paid to another
state.

Situation B

A Texas seller sells a vehicle to a purchaser located out-of-state. The
vehicle
is not located in Texas at the time of the sale; it is delivered to the
purchaser
from another out-of-state location (i.e., direct from the factory, from
another
out-of-state dealer, etc.) The vehicle does not enter Texas.

Sales or Use Tax Due?

This is not a Texas sale since the vehicle was not located in Texas. No
sales tax is due. The buyer will be responsible for motor vehicle taxes
to
the state in which he registers the vehicle.

Situation C

The same buyer as in Situation B brings the same vehicle to Texas for use
on the
public highways.

Sales or Use Tax Due?

Texas use tax is due if it can be determined that the buyer is a resident
of,
domiciled or doing business in Texas. (TEX. TAX.-GEN. ANN. art. 6.01(2)).
Credit
against the Texas use tax is allowed for any motor vehicle sales or use
tax
paid to another state.