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Motor Vehicle Rental Tax Guide
Collecting Motor Vehicle Rental Tax
When you rent a vehicle, you must collect motor vehicle rental tax from your customer, unless they can claim an exemption. Tax is collected on the "gross rental receipts" from vehicles rented in Texas, even if the vehicle will be driven outside the state during the rental agreement period.
Gross Rental Receipts
"Gross rental receipts" refers to the total amount charged to a customer to rent a motor vehicle.
Gross rental receipts do not include:
- Separately stated charges for insurance.
- Charges for damage to a vehicle while it is being rented.
- Separately stated fuel charges.
- Discounts.
Motor Vehicle Rental Tax Rates
The amount of motor vehicle gross rental receipts tax your customer must pay is a percentage of the gross rental receipts for renting the vehicle. You must collect the appropriate amount of tax when your customer pays you. The percentage you must charge for tax depends on the length of your rental contract.
The following are Texas motor vehicle rental tax rates:
- 10 percent for rental contracts of 1-30 days (short-term rental).
- 6.25 percent for rental contracts of 31-180 days (long-term rental).
Tax exemptions may apply.
Local Tax
Texas cities and counties can also impose a local tax on certain motor vehicle short-term rentals. Local taxes on short-term rentals are administered by your city or county, and you should contact them directly for more information.
Motor vehicle rental companies that provide short-term rental of self-propelled motor vehicles (including passenger cars, vans, sport utility and light trucks) and are located within the boundaries of a local government jurisdiction that has imposed a local tax on short-term rentals must collect this tax from their customers. The tax is not imposed on trailers or trucks having a manufacturer's rating of more than one-half ton.
Billing
When billing your customers, you must either separately state the amount of motor vehicle rental tax your customer is paying on their invoice or state on the invoice that motor vehicle rental tax is included in the total charge. You cannot pay someone’s rental tax for them or appear as though you are not charging tax when it is due.
If you do not separately state charges that are not part of your gross rental receipts from those that are, you must collect tax on the entire lump-sum charge.
96-143
(06/2021)
Rental
An agreement by the owner of a motor vehicle to give, for no longer than 180 days, the exclusive use of that vehicle to another for consideration; an agreement by the original manufacturer of a motor vehicle to give exclusive use of the motor vehicle to another for consideration; or an agreement to give exclusive use of a motor vehicle to another for re-rental purposes, regardless of the period of time covered by the agreement.
Gross Rental Receipts
Any amount of money or the value of property received by or due the owner of a motor vehicle as consideration for the rental of the vehicle to another including a reimbursement charge for property tax, title fee, and registration fee expenses. Gross rental receipts does not include, and tax is not due on, the following:
- a separately stated fee or charge for insurance;
- an assessment for damage to the vehicle which occurred during a rental agreement period;
- separately stated receipts for motor fuel sold by the owner of the vehicle;
- discounts; or
- any amount of gross rental receipts tax collected by or due the owner of the vehicle.