Could a lessor title vehicles tax-free when leasing them to a qualifying rural electric cooperative?

Plain-English summary

The Texas Tax Administration Division said rural electric cooperatives organized under the cited Electric Cooperative Corporation Act were among the organizations exempt from historical motor vehicle tax.

A vehicle leased to a qualifying cooperative could be titled in the lessor's name tax-free even though it could not receive exempt license plates.

As with leases to public agencies, the lessor owed motor vehicle tax on the vehicle's book value at the end of the lease unless the vehicle was sold.

What this means for you

Rural electric cooperatives and vehicle lessors

The 1991 exemption depended on the cooperative's organization under the cited act. Verify the current statute and lease-end tax treatment.

County tax assessor-collectors

The letter relied partly on a historical Motor Vehicle Tax Guidebook page that is not included in STAR.

Common questions

Q: Could the lessor title the leased vehicle tax-free?

A: Yes, for the qualifying cooperative described.

Q: Were exempt license plates required?

A: No, according to the letter.

Q: Was tax permanently avoided?

A: Not necessarily. Unless the vehicle was sold, the lessor owed tax on book value at lease end.

Citations and references

• Tex. Rev. Civ. Stat. Ann. art. 1528(b), § 30 — cited for rural electric cooperatives organized under the Electric Cooperative Corporation Act.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/9103L1083E03

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

JOHN SHARP
Comptroller March 7, 1991

Dear ** :

Thank you for requesting a letter regarding the motor
vehicle tax exemption for vehicles leased to COOP XYZ.

I have previously sent ** of your office a
copy of page IV-18 out of the Motor Vehicle Tax Guidebook
that we provide to County Tax Assessor-Collectors. Every
Assessor-Collector should collect taxes or exempt transfers
of motor vehicles as set out in the guidebook. The page I
sent you deals with the exemption for cooperatives and other
organizations that are not required to get exempt license
plates to qualify for the exemption.

Included in the list of federal and state organizations that
are entitled to exemption from the motor vehicle tax are
rural electric cooperatives that are organized under the
Electric Cooperative Corporation Act, Tex. Rev. Civ. Stat.
Ann. art. 1528(b), Section 30.

A motor vehicle leased to one of these exempt organizations
may be titled in the name of the lessor tax free even though
it cannot be issued exempt license plates. As with leases
to public agencies, the lessor will owe motor vehicle tax on
the book value at the end of the lease unless the vehicle is
sold.

This opinion is based on the facts presented. Other facts
though similar may provide a different result. If you have
other questions or need more information please call or
write. The toll-free number is 1-800-531-5441; my extension
is 3-4675. The regular number is (512)463-4675.

Sincerely,
Tom Soto
Tax Administration