taxes

Motor Vehicle Tax Guide

Dealers

Texas-licensed motor vehicle dealers are required to collect motor vehicle tax on taxable sales, including cash sales. Dealers must remit motor vehicle tax to the county tax assessor-collector (CTAC) within 30 calendar days (60 calendar days for sales made to active duty military personnel). Dealers have no collection responsibility when the gross weight of the motor vehicle is more than 11,000 pounds or when the motor vehicle is a non-titled trailer.

Standard presumptive value (SPV) procedures do not apply when a licensed dealer is a party to the sale.

When documents show that a purchaser paid motor vehicle tax to a dealer, yet the dealer failed to transfer title and submit the motor vehicle tax as required, the purchaser will not be required to pay the motor vehicle tax again when the title is transferred. The purchaser must provide acceptable documentation that they paid the motor vehicle tax to the dealer. Acceptable documentation includes a dealer’s invoice or sales contract that itemizes the motor vehicle tax paid to the dealer.

The CTAC can contact the Comptroller’s office with information on dealers who appear to be violating their motor vehicle tax collection responsibilities.

The CTAC must notify the Comptroller’s office in writing of the dealer's failure to remit the tax. The notice must be emailed to Ta.Audit.Leads@cpa.texas.gov before the 31st day after the date the application for title is accepted. The notice must contain the name and address of the dealer and include any documentation of the tax payment provided to the CTAC from the motor vehicle title applicant.

Consignment sales of motor vehicles by licensed dealers are dealer sales for motor vehicle tax purposes. All dealer tax responsibilities addressed here apply to consignment sales; therefore, SPV procedures do not apply.

Motor Vehicles Acquired for Resale

Franchised Dealer

Texas-licensed dealers authorized to sell new motor vehicles may acquire a new motor vehicle with a Manufacturer's Certificate of Origin (MCO) for resale tax free, but only for the make of motor vehicle they are franchised to sell. If the franchised dealer purchases a new vehicle that the dealer is not franchised to sell, the dealer owes motor vehicle tax even if the motor vehicle is being held strictly for resale.

A Texas franchised dealer may acquire any brand of used motor vehicle for resale and will not owe motor vehicle tax on that acquisition if the motor vehicle is being held strictly for resale.

A franchised dealer may lease a motor vehicle from its inventory without incurring a motor vehicle tax liability, provided the dealer immediately transfers the motor vehicle and the lease to another lessor. Motor vehicle tax is collected by the franchised dealer from the lessor. Subsequent lease payments by the lessee are not subject to motor vehicle tax.

Non-Franchised Dealer

A non-franchised dealer (independent dealer) may acquire any brand of used motor vehicle for resale and not owe motor vehicle tax.

Motor vehicle tax is due on the purchase of a new motor vehicle when purchased by an independent motor vehicle dealer or a dealer franchised to sell a different make of motor vehicle, even if the dealer is holding the motor vehicle strictly for resale.

Private Parties

Non-licensed entities (private parties) — whether individuals, corporations or other entities — are not dealers, and owe motor vehicle tax on purchases of motor vehicles. Standard presumptive value procedures may apply.

Lienholders

A lending institution may require a dealer to obtain a Texas certificate of title to record a lien on a motor vehicle purchased tax free for resale. The dealer may “title only” and not register the motor vehicle without paying motor vehicle tax. The dealer must hold the motor vehicle exclusively for resale, not for business or personal use.

Dealer License Plates – Use of an Unregistered Motor Vehicle

Transportation Code Section 503.061, Dealer’s License Plates, authorizes a dealer to operate an unregistered motor vehicle with a metal Texas dealer plate. The dealer must pay an annual $25 motor vehicle use tax for each metal dealer plate (master plate and all supplemental plates) to the Texas Department of Motor Vehicles (TxDMV).

If a dealer makes any business or personal use of the motor vehicle, other than what TxDMV allows for the metal dealer plate, motor vehicle tax is due on the purchase price.

Dealers may title a motor vehicle tax free if it is held exclusively for resale purposes and will not incur a motor vehicle tax liability as long as the motor vehicle is not registered. When a dealer registers a motor vehicle, the registration creates a presumption of use of the motor vehicle by the dealer and the dealer owes motor vehicle tax.

Advertising Claims to Waive Taxes

Dealers may not advertise or otherwise tell customers or the general public that they will pay, refund or not charge motor vehicle tax due on a motor vehicle sale or rental. An offense for such advertising is a Class C misdemeanor.

96-254
(09/2021)