When is a Texas motor vehicle rental to a state agency or an employee on official state business exempt?

Plain-English summary

The original 1989 letter said § 152.084 exempted a motor vehicle rented directly to a public agency, including a state agency, but not a vehicle rented in an employee's own name and paid by the employee.

STAR later partially superseded that employee rule. Its 2005 notice says an employee traveling on official state business may issue a rental exemption certificate when the rental is made under a master contract with the state. The notice applies that clarification to an Individual Bill Account, Corporate Liability Individual Bill Account, and Central Bill Account, and points to STAR 200509306L.

What this means for you

State travel managers and employees

The rental contract and billing arrangement matter. A direct agency rental remained within the stated public-agency exemption, while an employee rental requires the master-contract conditions in the supersession notice.

Vehicle rental companies

Do not apply the original 1989 employee-payment rule without the later clarification. Confirm the state master contract and exemption certificate.

Common questions

Q: Is a rental directly to a Texas state agency exempt?

A: Yes, under the statutes and original letter.

Q: Is an employee-paid official rental necessarily taxable?

A: No. The supersession notice allows an exemption certificate for an official-business rental under a state master contract and the listed billing arrangements.

Citations and references

• Tex. Tax Code §§ 152.084, 152.001(7)
• STAR 200509306L is identified by the official supersession notice; no unverified internal link is supplied.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/8901L0924B02

Original ruling text

STAR SUPERSEDED INFORMATION
Accession No.(s):
Supersede type: Partial
Document superseded on: 10/27/2005
Issue that caused the document to be superseded: Rental of a motor
vehicle to a state employee on official state business.
Reason for superseding the document: Policy clarification - An
employee on official business of the state may issue an exemption
certificate for the rental of a motor vehicle provided the rental is
made under a master contract with the state. This applies to a rental
paid for by the employee with an Individual Bill Account (IBA), a
Corporate Liability Individual Bill Account (CLIBA) and a Central Bill
Account (CBA) See Accession No.: 200509306L

January 10, 1989

Director, Travel and Transportation Division
State Purchasing and General Services Commission
P. 0. Box 13047
Austin, Texas 78711

Dear ***:

You have requested a written confirmation of the policy of the
Comptroller concerning the application of the Motor Vehicle Rental
Tax to transactions with state agencies and state employees. As
you know, this tax appears in Chapter 152, Tax Code.

Section 152.084 exempts "the rental of a motor vehicle to a public
agency." Under section 152.001(7) the term "public agency"
includes, among other things, a state agency.

Our reading of the provisions noted above is that this exemption
applies only to transactions in which a car is rented directly to
a state agency, and does not apply to rentals by employees who pay
the rental fee themselves. Even though the employee may be
reimbursed by the agency for the cost of the rental, the agency is
not a party to the transaction.

The prevailing rule governing the applicability of exemptions is
that unless a person clearly qualifies for the exemption, it is
not to be allowed. We believe the language noted above is limited
to transactions involving the agency itself.

I trust this meets your needs. However, if you need further
information, please feel free to contact me. I can be reached at
463-4606. Correspondence should be addressed to my attention at
P. 0. Box 12733, Austin, Texas 78711.

Sincerely,

Martin Cherry
Assistant Director
Legal Service Division