How did Texas apply use tax and minimum rental tax to out-of-state buses later placed in Texas rental service?

Plain-English summary

The Texas Tax Administration Division said an out-of-state vehicle brought into Texas, used for short-term rental, and registered tax-free generally carried minimum rental receipts tax liability equal to use tax under § 152.022.

That tax was based on the owner's purchase price regardless of when the bus was purchased.

A special rule applied if the vehicle had operated interstate, including Texas, for at least one year under Chapter 157 before moving to Texas rental use. Section 152.089 subjected it to rental receipts tax but established no minimum rental liability.

The letter also identified possible offsets for similar tax paid to another state and a fair-market-value deduction under § 152.002(c) for a qualifying vehicle removed from service.

What this means for you

Bus rental companies and interstate motor carriers

The historical exception depended on at least one year of qualifying interstate operation before rental use.

Fleet accountants

Purchase price, operating history, other-state tax, and retired-vehicle value were all relevant facts.

Common questions

Q: What was the general minimum-tax base?

A: The owner's purchase price.

Q: When did no minimum liability arise?

A: After at least one year of qualifying interstate operation under the cited provisions.

Citations and references

• Texas Tax Code § 152.022 — cited for use tax.
• Texas Tax Code Chapter 157 and § 152.089 — cited for interstate motor carrier and later rental treatment.
• Texas Tax Code § 152.002(c) — cited for the retired-vehicle fair-market-value deduction.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/9207L1206D02

Original ruling text

July 2, 1992

Dear ***:

You recently wrote to Mr. Wade Anderson concerning the motor vehicle tax
application to buses now rented in this state. I am responding to that
inquiry.

Generally, the title owner of a motor vehicle which is brought into this state,
used for short term rental purposes and that is registered tax free is liable
for an amount of gross rental receipts tax equal to the amount of use tax
imposed by Section 152.022 of the Texas Tax Code. And, that the tax is
computed on the owner's purchase price regardless of when the unit was
purchased. I do not feel that there is any administrative remedy available to
lessen the tax liability. Any change would require legislation .

However, a vehicle operated interstate (including Texas) for at least one year
and subject to Interstate Motor Carrier Sales and Use Tax, Chapter 157 of the
Tax Code, and later transferred to Texas rental use will be subject to motor
vehicle rental receipts tax but no minimum rental receipts tax liability is
established. This situation is provided for by Section 152.089 of the Code.

There are at least two provisions that your client may be able to take
advantage of to lessen the liability. First, credit may be allowed for a
similar tax paid to another state. If you client paid a sales tax on their
purchase to another state or collected a rental receipts tax in another state,
that dollar amount may be used to offset the Texas liability.

Also, a person in the business of renting motor vehicles may be able to reduce
the taxable value of a purchase by the value of a vehicle removed from
service. This is provided for in Section 152.002(c) of the Code.

If you have any questions, please feel free to contact me. You may call toll
free 1-800-252-5555, extension 3-4684.

Sincerely,

Curt Swenson
Tax Administration Division