Did a dealer owe additional Texas vehicle tax when a dealer-plated vehicle was used personally or provided in exchange for services?

Plain-English summary

The Texas Tax Administration Division said no additional motor vehicle sales tax was due when a dealer-plated vehicle was used for personal purposes after the dealer had properly paid the tax imposed on the dealer plate.

The response relied on Attorney General Opinion H-381 (1974), which defined prohibited commercial use for dealer-plate purposes as carrying a load. That definition did not treat every personal use or exchange for services as prohibited commercial use.

The Department of Public Safety was responsible for dealer-plate misuse enforcement. The Comptroller said only the Legislature could change the dealer-plate law or tax.

What this means for you

Motor vehicle dealers and compliance staff

This historical response did not create a general modern safe harbor for providing vehicles to family members, lawyers, coaches, or advertisers.

Dealer-plate users

Current authorized-use and registration rules should be checked with the agency that now administers dealer plates.

Common questions

Q: Did permitted personal use create additional tax?

A: No, after the dealer-plate tax was properly paid.

Q: Who handled plate misuse?

A: The Department of Public Safety under the historical arrangement.

Q: What authority did the letter cite?

A: Texas Attorney General Opinion H-381 (1974).

Citations and references

• Texas Attorney General Opinion H-381 (1974) — cited for dealer-plate use and the historical commercial-use 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/9405678L

Original ruling text

May 10, 1994

Dear **:

I appreciate your complaint against car dealers who allow others to use their
vehicles with dealer plates. Our tax is owed based on the plate obtained by the
dealer, and the Department of Public Safety is responsible for seeing that the
plate is not misused. While I agree that the generally understood meaning of
commercial use would normally include using a vehicle for barter for services,
this is not the definition applied to dealers regarding dealer plates.

Attorney General's Opinion No. H-381 (1974), addressed the question as to how
dealer plates could be used and found dealer plates could not be used for
commercial purposes. Commercial purpose was defined to mean the carrying of a
load. The plate could be used by the dealer for personal purposes; but, if it
was used for personal purposes, the motor vehicle sales tax applied.
Thereafter, the law was amended to require the payment of tax on the dealer
plate. As a result, when the dealer plate is used for personal purposes, no
additional tax is owed because the dealer plate is not being used for a purpose
forbidden by the dealer plate law and motor vehicle tax has been properly paid.
I assume the DPS would follow this opinion in determining whether a dealer was
misusing the dealer plate. Attorney General's Opinion No. H-381 (1974) is
enclosed.

Your observation that the tax and registration fee is far too low may be well
taken. When the tax was passed on dealer plates, vehicles sold for dramatically
less than they do now, and the tax may have been reasonable at that time.
Whether the fee is reasonable now is a matter for the Legislature to address.

I realize this is frustrating because of the perceived unfairness to you and
other taxpayers. However, there is no action the Comptroller can take in regard
to these uses by dealers. Only the Legislature is able to change the law
regarding dealer plates and the motor vehicle tax.

Sincerely,

Wade Anderson
Assistant Director
Tax Administration

cc: Charles Johnstone
Manager, Tax Administration

May 02, 1994

MR. WADE ANDERSON
DIRECTOR OF TAX ADMINISTRATION
111 EAST 17TH. STREET
AUSTIN, TX 78774

Re: Use of Dealer Plates

Dear Mr. Anderson:

I recently wrote Mr. Sharp relative to my complaint and was referred to you.

My concern is that I am retired from COMPANY A and during my years of dealing
with dealership I became aware of the fact dealers provide cars to their
spouses, children, lawyers and others in exchange for services.

It is apparent that this is becoming flagrant as evidenced by the number of
vehicles driven in this manner. In my area I know of a case where a Wholesale
Florist and the wife of a FOOTBALL coach drive such vehicles. All you have to
do is open your eyes as you go down the freeways to see the many vehicles that
are being driven without payment of sales taxes on the auto.

I feel that car dealers who provide cars to coaches or their lawyers, etc. in
exchange for services is a commercial use of the vehicle. Mr. Sharp said the
dealer only pays $25. tax and a $10.30 registration fee. This is absurd when
these vehicles are out on an annual basis. It is not fair that the rest of the
citizens of the state have to pay sales tax and registration when they purchase
a vehicle and dealers are allowed to escape the law.

Mr. Sharp said there is a restriction that the vehicle may not be used
commercially. It is certainly commercial when you barter and exchange the use
of a vehicle for the return of services such as legal and advertising. Dealers
rarely will allow a salesman to use such a vehicle and usually require them to
purchase their own and register same.

Very truly yours,