taxes

Motor Vehicle Tax Guide

Business Entities – Corporations and Limited Liability Companies (LLCs)

For purposes of motor vehicle tax, Limited Liability Companies (LLCs) are treated the same as corporations. When reading this text, the term "corporation" also includes an LLC.

A corporation may own property, engage in business and be held liable for its debts as a legal entity separate and apart from its stockholders. Corporate stock may be bought and sold without affecting the tax status of a motor vehicle titled in the corporate name. When a corporation acquires or sells a motor vehicle, however, motor vehicle tax is due.

Transfers Between Corporations and Stockholders

When an individual stockholder in a corporation transfers a motor vehicle from his or her name to the corporate name or the corporation transfers a motor vehicle to the stockholder, the following guidelines apply:

• If the corporation or stockholder pays consideration for the motor vehicle, motor vehicle tax is due. Standard presumptive value (SPV) procedures may apply.
• If the corporation or stockholder pays no consideration for the motor vehicle, there is a transfer without payment of consideration. Tax is due on the vehicle and SPV procedures may apply. The transfer cannot qualify as a gift.

A motor vehicle transfer between a shareholder and a subchapter S corporation or between a member and a single member LLC is taxable.

Transfers between an individual and an unincorporated company owned solely by that individual are treated differently. See Business Entities – Sole Owners in this guide.

Exception: See Incorporation of a Partnership or a Sole Ownership on this page.

Transfers Between Parent and Subsidiary Corporations

When a parent corporation transfers a motor vehicle to a subsidiary corporation or a subsidiary corporation transfers a motor vehicle to its parent corporation, the following guidelines apply:

• If the subsidiary or parent corporation pays consideration for the motor vehicle, motor vehicle tax is due. SPV procedures may apply.
• If the subsidiary or parent corporation paid no consideration for the motor vehicle, a sale has occurred and SPV procedures may apply. The transfer cannot qualify as a gift.

Exception: See Transfer from Existing Corporation to Newly Formed Subsidiary Corporation on this page.

Transfers from Subsidiary to Subsidiary

When a subsidiary of a corporation transfers a motor vehicle to another subsidiary of the corporation, the following guidelines apply:

• If the subsidiary pays consideration for the motor vehicle, motor vehicle tax is due. SPV procedures may apply.
• If the subsidiary pays no consideration for the motor vehicle, a taxable transfer has occurred, and motor vehicle tax is due. SPV procedures may apply. The transfer cannot qualify as a gift.

Incorporation of a Partnership or a Sole Ownership

When a sole owner or partnership incorporates and transfers a motor vehicle from the individual or partnership to the corporation in connection with that incorporation, the following guidelines apply:

• If a newly formed corporation pays no consideration (other than stock) to the individual or partnership transferring assets to it, no tax is due. The owners of the business simply have adopted a different form of doing business. The transfer of a motor vehicle to the newly formed corporation is not a change in ownership and is not a taxable sale.
• If the newly formed corporation pays consideration to the individual or partnership, a private-party sale has occurred, and motor vehicle tax is due since the corporation purchased the vehicle from the individual or partnership. SPV procedures may apply.
• In the case of a partnership converting to a corporation, no tax is due because the ownership is transferred by operation of law. No sale has occurred.

Transfer from Existing Corporation to Newly Formed Subsidiary Corporation

When an existing corporation transfers a motor vehicle to a subsidiary corporation upon the initial incorporation of the subsidiary, the following guidelines apply:

• If the subsidiary pays consideration to the parent corporation, motor vehicle tax is due. SPV procedures may apply.
• If the subsidiary pays no consideration (other than stock) to the parent corporation, no motor vehicle tax is due.

Transfer Upon Dissolution/Termination

When a corporation transfers a motor vehicle to a stockholder upon dissolution/termination of the corporation, the following guidelines apply:

• If a corporation transfers a motor vehicle for no consideration as a part of the stockholder’s share of the dissolving/terminating corporation’s assets, no tax is due because the ownership is transferred by operation of law. No sale has occurred.
• If the stockholder gives the dissolving/terminating corporation any consideration, motor vehicle tax is due. SPV procedures may apply.

Transfer Due to a Merger or Conversion

When two or more corporations merge, no tax is due on motor vehicles transferred to the surviving corporation. Also, when a corporation is divided into two or more new corporations, or into a surviving corporation and one or more new corporations, no tax is due on the transfer of motor vehicles. Similarly, when a corporation converts to a different entity type, no tax is due on motor vehicles transferred to the resulting entity following the conversion. In a merger or conversion, which is an operation of law, transfer of liens with motor vehicles does not constitute "consideration" since the merger or conversion is not a sale by statute; therefore, no taxable event has occurred. Evidence of merger or conversion is a Certificate of Merger or Conversion issued by the Texas Secretary of State (SOS).

Corporate Name Change

If a corporation changes its registered name, it may change its name on a certificate of title without owing motor vehicle tax. Evidence of a corporate name change may include a Certificate of Amendment filed with the Texas SOS.

Lien Assumption

With the exception of a merger or conversion, any motor vehicle transfer involving the assumption of a lien is subject to motor vehicle tax. SPV procedures may apply.

Sale of Corporate Assets

Tax Code Section 151.304, Occasional Sale provides for the sale of the entire operating assets of a business to be exempt from limited sales and use tax as an occasional sale. Motor vehicle tax law does not provide for an occasional sale exemption. The purchaser owes motor vehicle sales tax on the transfer of each motor vehicle. SPV procedures may apply.

Corporation as a New Resident

When a corporation enters Texas to establish residency and begins doing business for the first time, the corporation is considered a new resident. The following guidelines apply:

• If the corporation has registered the motor vehicle in the corporate name in another state or country prior to the corporation entering Texas as a new resident and bringing the motor vehicle into Texas, the $90 new resident tax applies.
• If the corporation has not registered the motor vehicle in the corporate name in another state or country prior to the corporation entering Texas as a new resident and bringing the motor vehicle into Texas, motor vehicle use tax is due. SPV procedures apply if the purchase of the motor vehicle was a private-party transaction. Credit may be applied for any legally imposed sales or use tax paid to another state, including any political subdivision of that state, Puerto Rico, or U.S. possession or territory. Credit may not be applied for sales or use tax paid to another country.
• If, after becoming a Texas resident, the corporation brings in a motor vehicle from outside of Texas for public highway use in Texas, motor vehicle use tax is due and SPV procedures may apply. The corporation may take a credit for any legally imposed sales or use tax paid to another state, including any political subdivision of that state, Puerto Rico, or U.S. possession or territory.

A corporation that is presently doing business in Texas or is domiciled in Texas is not a new resident for Texas motor vehicle tax purposes.

96-254
(09/2021)