Did a used-car dealer owe Texas motor vehicle tax after operating a new vehicle on a metal dealer tag?

Plain-English summary

The Texas Comptroller said a used-car dealer owed motor vehicle sales tax after operating a newly purchased vehicle on a metal dealer tag. The vehicle was not held exclusively for resale, and the letter said a used-vehicle dealer was not eligible to operate a new vehicle on that tag, so taxable use occurred.

Before transferring the divorce-awarded vehicle to the requester, the dealer first had to apply for title in its own name. The county tax assessor-collector would collect the dealer's tax at that point.

The letter did not decide whether tax was also due when the requester's husband acquired the vehicle from the dealership because the acquisition facts were not provided.

What this means for you

Used-car dealers

Operating inventory inconsistently with exclusive resale treatment created taxable use under the historical rules described.

Title staff and divorce practitioners

The letter required the dealer to title the vehicle before assigning it to the divorce recipient.

Common questions

Q: Why did the dealer owe tax?

A: The dealer operated the new vehicle rather than holding it exclusively for resale.

Q: Who collected tax when the dealer applied for title?

A: The local county tax assessor-collector.

Q: Did the letter decide the husband's acquisition tax?

A: No.

Citations and references

• The letter did not identify a statute or administrative rule by number.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/9702187L

Original ruling text

February 5, 1997

Dear ***:

Thank you for your letter concerning the transfer of a motor vehicle.

I understand the situation to be that ABC EQUIPMENT CO. (ABC), a corporation
and a motor vehicle dealer registered with the Texas Department of
Transportation, purchased the motor vehicle new (on a manufactures statement of
origin). You were awarded the vehicle through a divorce proceeding. ABC
operated this vehicle on a metal dealer tag (registration).

In so far as state tax is concerned, ABC will owe motor vehicle sales tax on
their purchase of the vehicle because the vehicle was not held exclusively for
resale. A used vehicle dealer is not eligible to operate a new vehicle on a
metal dealer tag thus a taxable use occurred and tax is due from the dealer.

The Texas Department of Transportation is charged with administering the
titling and registration of motor vehicles. It is my understanding of that
agency's administration that the dealer will have to first apply for a
Certificate of Title to the vehicle before the dealer can assign the title
document to you. Motor vehicle sales tax will be collected from the dealer by
the local County Tax Assessor-Collector when the dealer applies for title in
their name.

You did not indicate how your husband acquired the vehicle from the dealership.
Tax may be due on his acquisition of the vehicle from the dealer.

In any case the title transfer should be done through the local County Tax
Assessor-Collector.

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 contract one of our representatives by calling
1-800-252-1382, toll free or write to the Tax Policy Division.

Sincerely,
Curt Swenson
Tax Policy Division