taxes

Motor Vehicle Tax Guide

Even Trade Transfer Tax

Texas law imposes a $5 even trade transfer tax on each motor vehicle acquired in an even trade. Even trades of motor vehicles are excluded from standard presumptive value (SPV) procedures.

An even trade is the exchange of a motor vehicle for another motor vehicle that involves no consideration other than the exchange of the motor vehicles. The parties to the exchange can trade more than one motor vehicle for one or more other motor vehicles as long as no other consideration is involved.

A person cannot use a motor vehicle that is on an "open title," meaning that it has been reassigned but not titled in that person’s name, in an even trade transfer.

An even trade of two motor vehicles can occur even when one motor vehicle has a Texas title and the other motor vehicle has an out-of-state title and is owned by an out-of-state resident. In this situation, the out-of-state resident who accepted an even trade with a person who resides in Texas does not have to obtain a Texas title before making the trade. The county tax assessor-collector (CTAC) should collect the $5 even trade tax from the Texas resident when the Texas resident obtains a title on the motor vehicle. The Texas resident would have to show proof of an even trade.

Form 130-U

The parties must document each transaction on a separate Form 130-U, Application for Texas Title and/or Registration (PDF). The parties are not required to present these forms to the CTAC at the same time.

Dealer Exception

A dealer is not required to file Form 130-U (PDF) or to pay tax on a motor vehicle received in an even trade when the dealer holds that motor vehicle exclusively for resale and not for the dealer’s own use.

Examples of Transactions That Are Not Even Trades

Example 1 – David swapped motor vehicles with Laurie, but also gave her $2,000. The motor vehicle David traded to Laurie is worth $8,000, while the motor vehicle Laurie traded to David is worth $10,000. Is this an even trade or do SPV procedures apply?

Answer – An even trade involves only the exchange of motor vehicles. In this example, David gave Laurie $2,000 as part of the transaction, so this is not an even trade. SPV procedures may apply. David receives a trade-in credit of $8,000.

Example 2 – How is the tax calculated when two individuals trade motor vehicles and there is other consideration involved? For example, Don has a $5,000 vehicle with a $1,500 lien and Michelle has a vehicle worth $3,000. They trade motor vehicles. Michelle assumes the $1,500 lien on the motor vehicle from Don.

Answer – The lien assumption is consideration; therefore, this transaction is not an even trade. Don has a "trade-down" and owes no motor vehicle tax. Michelle, however, is trading up and has a trade-in; therefore, she owes tax on the greater of $2,000 (the value of the vehicle received from Don minus the value of the trade-in) or SPV. SPV procedures may apply.

96-254
(09/2021)