Motor Vehicle Tax Guidebook 2011 - Texas Comptroller of Public ...

winning ticket. Nor does the contest sponsor 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 seller assigns the title to the sponsor who in turn
transfers the motor vehicle to the contest winner, two
taxable events have occurred. The contest sponsor owes
motor vehicle tax on the amount paid to the seller
and the contest winner owes motor vehicle tax on the
transfer of the motor vehicle from the contest sponsor
to the contest winner. If the contest sponsor is not a
licensed dealer, SPV procedures apply.
Exceptions: The $10 gift tax applies when the contest
sponsor, contest winner or both are a nonprofit service
organization qualifying under Section 501(c)(3), IRC.
Remember, that although the $10 gift tax applies
on the transfer, the motor vehicle tax is due when a
Section 501(c)(3), IRC nonprofit service organization
purchases a vehicle to be used in a contest.
Seller-to-Winner Transfer
Although it may appear only one taxable transaction
has occurred, two taxable transactions have occurred
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
was 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 responsibility are the
same in this situation as those in the previous section,
“Seller-to-Contest Sponsor-to-Winner Transfer.”
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 based on SPV. If the contest
sponsor is a licensed dealer outside of Texas, tax is
assessed on the dealer’s book value.
Co-Owners and Co-Signers
• Transfer to Co-Owner or Co-Maker
• Transfer to Co-Signer
Transfer to Co-Owner or Co-Maker
Transferring a title from one co-owner or co-maker
to another is not a taxable transfer. Co-owners or
co-makers have purchased a motor vehicle together.
Both parties own the motor vehicle and, if there is a
lien involved, both are jointly and severally liable for
repayment of the entire loan. Taking over the sole
responsibility of a lien does not make the transfer
taxable. Each owner has been jointly and severally
liable for the loan.
Documentation should indicate that a co-owner or
co-maker’s name is being removed from the loan.
If a new co-owner gives any consideration to the other
co-owner, then motor vehicle tax is due. SPV applies to
the private-party purchase.
Transfer to Co-Signer
Tax is due when a co-signer takes possession of the
motor vehicle. A co-signer who has agreed to guarantee
the repayment of a loan on a motor vehicle does not
become liable unless the borrower defaults. With the
default, the co-signer could take direct ownership rights
in the motor vehicle and owes motor vehicle tax on the
assumed liability.
SPV applies when the co-signer takes possession of
the motor vehicle, since the sale is a private-party
transaction with no licensed dealer involved in the sale.
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Motor Vehicle Tax Guidebook