Did vehicles received instead of foreclosure qualify for Texas's sale-for-resale exemption when they would be used before resale?

Plain-English summary

The Texas Tax Administration Division denied sale-for-resale treatment for vehicles received with other assets in a settlement instead of foreclosure.

Vehicles titled for resale could not be driven, and the requester planned to use them while holding them. The historical resale exemption under § 152.001(2)(A) therefore did not apply.

The letter found no other exemption for the described recipient. It separately said tax was not due if the vehicles were titled in FDIC's name as a governmental entity.

What this means for you

Financial institutions and foreclosure asset managers

Using an acquired vehicle before resale defeated the historical resale treatment.

FDIC and vehicle resellers

The governmental exemption was tied to title in FDIC's name, not every asset handled in an FDIC-related settlement.

Common questions

Q: Did the resale exemption apply?

A: No, because the vehicles would be used.

Q: Was FDIC title exempt?

A: Yes, according to the letter.

Citations and references

• Texas Tax Code § 152.001(2)(A) — cited for the historical sale-for-resale definition.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/9108L1124A03

Original ruling text

August 7, 1991

Dear **:

This is in response to your letter postmarked July 11, 1991, which
indicated it was a second request. This office has no record of
receiving the letter previously (all incoming mail is recorded and
tracked by our computer system).

Your letter requests a determination regarding sales tax on motor
vehicles which were received in a settlement agreement in lieu of
a foreclosure which includes real property, tangible personal
property and motor vehicles.

You specifically asked if the transaction can qualify for a sales
tax exemption either pursuant to the definition of a sale for
resale as provided under Texas Tax Code Sec. 152.001 (2)(A), or under
any other applicable exemption. Vehicles titled for resale
purposes can not be driven. The odometer reading must be
supported by an affidavit at the time a title for resale is
applied for and again when the purchaser takes title to the
vehicle. Because you stated the vehicles will be used during the
time they are held for resale, the exemption will not apply.

There are no other exemptions which would allow vehicles (in the
situation described) to be titled without tax being due. If the
vehicles are titled in a governmental entity's name (FDIC), tax
is not due.

This opinion is based on the facts presented. If there are
additional or different facts, the opinion may change.

If you have any questions or need more information, you may call
me toll free at 1-800-531-5441, extension 5-0330. The regular
number is 512/463-4600, or write Tax Administration Division.

Sincerely,

Bettie U. Peterson
Tax Administration Division