Could a Texas lessee later obtain a refund as Michigan tax continued to be paid on the same out-of-state vehicle lease?

Plain-English summary

Texas use tax was due when the Michigan-origin leased vehicle entered Texas. Texas Tax Code § 152.022 imposed tax on an out-of-state-acquired vehicle brought into the state.

Because Texas participated in the Multistate Tax Compact, it credited similar tax legally paid to another state. Only $97.24 had been paid to Michigan before Texas entry, so that was the initial credit.

If Michigan tax continued to be legally due month by month, Texas would issue a dollar-for-dollar refund after the lease ended. A full refund required total Michigan tax to equal or exceed the Texas tax paid.

What this means for you

Vehicle lessees and new Texas residents

The historical credit covered tax already paid, not merely tax expected later.

Refund claimants and multistate tax professionals

The later refund depended on proving that continuing Michigan tax was legally due and paid.

Common questions

Q: Why was the initial credit only $97.24?

A: That was the Michigan tax paid before the vehicle entered Texas.

Q: Could later Michigan payments produce a refund?

A: Yes, after the lease ended.

Q: When was the Texas refund complete?

A: When qualifying Michigan tax equaled or exceeded Texas tax paid.

Citations and references

• Texas Tax Code § 152.022 — cited for use tax on an out-of-state-acquired vehicle brought into Texas.
• Multistate Tax Compact — cited as the basis for other-state tax credit.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/9203L1159E10

Original ruling text

March 10, 1992

Dear **:

Thank you for your letter concerning the potential refund of motor
vehicle use tax.

In your letter you asked for further explanation of how motor vehicle
use tax that you paid upon bringing your lease vehicle into this state
might be refunded.

Texas motor vehicle use tax was due on bringing the vehicle into this
state. And, only because Texas is a member of the Multistate Tax
Compact can credit be allowed for any similar tax paid to another state.
Because you had paid only $97.24 to Michigan prior to bringing the
vehicle into Texas, credit was allowed only for that amount.

If the tax that you are paying to the lessor on a month to month basis
continues to be legally due tax Michigan (and it could be since the
lease originated in Michigan), we will refund the Texas use tax on a
dollar for dollar basis at the conclusion of your lease. A full refund
would only be available if your total tax paid to Michigan equaled or
exceeded the total paid Texas.

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, please contact the
Tax Administration Division. You may call toll free at 1-800-252-5555,
or write to the division.

Sincerely,

Curt Swenson
Tax Administration

December 31, 1991

The Honorable Tony Goolsby
House of Representatives
P. O. Box 2910
Austin, TX 78768-2910

Dear Representative:

Thank you for sending the copy of Ms. Schwartz's letter concerning
the motor vehicle tax that she paid upon moving to Texas.

It appears that the Dallas County Tax Assessor-Collector correctly
collected motor vehicle use tax. Section 152.022 of the Texas Tax
Code imposes a use tax on a vehicle that was acquired outside this
state and brought into this state. This use tax is a complement
to motor vehicle sales tax.

Texas, as a member of the Multistate Tax Compact, will allow credit
for a legally imposed similar tax previously paid to another state.
Part of the problem here is that Ms. Schwartz has apparently paid
only a portion of her Michigan tax liability prior to bringing the
vehicle into Texas. We were able to allow credit for $97.24. Because
factors can change, I am sure you will agree that it would not
be prudent to allow credit for tax which may be paid to another state.

If Ms. Schwartz is required to continue to pay tax to Michigan, she
may apply to this office at the conclusion of the lease contract for
refund of at least a portion of the Texas tax paid (the future refund
may be made because Michigan would have first claim to tax since her
transaction occurred in that state).

If you or your constituent have any questions please feel free to call
me at 463-4684. Our toll free number is 1-800-252-5555. My extension
is 3-4684. The mailing address is State Comptroller, Tax Administration
Division, Capitol Station, Austin, Texas 78774.

Sincerely,

Curt Swenson
Tax Administration Division