Did Texas new-resident motor vehicle tax treatment apply when a company leased the vehicle out of state and a newly resident employee drove it in Texas?

Plain-English summary

The Texas Comptroller denied new-resident motor vehicle tax treatment where a company leased a vehicle outside Texas and a newly resident employee drove it after the vehicle was brought into Texas.

The Tax Code provision described in the letter required the new resident to be the person who leased the vehicle. The employee was a new resident, but the company was the lessee and was already doing business in Texas. The Comptroller therefore applied the ordinary tax rather than the new-resident alternative.

The 1999 letter calculated tax at 6.25% of the lessor's purchase price and allowed credit for similar tax paid to another state. That rate and procedure should be treated as historical.

What this means for you

Employers relocating workers

The employee driver's residency did not control. The Comptroller looked to the identity and residency status of the person that signed the lease.

Fleet leasing companies

For an out-of-state lease brought into Texas, identify the legal lessee before evaluating new-resident treatment.

Fleet accountants

Preserve proof of similar tax paid to another state. The letter allowed a credit against the Texas tax.

Common questions

Q: Why did the newly resident employee not qualify the vehicle?

A: The employee was not the lessee; the company was.

Q: Was the company a new resident?

A: No. The letter described it as doing business in Texas.

Q: What tax base did the letter use?

A: The lessor's purchase price.

Q: Did Texas give credit for another state's tax?

A: Yes, for similar tax paid to another state.

Citations and references

• Texas Tax Code new-resident motor vehicle provision; the letter did not identify the section 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/9910811L

Original ruling text

October 20, 1999

Dear **:

Thank you for your letter concerning motor vehicles being brought into this
state and the application of the new resident use tax.

The issue at hand is whether a vehicle that has been leased out of state by a
company (as the lessee) doing business in Texas, driven by an employee who is a
new resident to this state, and now operated in Texas, will qualify for the new
resident use tax in lieu of the 6.25% tax imposed on Texas residents and other
persons who are domiciled or doing business in this state.

In order for the new resident provision to apply, the Tax Code requires that
the new resident be the person who leased the motor vehicle. In this case, the
person (the company) who leased the unit is not a new resident; therefore the
6.25% tax calculated on the lessor's purchase price is due. Credit will be
given for any similar tax paid to another state.

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 don't hesitate to write the Tax Policy
Division or call one of our Tax Specialists at 1-800-252-1382, toll free.

Sincerely,

Curt Swenson
Tax Policy Division