Did a leased vehicle brought into Texas before September 1, 1999 qualify for the new-resident tax rule that took effect on that date?

Plain-English summary

The Texas Comptroller explained why a new resident owed the ordinary motor vehicle use tax on a leased vehicle brought into Texas before a September 1, 1999 law change.

Before that date, the new-resident provision required the vehicle to have been registered to the new resident in another state. Leased vehicles were generally registered to the leasing company rather than the lessee, so the letter said the ordinary 6.25% tax applied. Effective September 1, the Legislature removed that prior-registration requirement for leased vehicles.

The change did not help this taxpayer because the taxable moment occurred when the vehicle first entered and was operated in Texas, not when registration was later obtained. The vehicle entered Texas before September, so the county tax assessor-collector had to apply the earlier rule.

The letter described the then-current new-resident alternative as $90 and said no additional Texas motor vehicle tax was due on lease payments after Texas collected the tax in full at registration. Every amount and procedure here is historical.

What this means for you

New Texas residents

For this 1999 transition, the vehicle's entry and first operation date controlled which version of the law applied. A later registration date did not move the taxable event.

Vehicle lessees

The prior rule created a problem because the leasing company, not the lessee, commonly held the out-of-state registration. The Legislature removed that specific requirement effective September 1, 1999.

Accountants and relocation advisers

When a law changes, identify the statutory effective date and the transaction's taxable moment before applying the newer rule.

Common questions

Q: When did Texas say the tax became due?

A: The day the vehicle first entered and was operated in Texas.

Q: Did waiting to register postpone the tax?

A: No.

Q: What changed on September 1, 1999?

A: The Legislature removed the requirement that a leased vehicle be previously registered to the new resident.

Q: Are the $90 amount and 6.25% rate current?

A: This page reports only what the 1999 letter said; current law must be checked separately.

Citations and references

• Texas Tax Code motor vehicle use tax and new-resident provisions; the letter did not identify section numbers.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/9910912L

Original ruling text

October 5, 1999

Dear **:

Thank you for your letter concerning the motor vehicle tax you paid upon
registration of the leased motor vehicle brought into Texas. Please let me
explain why that amount of motor vehicle tax was due.

The Tax Code imposes a use tax on any motor vehicle that was acquired outside
this state that is later operated in Texas. A new resident to the state may
qualify for the new resident provision (currently $90) in lieu of 6.25% of the
sales price that is imposed on Texas residents and persons doing business or
domiciled in this state. Prior to September 1, 1999, the Tax Code required
that in order to qualify for the new resident provision the vehicle must have
been previously registered to the new resident elsewhere. Generally, leased
vehicles are registered to the leasing company and not to the lessee (new
resident), thus the 6.25% tax applied. This appears to be your situation.
Effective September 1, 1999, the Legislature removed the "previously registered
to the new resident" requirement on leased vehicles.

The taxable moment occurs when the vehicle is first operated in Texas and tax
is due the day the vehicle first enters Texas, regardless of when the
registration is obtained. Because you brought the vehicle into Texas prior to
September, the County Tax Assessor-Collector was required to collect the tax
due at that time.

Also, please be aware that different states collect tax on vehicles in
different manners. Many states tax the lease payment and receive the tax as
the payments are made. The Texas tax law provides that the tax is due in full
at the time of registration. No additional tax is due on the lease payments.

I appreciate your commitment to teaching. As a former school teacher and
former school board president, but most importantly as a mother and
grandmother, I have a deep and abiding interest in education excellence for all
Texas children. The students of Texas are our most precious resource, and
nothing is more important than education!

Please let me know if I can be of further assistance. If you have any
questions, please contact Curt Swenson in my Tax Policy Division. Curt may be
reached by calling 1-800-252-1382, extension 3-4684, toll free.

Thank you for all that you do for future generations of Texans.

Sincerely,

CAROLE KEETON RYLANDER
Comptroller of Public Accounts

cc: Curt Swenson