How did Texas tax off-road vehicles and their trade-ins after the September 1, 1983 law change?

Plain-English summary

Effective September 1, 1983, vehicles not designed for public highways became subject to limited sales tax rather than motor vehicle tax. Applicable city or metropolitan-transit-authority tax also applied.

An off-road vehicle could reduce the sales-tax base of another off-road vehicle, but could not reduce the motor vehicle tax base of a street vehicle. The examples taxed $1,000 off-road sales on $250 after a $750 motorcycle trade-in and on $400 after a $600 off-road trade-in. A $500 off-road trade-in did not reduce the $1,000 motor vehicle tax base of a street vehicle.

Motor vehicle tax collected on off-road vehicles from September 1 through September 20, 1983 would satisfy the sales tax due.

What this means for you

Identify each item's tax category before applying a trade-in. Cross-category trade-ins did not always reduce the taxable base.

Common questions

Q: Were farm-use three-wheel off-road vehicles exempt?
A: No; sales tax still applied.

Q: Could an off-road trade-in reduce tax on a street vehicle?
A: No.

Citations and references

• Enforcement Memo 1271 — earlier guidance referenced by the report
• Law change effective September 1, 1983 — described without a bill or section number

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/8310L0534B12

Original ruling text

Enforcement Management Report - Week Ending October 21, 1983

TAXABILITY OF "OFF-ROAD" VEHICLES

Enforcement Management Report, E Memo 1271, refers to a letter sent to all
County Tax Assessor - Collectors and Texas Motorcycle Retailers explaining the
change in taxability of 'off-rood" vehicles. Effective September 1, 1983,
off-road vehicles are subject to limited sales tax rather than motor vehicle
sales tax.

Sales and Motor Vehicle Tax Divisions have received many calls requesting
further explanation. If you receive any inquiries, here are some important
points to remember:

• Vehicles not designed for use on public highways are no longer subject to
  motor vehicle Sales tax, For taxing purposes, these off-road vehicles are
  not considered motor vehicles. - off-road vehicles include: dirt bikes,
  "strikes", etc. (refer to E Memo 1271)

• Off-road vehicles are subject to limited sales tax.

• Three-wheeled vehicles or "strikes" designed for off-road use and purchased
  for use on a farm or ranch are still subject to sales tax.

• When sales tax is due, any applicable city or MTA tax is also due.

• Any motor vehicle tax collected on the sale of an off-road vehicle sold and
  registered between September 1, 1983, and September 20, 1983, will satisfy
  the required sales tax due.

• Off-road vehicles that are traded-in cannot be used to reduce the taxable
  value of a motor vehicle when calculating motor vehicle tax, even though
  motor vehicle tax was paid on that off-road vehicle. Motor vehicle tax now
  allows motor vehicle tax to be based on the difference between the price of
  a motor vehicle and the value of trade-in only when the trade-in is another
  motor vehicle.

Off-road vehicles can only reduce the taxable value of another off-road
vehicle, and that is when calculating the amount subject to sales tax.

Example: A dealer sells an off-road vehicle for $1000 and accepts a
motorcycle (a motor vehicle) valued at $750 as a trade-in. - Limited sales
tax is due on $250, the difference between the sales price and the value
of the trade-in.

Example: A dealer sells an off-road vehicle for $1000 and accepts a used
off-road vehicle valued at $600 as a trade-in. Tax Due: Limited sales tax
is due $400, the difference between the sales price and the value of the
trade-in.

Example: A dealer sells a motor vehicle for $1000 and accepts an off-road
vehicle valued at $500 as a trade-in. Tax Due: Motor vehicle sales tax is
due on the $1000 price of the motor vehicle.

QUESTIONS: If you have further questions, contact:
Eddie C. Washington, Sales Tax Division, 622-1931.
Richard Montgomery, Motor Vehicle Tax Division, 822-1935.