Was a fee paid directly to a licensed vehicle lease facilitator subject to Texas motor vehicle sales tax?

Plain-English summary

The Texas Tax Policy Division said Texas Tax Code § 152.021 imposed motor vehicle tax on the retail sale, not the later lease or its capitalized price.

In the described flow, the dealer sold the new vehicle directly to the banking-institution lessor. The licensed lease facilitator acted only as the lessor's agent in arranging the purchase and lease.

Tax was due on the total consideration paid to the dealer. A fee paid directly to the facilitator by either the bank lessor or the lessee was not subject to motor vehicle sales tax.

What this means for you

Lease facilitators and banking lessors

The historical exclusion depended on true agency and direct payment outside the dealer's sale consideration.

Motor vehicle dealers and accountants

The taxable base was the consideration paid to the dealer in the retail sale.

Common questions

Q: Was the facilitator fee taxable?

A: No, under the described agency structure.

Q: What transaction was taxed?

A: The dealer's retail sale to the banking-institution lessor.

Citations and references

• Texas Tax Code § 152.021 — cited for tax on the retail sale.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/9512909L

Original ruling text

December 8, 1995

Dear ***:

Thank you for your letter concerning the taxability of the fee charged by a
lease facilitator in connection with the sale and lease of a motor vehicle.

Based on correspondence and conversations with representatives of leasing
associations my understanding of the purchase and lease flow when a licensed
lease facilitator is involved is that the dealer will sell the new car directly
to the lessor, in your case the banking institution lessor. The lease
facilitator will act as agent for the lessor in arranging the purchase and
lease of the vehicle. The lease facilitator will receive his fee from the
lessor or the lessee.

Section 152.021 of the Tax Code imposes tax on the retail sale, not the lease
or lease capitalized price. If the vehicle is sold by the dealer directly to
the banking institution lessor (with the lease facilitator acting only as an
agent for the purchaser), tax is due only on the total consideration paid to
the dealer. A fee paid directly to the lease facilitator by the banking
institution lessor or the lessee, is not subject to motor vehicle sales tax.

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

If you have any questions, please don't hesitate to write the Tax
Administration Division or call toll free 1-800-531-5441, extension 3-4684.

Sincerely,

Curt Swenson
Tax Policy Division