Ezel / Tax Rulings / TX
TX 9906519L Motor Vehicle Tax 1999-06-29

Did a Texas floor-plan lender owe motor vehicle sales tax when it repossessed a defaulting dealer's vehicle inventory and took title?

Short answer: No. Repossession was not a taxable transaction, so the floor-plan lender owed no tax when it took title to the defaulting dealer's vehicles. Motor vehicle sales tax was due on the lender's later sales of those repossessed vehicles to new owners.

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 letter issued on the specific facts presented. It dates from 1999, predates modern Private Letter Ruling reliance terms, and cannot be treated by unrelated taxpayers as binding protection. The repossession, titling, and subsequent-sale rules may have changed, so verify current Texas law before relying on the historical result. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice.
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

The Texas Comptroller said a floor-plan lender did not owe motor vehicle sales tax when it repossessed and took title to a defaulting dealer's vehicle inventory.

The lender had financed the dealer's inventory under an agreement allowing repossession after default. Taking the vehicles back was not a taxable transaction.

The tax result changed when the lender sold the repossessed vehicles to new owners. Those subsequent sales were taxable.

What this means for you

Floor-plan lenders

The historical letter separated the lender's recovery of collateral from its later disposition of that collateral.

Motor vehicle dealers

Dealer default and repossession did not eliminate tax on the vehicles' later retail sales.

Title departments

Taking title as part of the repossession was not taxed on the stated facts, but the later buyer transaction was.

Common questions

Q: Was the repossession taxable?

A: No.

Q: Did taking title trigger tax?

A: No, according to the letter.

Q: Were later sales taxable?

A: Yes.

Citations and references

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

Source

Original ruling text

June 29, 1999

Dear *:

Thank you for your request for motor vehicle tax information.

Your corporation (ABC CORP.) floor planned inventory for COMPANY A, a motor
vehicle dealer. Under the terms of the agreement, ABC CORP. repossessed the
dealership inventory due to the dealer defaulting on the agreement terms. The
vehicles are now being sold to new owners. You ask if tax is due when the
vehicle is repossessed by ABC CORP.

A repossession is not a taxable transaction. No tax is due when ABC CORP.
takes title to vehicles it has repossessed. Tax is due on subsequent sales of
these vehicles.

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

If you have any questions, please do not hesitate to call one of our tax
specialists toll free at 1-800-252-5555. The direct number is 512/463-4600.
You may also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Joan Hale
Tax Policy Division

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