Did a Texas vehicle buyer have to pay sales tax again when a licensed dealer collected the tax, went out of business, and failed to remit it or transfer title?

Plain-English summary

The Texas Comptroller said a vehicle buyer did not have to pay motor vehicle sales tax twice when a licensed dealer collected the tax, went out of business, and failed to remit the money or transfer title.

Payment to the licensed dealer satisfied the buyer's tax obligation. The title could be transferred without another payment, and a sales invoice itemizing the tax was acceptable proof that the buyer had paid it.

The buyer did not need a separate Comptroller authorization for each vehicle as long as the title office received proof of dealer payment. Documentation should also be sent to the Comptroller so the agency could pursue the dealer.

What this means for you

Vehicle buyers

Keep the sales invoice and any other record showing tax separately collected by the licensed dealer.

County tax assessor-collectors and title services

The 1999 letter accepted an itemized sales invoice and allowed title transfer without collecting the tax again.

Motor vehicle dealers

Collecting tax without remitting it shifted enforcement to the dealership; it did not erase the buyer's proven payment.

Common questions

Q: Did the buyer owe tax a second time?

A: No.

Q: What proof did the Comptroller accept?

A: A copy of the sales invoice itemizing the tax paid to the licensed dealer.

Q: Could title transfer without another payment?

A: Yes.

Q: Who would the Comptroller pursue?

A: The dealership.

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/9905419L

Original ruling text

May 24, 1999

Dear **:

Thank you for your request for motor vehicle tax information.

You have requested a letter from this office waiving motor vehicle sales tax on
a 1997 Alfa Gold, VIN# **, sold to MR. A. MR. A purchased the
vehicle from CAR COMPANY, who has gone out of business. The dealership
collected tax from MR. A, but did not transfer title and remit the tax.

Response: Because motor vehicle dealers are now required to collect motor
vehicle sales tax from their customers, motor vehicle sales tax that was paid
to a licensed dealer by the purchaser will satisfy the purchaser's requirement
to pay the tax, even though the dealership did not get the tax remitted to the
assessor-collector's office. The titles may be transferred without additional
tax payment. This office will pursue the tax from the dealership. A copy of
the sales invoice itemizing tax will be acceptable evidence of tax paid to the
dealer. As long you receive such proof that the tax was paid to the dealer,
you do not need separate authorization from this office on each vehicle.
Please be sure to submit documentation to this office so that we may pursue the
dealer.

If you have any questions, please do not hesitate to call me toll free at
1-800-531-5441, extension 34663. My direct number is 512/463-4663. You may
also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Joan Hale
Tax Policy Division