taxes

Motor Vehicle Tax Guide

Contests and Prizes

Purchasing a ticket that merely represents a chance to win a motor vehicle is not consideration given for a motor vehicle. A person who buys a ticket or is given a ticket for a chance to win a motor vehicle, therefore, does not owe tax on the ticket price, even if it is the winning ticket. The contest sponsor also does not owe motor vehicle tax on the total price of the sold tickets.

Seller-to-Contest Sponsor-to-Winner Transfer

When a contest sponsor buys a motor vehicle and the motor vehicle seller assigns the title to the sponsor, who, in turn, transfers the motor vehicle to the contest winner, two taxable transactions have occurred. The first taxable transaction is when the contest sponsor purchases the motor vehicle; the sponsor owes motor vehicle tax on the amount paid to the seller. The second taxable transaction is the transfer of the motor vehicle from the contest sponsor to the contest winner; the contest winner then owes motor vehicle tax on that transaction. If the contest sponsor is not a licensed dealer, standard presumptive value (SPV) procedures may apply.

Exceptions: The $10 gift tax applies when the contest sponsor or contest winner is a nonprofit service organization (or if both are nonprofit service organizations) qualifying under Section 501(c)(3), of the Internal Revenue Code (IRC). Remember, although the $10 gift tax applies to the transfer, the motor vehicle tax is due when a Section 501(c)(3), IRC nonprofit service organization purchases a vehicle used in a contest.

Seller-to-Winner Transfer

Although it may appear that only one taxable transaction has occurred, two taxable transactions occur when a contest sponsor buys a motor vehicle and the seller assigns the title directly to the contest winner, bypassing the contest sponsor. Even though the title is not first transferred to the contest sponsor, this purchase transaction is still taxable, as well as the recorded transfer of the motor vehicle to the contest winner.

The rules for determining tax responsibilities are the same in this situation as those in the Seller-to-Contest Sponsor-to-Winner Transfer section on this page.

Dealer Contest Sponsor-to-Winner Transfer

When a licensed dealer is a contest sponsor and transfers a motor vehicle directly to a contest winner, the winner owes motor vehicle tax based on the dealer’s book value of the motor vehicle. The dealer owes no motor vehicle tax on their acquisition of the vehicle.

Motor Vehicle Won in Another State

A Texas resident who wins a motor vehicle in another state and brings that motor vehicle into Texas will owe motor vehicle use tax. SPV procedures may apply. If the contest sponsor is an out-of-state manufacturer or dealer, tax is assessed on the contest sponsor’s book value.

96-254
(09/2021)