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

If the lessee is paying tax on lease payments, the lessee
may not have a receipt available from the other state.
Documentation may be in the form of a statement
from the lessor or a copy of the lease agreement
showing the tax collected per payment.
Title to Lease Customer at End of an
Operating Lease
Tax is due at the time of titling and registration, since
a new taxable sale (second transaction) has occurred,
whether the vehicle was leased in Texas or outside
Texas. The tax is based on the amount (option) paid at
the conclusion of the lease. SPV may apply. The lessee
receives no credit for tax reimbursed to the lessor on the
lessor’s initial purchase of the vehicle to be leased. This
is the most common situation. On occasion, however,
a lease may qualify as a conditional sale as described
below.
Conditional Sale (Lease/Purchase)
One taxable sale has occurred in a conditional sale
(lease/purchase) transaction. The lessor retains title
to the vehicle while payments are being made by the
lessee. To be a conditional sales agreement (lease/
purchase) it must meet one of the following conditions:
• the lessor transfers the motor vehicle to a lessee
under a “must purchase” clause;
• the lessor transfers the motor vehicle to a lessee
under an “option to purchase” clause at nominal
value; or
• the lessor transfers the motor vehicle to a lessee at
nominal value.
If the contract terms do not firmly establish at the
onset that the contract is a conditional sale (lease/
purchase), the lessor owes tax on the acquisition of the
vehicle. When the lessee later takes title under such a
conditional sale agreement, the tax due from the lessee
is recalculated based on the lessee’s total consideration
that includes the down payment, sum of payments
and balloon payment. SPV may apply. Only separately
stated interest may be excluded from the sales price to
determine the sales tax due. The lessee receives credit
for the tax paid up front at the time the motor vehicle
was initially titled in the lessor’s name if this person is
the initial lessee/purchaser.
Subsequent Lease of Lessor’s Unit (Re-Lease)
A re-lease of a motor vehicle on which Texas tax was
paid and the title owner does not change, is not a
taxable event, since no sale has occurred.
TRAC Lease
A Terminal Rental Adjustment Clause (TRAC) Lease
is a contract where there is a residual dollar amount the
lessee is obligated to pay, whether the lessee purchases
the vehicle or the vehicle is sold to a third party.
If the lessee takes title to the vehicle for an amount
other than a nominal amount, tax is due on the
amount paid by the lessee. A new sale has occurred.
SPV may apply.
If the vehicle is acquired for a nominal amount under
the TRAC agreement, see Conditional Sale (Lease/
Purchase) in this topic.
Lien Assumptions
• Existing Lien Assumption
• Unrelated Lien
• Refinancing
• Sale and Repurchase
Existing Lien Assumption
Motor vehicle tax is due from any person assuming an
existing lien on a motor vehicle. The taxable amount
is the amount required to release the lien, commonly
called “net payoff,” plus any other consideration paid
by the purchaser.
If the person assuming the lien pays an amount in
addition to the amount of the lien, tax is due on the
total amount.
Since the lien assumption is a sale, SPV applies to
a used vehicle in a private-party purchase via lien
assumption.
Unrelated Lien
The existing title owner may record or delete a lien
without motor vehicle tax being due, as long as the
lien is unrelated to the motor vehicle’s purchase. For
example, if a person takes out a loan for a vacation
and uses a motor vehicle as collateral for the loan, this
is not a taxable event. The county TAC may request
documentation.
Refinancing
Refinancing a motor vehicle is not a taxable event.
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Motor Vehicle Tax Guidebook