~July 29, 1971 

Honorable Robert S. Calvert Opinion No. M-913 

Comptroller of Public Accounts 

State of Texas Re: Questions concerning 

Austin, Texas Article 6.01, et seq., 

Title 122A, V.C.S., 

and .amendments thereto 

contained in H.B. 730, 

Acts 1971, 62nd Leg., 

Dear Mr. Calvert,: R.S. 

~You have requested an oplnlon on the following questions 

concerning the Motor Vehicle Retail Sales and Use Tax Act, 

as amended.1 

"1 . A purchaser who buys a motor vehicle for' "leasing" as that term is defined In Article 6.03(f) 

(added by H.B. 730) must pay motor vehicle tax 

upon the purchase price of the vehicle at the time, 

of registration thereof. If such person thereafter "leases" this motor vehicle to another person 

for two (2) months, then.elects to "rent" (as that 

term is defined in Article 6.03(E), added by H.B. 

730) the same vehicle to others for a series of 

dally or weekly rentals is the owner entitled to 

any credit or reimbursement due to the fact that 

he has paid motor vehicle tax upon the original 

purchase price? 

"2. Does Article 6.04, as amended by H.B. 730, make 

applicable to motor vehicle tax reports the penalty 

and interest provisions, the one per cent (1%) retailer reimbursement provisions, direct pay provision, 

and the prepayment discount provisions contained in 

Article 20.05, Limited Sales, Excise and Use Tax Act? 

1 All articles herein referred to are comprehended within 

Chapter 6, Title 122A, Taxation-General, Vernon's Civil Statutes, 

unless otherwise stated. 

-4446- 
Honorable Robert S. Calvert, page 2 (M-913) 

"3. In many Instances, a deposit is required of a 

person desiring to rent a car. When the car is 

returned, the deposit is credited toward the amount 

of rental due. Is this office correct In assuming 

that the motor rental tax is to be collected at 

the time the vehicle Is returned and at the tine 

any deposit is credited toward the rental due? 

"4. If a car rental agency has no office or 

operation at the place at which the car is to be 

left at the conclusion of a rental, it is common 

for such agency to levy a "drop-charge' to recompense 

i;~ ;;ycy for its expense involved In picking up 

. Is such drop-charge, or similar charge, 

subject to tax under Article 6.01(l), as amended 

by H.B. 730, or other provisions of that Chapter 

as so amended? 

The amendments to Chapter 6, Title 122A, TaxationGeneral, Vernon's Civil Statutes, became effective on July 

1, 1971. Prior to these amendments, the Motor Vehicle 

Retail Sales and Use Tax Act did not tax rentals of motor 

vehicles. The above mentioned amendments impose a tax 

under Chapter 6 on the receipts from such rentals and on 

the total consideration paid or to be paid on a lease of a 

motor vehicle. Pertinent provisions of the Motor Vehicle 

Act as related to this opinion are hereafter quoted: 

Relevant sections'of Article 6.01 read as follows: 

"(1) There Is hereby levied a tax upon every 

retail sale of every motor vehicle sold in this 

State, such tax to be equal to four per cent (4%) 

of the total consideration paid or to be paid for 

said motor vehicle. In the case of a motor vehicle 

purchased to be rented or held for rental, the tax 

is levied on the gross rental receipts of the renting 

of such motor vehicle at the same rataas that tax 

levied In Article 20.02 of this title. Provided, 

however, that where the period for rental is intended 

to be for more than 31 days, such rental is deemed 

to be a lease as defined In this Article and the 

purchaser-lessor must pay the tax on total consideration paid or to be paid for said motor vehicle. 

The tax on rental receipts shall be collected by the 

owner from the renter who has exclusive use of the 

-4447- 
Honorable Robert S. Calvert, page 3 (M-913) 

motor vehicle for a period of time and has the 

right ,to direct the manner of use of the vehicle, 

whether exercised or not, for that period. . ..' 

II 

. . . 

“(6) In the renting of motor vehicles, . . . . the 

purchaser shall furnish the County Assessor and 

Collector of Taxes with a resale certificate in 

accordance with the provisions of Article 6.04 of 

this Chapter, whereupon the Tax Collector shall 

accept the motor vehicle for registration or 

transfer. 

“(7) Motor vehicles purchased to be rented or to 

be held for renting must be purchased by an owner 

for use In a business where the renting of motor 

vehicles Is an established business. Every motor 

vehicle used In a business which either rents or 

leases motor vehicles to others, as those terms 

are defined ins this Article; and for consideration, 

must have paid the tax on total consideration at the 

time of purchase of those motor vehicles, intended 

for leasing or must be collecting and paying the 

gross rentals receipts tax on renting those motor 

vehicles. Any motor vehicle leased in this State 

and owned by the original manufacturer must be 

registered in this State and taxed in accordance 

with the provisions of this Article. If a person 

engages in both renting and leasing of motor vehicles, 

he shall keep complete and adequate records, 

segregating or enabling the segregration of both 

types of transactions. 

“(8) When the owner of a motor vehicle changes the 

status of the motor vehicle from a rental unit to 

a lease unit, the owner shall so inform the State 

Comptroller of Public Accounts of such change on a 

form to be supplied by the Comptroller, and the 

owner shall then pay the tax on such motor vehicle 

based on the owner's book value and at the rate 

provided in this Article." 

The relevant portions of Article 6.03 read as follows: 

"The following words shall have the following 

meaning unless a different meaning clearly appears 

from the context. 

-4448- 
Honorable Robert S. Calvert, page 4 (M-913) 

11 

. . . 

"(B) Retail Sale. The term 'retail sale' as herein 

used shall include all sales of motor vehicles except 

those whereby the purchaser acquires a motor vehicle 

for the exclusive purpose of resale and not for use 

and shall not include those operated under and in 

accordance with the terms of Article 6686, Revised 

Civil Statutes of Texas, 1925, as amended. The 

term 'retail sale' also shall include rentals the 

gross receipts from which are subject to the tax 

imposed by this Chapter, and purchases used or to 

be held for in such rentals shall be considered 

purchases for resale." 

11 . . . 

"(D)(3) Any person purchasing motor vehicles for 

resale at retail who has obtained a certificate of 

title to a motor vehicle which he uses for personal 

or business purposes may deduct the fair market 

value of such vehicle from the 'total consideration' 

when such person purchases another motor vehicle 

upon which he obtains a certificate of title as 

a substitute vehicle for personal or business use 

and the original vehicle is offered for sale at 

retail." 

"(E) Rental or Renting. Those terms as herein 

used shall mean the agreeing by the owner to give 

exclusive use of a motor vehicle to another for a 

consideration and for a period of time not to 

exceed 31 days under any one agreement. 

"(F) Lease or Leasing. Those terms as herein used 

shall mean the agreeing by the other to give 

exclusive use of,a motor vehicle to another for a 

consideration and for a period of time exceeding 

31 days under such agreement." 

"Article 6.04. Collection of Taxes. 

"The taxes on total consideration paid or to be paid 

levied In this Chapter shall be collected by the 

Assessor and Collector of Taxes of the county in 

which any such motor vehicle Is first registered 

-4449- 
Honorable Robert S. Calvert, page 5 (M-913) 

or first transferred after such a sale; the Tax 

Collector shall refuse to accept for registration or 

for transfer ,any motor vehicle until the tax 

thereon is paid or he is furnished with a resale 

c,ertlflcate in accordance with Article 6.01(6) of 

this Chapter. 

"The taxes on gross rental receiwts levied In this 

Chapter shall be reported and paid to the State 

Comptroller of Public Accounts in the same manner 

that the Limited Sales, Excise and Use Taxes of this 

State are reported and paid by retailers under 

Chapter 20, Article 20.05. Motor vehicle owners 

required to collect, report and pay the taxes on 

gross rental receipts Imposed by this Chapter 

shall register as sellers with the State Comptroller 

of Public Accounts and obtain from him a Motor 

Vehicle Retail Seller's Permit in the same manner 

as required under the Limited Sales, Excise and Use 

Tax laws of this State, Article 20.031 of this title. 

. ..The tax shall .be paid at the time application is 

made for registration of said motor vehlole, and 

the Tax Collector shall refuse to issue the registration 

license until the tax Is paid or he is furnished with 

a resale certificate in accordance with Article 6.01(6) 

of this Chapter." 

Under these amendments, the tax imposed on every retail 

sale of a motorvehicle in Texas was raised from three per 

cent (3%) of the total consideration paid or to be paid for 

such motor vehicle to four per cent (4%). In case of a motor 

vehicle purchased to be rented or hela for rental for 

periods not exceeding 31 days in any one agreement, the tax 

is levied on the gross rental receipts. When a motor vehicle 

is purchased for rental for more than 31 days, the rental 

Is considered a lease and not a rental. The tax due on the 

motor vehicle by the purchaser-lessor Is the total consideration 

paid or to be paid for it. 

If a motor vehicle owner changes the status of his motor 

vehicle from a rental unit to a lease unit, the act provides 

that the owner will be taxed on such vehicle according to its 

book value Instead of the receipts from the rental of such 

vehicle. Question number one poses a question with regard 

to the reverse factual situation, that is, whether any credit 

-4450- 
Honorable Robert S. Calvert, Page 6 (M-913) 

or reimbursement nay be allowed when a person leases a 

motor vehicle and then later desires to rent the same 

vehicle, having paid the motor vehicle tax upon the 

original purchase price. The law In question is silent 

as to any credit or reimbursement that may be granted 

or Is due to an owner in a situation where there is a 

lease and then a rental of the same motor vehicle. The 

owner has the option at the time of purchase to choose the 

rental unit use for his vehicle and be accorded the change 

in tax mus authorized by Article 6.01(8). If he selects 

the lease unit use, he must pay the tax as.provided In 

Chap- without a change. Therefore, it is the opinion 

of this office that the question of any relief that may 

be given to the owner in such instances by way of credit on 

or reimbursement from hls taxes paid was within the purview 

of the Legislature, and we must assume from the absence of 

any language in the statute that nay reasonably be interpreted 

to grant such relief, that the Legislature did not authorize 

the giving of such credit or reimbursement. Therefore your 

Question Number 1 is answered in the negative. 

Your Question Number 2 concerns the applicability of 

the penalty and interest provisions, the one per cent 

retailer reimbursement provisions, direct pay provisions 

and the prepayment discount provisions of Article 20.05 of 

the Limited Sales, Excise and Use Tax Act, Chapter 20, 

Title 122A, Taxation-General, Vernon's Civil Statutes, to 

the reports and payments required under the Motor Vehicle 

Retail Sales and Use Tax Act here under discussion. In 

view of the provisions of Article 6.04 requiring the taxes 

levied on gross rental receipts to be reported and paid in 

the same manner as the general sales and use taxes are so 

reported and paid, we deem such provisions of Article 20.05 

of the Limited Sales, Excise and Use Tax Act, which are 

designed to facilitate the collection of such taxes, to be 

equally applicable to the Motor Vehicle Sales and Use Taxes. 

Therefore your Question Number 2 is answered in the 

affirmative. 

We are of the opinion that the motor vehicle tax on 

rentals is due at the time of payment of the rental charges. 

This answers your Question Number 3 in the affirmative. 

-4451- 
Honorable Robert S. Calvert, page 7 (M-913) 

Article 6.03(D)(l) defines "total consideration" 

"the amount paid or to be paid for said motor 

vehicle . . . at the time of sale . ..' 

as: 

Under Article 6.03(B) a "Retail Sale" Is defined to include 

rentals "the gross receipts from which are subject to the 

tax imposed by this Chapter . ..' Therefore, since a rental 

is a retail sale, the definition of total consideration for 

a sale in Article 6.03(D)(l) now would cover a rental. In 

your Question Number 4, you ask whether a "drop-charge" as 

stated In that question Is taxable under Article 6.01(l). 

Apparently the charge is paid by the person renting the 

vehicle at the time that he rents it or at some time 

thereafter. 

Under Article 6.03(D)(l), the total rental consideration 

includes all amounts paid or to be paid for the rental at the 

time 'of rental, unless otherwise excluded. Article 6.03(D) 

(2) lists items not included within the meaning of total 

consideration. Among these items and the only one seen to 

be possibly applicable herein Is: 

"(f) charges for transportation of motor vehicles 

after sale." 

There are no facts to indicate that a "drop-ch-rPe' is 

in effect a transportation charge within Subsectior (f). Article 

10, Vernon's Civil Statutes, provides that the provisions of 

statutes shall be liberally construed with a view to effect 

their objects. Calvert v. Rritlsh American 011 Producing 

co.2 397 S.W.2d 839, (Tex.Sup., 1966) The purpose of H.B. 

730 as stated in the enacting clause is to raise revenue 

to support the government of Texas. It would appear that a 

"drop-charge" is just an amount imposed by the rental agency 

as part of the total charge for renting the vehicle. 

Therefore, the opinion of this office is that such charges 

are taxable under Article 6.01(l) as part of the tctal 

charge paid for the rental. 

SUMMARY 

In the absence of any language in the statute that 

might reasonably be interpreted to grant such relief, 

it is assumed that the Legislature did not authorize 

the giving of credit or reimbursement for motor 

vehicle tax paid upon theoriginal purchase price, 

-4452- 
Honorable Robert S. Calvert, page 8 (M-913) 

when the status of the vehicle is changed from a 

lease unit to a rental unit. Chapter 6, Title 122A, 

Taxation-General, V.C.S. 

Since Article 6.04, Title 122A, TaxatlonGeneral, V.C.S., requires the taxes levied on gross 

rental receipts to be reported and paid in the sane 

manner as the general sales and use taxes are so 

reported and paid, the provisions of Article 20.05, 

Limited Sales, Excise and Use Tax Act, which are 

designed to faoilitate the collection of such taxes, 

are deemed to be equally applicable to the Motor 

Vehicle Sales and Use Tax Act. 

The motor vehicle tax on rentals is due at the 

time of payment of the rental charges. 

A drop-charge or similar charge is subject to 

tax under Chapter 6, Title 122A, V.C.S., as part 

of the total charge paid for the rental of the 

motor vehicle. , 7 

Prepared by R. L. Lattimore 

and Harriet D. Burke 

Assistant Attorneys General 

APPROVED: 

OPINION COMMITTEE 

Kerns Taylor, Chairman 

W. E. Allen, Co-Chairman 

Marietta Payne 

Harold Kennedy 

James Quick 

Jim Swearingen 

-4453- 
Honorable Robert S. Calved, page 9 

MEADE F. GRIFFIN 

Staff Legal Assistant 

ALFRED WALKER 

Executive Assistant 

NOLA WHITE 

First Assistant 

(M-913) 

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