Ezel / Tax Rulings / TX
TX 9904402L Sales and/or Use Tax (State,Local,MTA) 1999-04-16

Is a fee charged to a rental car company for retrieving one of its cars that a renter failed to return taxable in Texas?

Short answer: No. A charge for retrieving (not towing -- simply driving to the location and driving the vehicle back) a motor vehicle rented by a rental company but not returned is not subject to Texas sales tax.

Apply this to your situation

This page answers the general question as of 1999. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1999
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A short, simple, and useful fact pattern: a company retrieves cars that were rented from a rental car company but never returned. The rental car company pays this retrieval company for the service. Notably, the retrieval is done by driving the rental vehicle back rather than towing it -- the retrieval company's own employee drives their personal vehicle to the location and then drives the rental car back.

The Comptroller's answer: the charge for this retrieval service is not subject to Texas sales tax.

What this means for you

Vehicle retrieval / repossession-adjacent services working with rental car companies

Charges for retrieving an unreturned rental vehicle by driving it back are not taxable in Texas.

Rental car companies paying for vehicle retrieval

You shouldn't expect (or need to pay) sales tax on invoices from a company you hire to retrieve unreturned vehicles under this fact pattern.

Accountants and tax professionals

A narrow, concrete data point -- worth distinguishing from towing services or other vehicle-recovery services that may be taxed differently depending on the specific service characterization; this letter addresses only the drive-it-back retrieval scenario, not towing.

Common questions

Q: Is a charge for retrieving an unreturned rental car taxable?
A: No, not when the retrieval is done by driving the vehicle back (not towing).

Q: Does it matter whether the retrieval company uses a tow truck?
A: This letter's facts specifically involve driving the car back, not towing -- the Comptroller's answer is tied to those facts.

Q: Can I rely on this letter for my own retrieval business?
A: No. It is based on the specific facts presented and can only be relied on by the taxpayer to whom it was issued.

Citations and references

This letter applies general Comptroller policy on vehicle retrieval services; it does not cite a specific numbered Tax Code section or rule.

Source

Original ruling text

April 16, 1999

Dear **:

Thank you for your recent letter concerning your company's Texas sales and use
tax responsibilities.

Your company picks up cars that have been rented from a rental company but not
returned. The rental car company pays your company to go and retrieve the car.
You do not use a tow truck. You and your partner drive your vehicle to pick
up a rental vehicle.

Question: Do you charge sales tax?

Answer: No. The charge your company makes for retrieving a motor vehicle
rented by a rental company is not subject to sales tax.

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

You may call me toll free at 1-800-531-5441, extension 3-4683, if you have any
questions or need more information. The direct line is 512/463-4683. You may
also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Policy Division

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