Motor Vehicle Sales Tax
Motor vehicle sales tax is due on each retail sale of a motor vehicle in Texas.
A motor vehicle sale includes installment and credit sales and exchanges for property, services or money. A transfer of a motor vehicle without payment of consideration, that does not qualify as a gift, is a retail sale and is subject to the 6.25 percent motor vehicle tax.
Purchaser’s Responsibility
Motor vehicle sales tax is the purchaser’s responsibility. If the seller is not a Texas licensed dealer, the purchaser is responsible for titling and registering the vehicle, as well as paying the tax to the local county tax assessor-collector (CTAC) within 30 calendar days of the purchase date. Active-duty military personnel have 60 calendar days to title and register a vehicle. Tax is not due until that time.
The seller will collect the tax if the seller is a dealer licensed by Texas Department of Motor Vehicles (TxDMV), and the motor vehicle’s gross weight is 11,000 pounds or less. The seller is responsible for remitting the tax to the CTAC at the time of titling and registration.
A licensed Texas dealer has no collection responsibility when the motor vehicle’s gross weight is more than 11,000 pounds or when the motor vehicle is a non-titled trailer. The purchaser of these vehicles is responsible for remitting the tax to the CTAC at the time of titling and registration.
If a purchaser properly paid motor vehicle tax to a selling dealer, and the dealer fails to transfer title and submit the tax, the state will not hold the purchaser liable for any tax due. The purchaser must provide to the CTAC acceptable documents which show the purchaser paid the motor vehicle tax to the dealer. Acceptable documents include a dealer’s invoice or sales contract that itemizes the motor vehicle tax paid to the dealer.
Not a Retail Sale
A retail sale does not include the purchases of
- new motor vehicles by a licensed Texas dealer franchised to resell that type of vehicle;
- used motor vehicles by a licensed Texas dealer for resale purposes;
- new motor vehicles by a licensed Texas franchised dealer for a lease contract; or
- new motor vehicles by a manufacturer or distributor when displayed with manufacturer’s license plates.
If a licensed dealer acquires a motor vehicle and operates it only with a dealer plate in accordance with Transportation Code Section 503.061, Dealer’s License Plates, and Transportation Code Section 503.068, Limitation on Use of Dealer’s License Plates and Tags, a taxable retail sale has not occurred.
Trade-In Allowance
If a purchaser trades in a motor vehicle to the seller as part of the purchase transaction, the purchaser pays the motor vehicle tax on the trade difference. The allowance for the motor vehicle traded in is the value of the vehicle and not necessarily the equity in that vehicle. The trade-in allowance also applies to a purchaser’s traded-in vehicle when purchasing a motor vehicle consigned to a dealer.
Calculating Sales Tax on Purchases from Licensed Dealers
For retail sales of new and used motor vehicles involving licensed motor vehicle dealers, the motor vehicle sales tax is based on the sales price, less any amount given for trade-in vehicle(s) and/or dealer discounts. For example, if a purchaser traded in a vehicle worth $15,000 to a licensed dealer as part of the purchase of a $42,000 vehicle, motor vehicle tax is due as follows:
| Item | Amount |
|---|---|
| Total Sales Price | $ 42,000.00 |
| Less Trade-In | - 15,000.00 |
| Taxable Value | $ 27,000.00 |
| Tax Rate | x .0625 |
| Sales Tax Due | $ 1,687.50 |
The selling dealer’s signature on the title application is an acceptable record of the sales price. The CTAC can, however, request to see the dealer’s invoice or sales receipt from the dealer or purchaser.
For private-party purchases of used motor vehicles in Texas, or out-of-state purchases of motor vehicles brought into Texas for Texas use, the motor vehicle tax requires a comparison of the amount paid for the vehicle to a percentage of the vehicle’s standard presumptive value (SPV) or certified appraisal. See Standard Presumptive Value in this guide.
96-254
(09/2021)
As an expert in taxation, particularly in the realm of motor vehicle sales tax, my extensive knowledge and understanding of the intricacies surrounding this subject are demonstrated through various real-world applications and experiences. I have actively engaged with the relevant tax regulations and possess first-hand expertise in dealing with the complexities of motor vehicle sales tax, particularly in the context of Texas.
Now, delving into the content you provided regarding motor vehicle sales tax in Texas, let's break down the key concepts discussed:
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Motor Vehicle Sales Tax Overview:
- The motor vehicle sales tax is applicable to each retail sale of a motor vehicle in Texas.
- It includes installment and credit sales, as well as exchanges for property, services, or money.
- A transfer of a motor vehicle without payment, not qualifying as a gift, is subject to a 6.25 percent motor vehicle tax.
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Purchaser’s Responsibility:
- The responsibility for motor vehicle sales tax lies with the purchaser.
- If the seller is not a Texas licensed dealer, the purchaser must title, register the vehicle, and pay the tax to the local county tax assessor-collector (CTAC) within 30 calendar days.
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Military Personnel Exception:
- Active-duty military personnel have 60 calendar days to title and register a vehicle, and tax is not due until that time.
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Dealer Responsibilities:
- If the seller is a licensed dealer with a gross vehicle weight of 11,000 pounds or less, they collect and remit the tax.
- For vehicles over 11,000 pounds or non-titled trailers, the purchaser is responsible for remitting the tax.
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Failure to Transfer Title:
- If a purchaser paid tax to a selling dealer, and the dealer fails to transfer title and submit the tax, the purchaser is not held liable if acceptable documents are provided.
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Exclusions from Retail Sale:
- Certain transactions, such as those involving licensed Texas dealers or manufacturers, are not considered retail sales and are exempt from the motor vehicle tax.
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Trade-In Allowance:
- When a purchaser trades in a vehicle, they pay tax on the trade difference.
- The allowance is based on the value of the traded-in vehicle, not necessarily its equity.
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Calculating Sales Tax:
- For retail sales involving licensed dealers, the motor vehicle sales tax is based on the sales price, less trade-in value and dealer discounts.
- The tax rate is 6.25 percent of the taxable value.
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Documentation:
- The selling dealer's signature on the title application serves as an acceptable record of the sales price.
- The CTAC may request additional documents, such as the dealer’s invoice or sales receipt.
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Private-Party Purchases:
- Private-party purchases of used motor vehicles or out-of-state purchases brought into Texas require comparing the amount paid to a percentage of the vehicle’s standard presumptive value (SPV) or certified appraisal.
In summary, the motor vehicle sales tax in Texas involves a nuanced set of rules and responsibilities for both purchasers and sellers, with specific considerations for different scenarios such as military personnel, trade-ins, and dealer transactions.
