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

For a Motor Vehicle 25 Years Old or Older
• Use a seller-signed bill of sale.
• If a signed bill of sale is not available, then
require an appraisal from a dealer, insurance
adjuster or at the discretion of the county TAC,
someone who would have special knowledge of
the vehicle’s value. Such a person may include
an antique dealer or antique auction. The
Comptroller’s appraisal form Form 14-128
may be used, but is not required. In lieu of the
appraisal, a title applicant who is obtaining a
title through a bonded title process may use
two-thirds of the bond amount (bond is for
150 percent of vehicle value).
Trade-Ins
• Value Allowed
• Multiple Trades
• Split Trade-In Value
• Trade-Down
• Vehicle Sold to Lender at Conclusion of Balloon
Note
• Purchase of Vehicle Consigned to Dealer
Value Allowed
The purchaser may deduct from the selling price the
value of a motor vehicle traded by the purchaser to the
seller on the purchase of another motor vehicle. The
eligible trade-in must be taken as part of the purchase
transaction. The tax is computed on the remaining
selling price for the purchased vehicle. For example, Jim
purchases a $25,000 vehicle and trades in his $10,000
vehicle. Jim owes tax on the $15,000 difference.
The purchaser can take this deduction only by trading
in a motor vehicle. Any other property, such as a boat,
airplane, livestock, etc., that a seller takes in trade
cannot be deducted from the selling price for motor
vehicle tax purposes.
The value of the motor vehicle trade-in is not the
equity, but the value of the vehicle traded in.
Be aware that SPV applies in a private-party purchase
to determine the sales price to use for calculating the
motor vehicle tax, but does not apply to determining
the value of the trade-in vehicle.
Multiple Trades
A purchaser can trade in more than one motor vehicle
on the purchase of another motor vehicle.
The seller must describe the first trade-in in the trade-in
block of the Form 130-U, Line 20. Block 20(a) is for
noting additional trade-ins.
Split Trade-In Value
When a purchaser trades in a motor vehicle on the
purchase of two or more motor vehicles from the
same seller and the trade-in motor vehicle is greater in
value than any single price of a motor vehicle being
purchased, the trade-in value may be split among the
purchases to allow full credit for the trade-in.
The seller must show the trade-in description on each
Form 130-U and reference the forms to each other to
clarify the transaction. The seller must reference the tax
receipts in the same manner.
Trade-Down
There is no tax due when a purchaser trades in a motor
vehicle of greater value on a motor vehicle of lesser
value, commonly referred to as a trade-down.
For example, Sally purchases a $20,000 vehicle and
trades in to the seller her $30,000 vehicle. Sally owes no
motor vehicle sales tax on her trade-down of vehicles.
Vehicle Sold to Lender at Conclusion of
Balloon Note
Sometimes a borrower/purchaser will enter into a
finance agreement where at the conclusion of the
agreement there are three options available regarding
the ownership of the motor vehicle. (1) The borrower/
purchaser pays off the balloon note and the borrower/
purchaser retains the motor vehicle. (2) The borrower/
purchaser refinances the vehicle and retains the vehicle.
(3) The lender guarantees to purchase the vehicle from
the borrower/purchaser.
If a borrower/purchaser sells the motor vehicle to the
lender (the third option) at the conclusion of a finance
agreement, the borrower/purchaser cannot use that
motor vehicle as a trade-in deduction in the purchase
transaction of another motor vehicle. The borrower/
purchaser is not directly trading the old motor vehicle
for the purchase of a new motor vehicle to the new
Motor Vehicle Tax Guidebook
III-27