~July 29,1971

Honorable Robert S. Calvert OpinionNo. M-913 Comptrollerof PublicAccounts State of Texas Re: Questions concerning Austin, Texas Article 6.01, et seq., Title 122A,V.C.S., and .amendmentsthereto contained in H.B. 730, Acts 1971, 62nd Leg., Dear Mr. Calvert,: R.S.
~Youhave requested an oplnlon on the followingquestions concerning the MotorVehicle Retail Sales and Use Tax Act, as amended.1

"1

. A purchaserwho buys a motor vehicle for'"leasing" as that term is defined In Article 6.03(f) (addedby H.B. 730)must pay motor vehicle tax upon the purchaseprice of the vehicle at the time, of registration thereof. If such person thereafter "leases" thismotor 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 reimbursementdue to the fact that he has paidmotor vehicle tax upon the original purchaseprice?
"2. Does Article 6.04, as amended by H.B. 730,make applicable to motor vehicle tax reports the penalty and interestprovisions, the one per cent (1%)retailerreimbursementprovisions,directpay provision, and the prepayment discountprovisions contained in Article 20.05, Limited Sales, Excise and Use Tax Act?

1 All articles herein referred to are comprehendedwithin Chapter 6, Title 122A, Taxation-General,Vernon's Civil Statutes, unless otherwise stated.

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"3. Inmany 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 collectedat 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 operationat 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 underArticle 6.01(l), as amended by H.B. 730, or otherprovisions 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 MotorVehicle Retail Sales andUse Tax Act did not tax rentals ofmotor vehicles. The above mentioned amendments impose a tax under Chapter 6 on the receipts from such rentals and on the total considerationpaid or to be paid on a lease of a motor vehicle. Pertinentprovisions of the MotorVehicle Act as related to this opinionare hereafterquoted:
Relevant sections'ofArticle 6.01 read as follows: "(1) There Is hereby levied a tax upon every retail sale of everymotor vehicle sold in this State, such tax to be equal to four per cent (4%) of the total considerationpaid or to be paid for saidmotor 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 suchmotor 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 thisArticle and the purchaser-lessormust pay the tax on total considerationpaid or to be paid for saidmotor vehicle. The tax on rental receipts shall be collectedby the owner from the renter who has exclusive use of the

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motor vehicle for a period of time and has the right ,todirect themanner of use of the vehicle, whether exercised or not, for that period.

...' II

... “(6) In the renting ofmotor vehicles,

.... the purchaser shall furnish the CountyAssessor and Collector of Taxes with a resale certificate in accordance with the provisions ofArticle 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 rentingmust be purchased by an owner for use In a businesswhere the renting of motor vehicles Is an establishedbusiness. Every motor vehicle used In a businesswhich either rents or leasesmotor vehicles to others, as those terms are defined insthis Article; and for consideration, must have paid the tax on total considerationat the time of purchase of thosemotor vehicles, intended for leasing ormust be collectingand paying the gross rentals receipts tax on renting thosemotor vehicles. Any motor vehicle leased in this State and owned by the originalmanufacturermust be registered in this State and taxed in accordance with the provisions of this Article. If a person engages in both renting and leasing ofmotor 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 PublicAccounts of such change on a form to be supplied by the Comptroller,and the owner shall then pay the tax on suchmotor vehicle based on the owner'sbook 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 differentmeaning clearly appears from the context. -4448-HonorableRobert S. Calvert,page 4 (M-913)

11

. . . "(B) Retail Sale. The term 'retailsale' as herein used shall include all sales ofmotor vehicles except those whereby thepurchaser acquires a motor vehicle for the exclusivepurpose of resale and not for use and shall not include those operatedunder and in accordancewith the terms of Article 6686, Revised Civil Statutes of Texas, 1925, as amended. The term 'retailsale' also shall includerentals the gross receipts from which are subject to the tax imposedby this Chapter, and purchasesused or to be held for in such rentals shall be considered purchases for resale." 11

... "(D)(3) Any person purchasingmotor vehicles for resale at retail who has obtaineda certificateof title to a motor vehicle which he uses forpersonal or business purposesmay deduct the fairmarket value of such vehicle from the 'totalconsideration' when such person purchases anothermotor vehicle upon which he obtains a certificate of title as a substitutevehicle for personal or business use and the originalvehicle is offered for sale at retail." "(E) Rental or Renting. Those terms as herein used shallmean the agreeingby the owner to give exclusive use of a motor vehicle to another for a considerationand for a period of time not to exceed 31 days under any one agreement. "(F) Lease or Leasing. Those terms as herein used shallmean the agreeing by the other to give exclusive use of,amotor vehicle to another for a considerationand for a period of time exceeding 31 days under such agreement." "Article6.04. Collectionof Taxes. "The taxes on total considerationpaid or to be paid levied In this Chapter shall be collectedby the Assessor and Collector of Taxes of the county in which any suchmotor vehicle Is first registered
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or first transferredafter such a sale; the Tax Collector shall refuse to accept for registration or for transfer ,anymotor 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 PublicAccounts in the samemanner 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 sellerswith the State Comptroller of PublicAccounts and obtain from him a Motor Vehicle Retail Seller's Permit in the samemanner as required under the Limited Sales, Excise and Use Tax laws of this State, Article 20.031 of this title.

...Thetax shall .bepaid at the time application is made for registration of saidmotor vehlole, and the Tax Collector shall refuse to issue the registration license until the tax Is paid or he is furnishedwith a resale certificate in accordancewith 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 considerationpaid or to be paid for suchmotor vehicle to four per cent (4%). In case of a motor vehiclepurchased 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 considereda 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 oneposes a question with regard to the reverse factual situation, that is, whether any credit

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or reimbursementnay be allowedwhen a person leases a motor vehicle and then later desires to rent the same vehicle, havingpaid themotor vehicle tax upon the originalpurchase price. The law In question is silent as to any credit or reimbursementthatmay be granted or Is due to an owner in a situationwhere there is a lease and then a rental of the samemotor 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 taxmus authorizedby Article 6.01(8). If he selects the leaseunit use, hemust pay the tax as.provided In Chap- without a change. Therefore, it is the opinion of this office that the question of any relief thatmay be given to the owner in such instancesby 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 thatnay reasonably be interpreted to grant such relief, that the Legislature did not authorize thegiving of such credit or reimbursement. Therefore your Question Number 1 is answered in the negative.
Your Question Number 2 concerns the applicabilityof the penalty and interestprovisions, the one per cent retailer reimbursementprovisions,direct pay provisions and the prepayment discountprovisions ofArticle 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 paymentsrequired under the MotorVehicle 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 samemanner 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 MotorVehicle Sales andUse Taxes. Thereforeyour QuestionNumber 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 answersyour Question Number 3 in the affirmative.

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Article 6.03(D)(l) defines "total consideration"
"the amount paid or to be paid for saidmotor vehicle

... at the time of sale

...' as:

Under Article 6.03(B) a "Retail Sale" Is defined to include rentals "thegross receipts from which are subject to the tax imposedby this Chapter

...' Therefore, since a rental is a retail sale, the definition of total considerationfor 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 taxableunder 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 amountspaid or to be paid for the rental at the time 'ofrental, unless otherwiseexcluded. Article 6.03(D) (2) lists items not includedwithin the meaning of total consideration. Among these items and the only one seen to be possibly applicableherein Is:

"(f) charges for transportationofmotor vehicles after sale."
There are no facts to indicate that a "drop-ch-rPe'is in effect a transportationchargewithin Subsectior (f). Article 10,Vernon's Civil Statutes, provides that the provisions of statutes shall be liberally construedwith a view to effect their objects. Calvertv. RritlshAmerican 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 imposedby 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 underArticle 6.01(l) as part of the tctal chargepaid for the rental.
SUMMARY
In the absence of any language in the statute that might reasonablybe interpreted to grant such relief, it is assumed that the Legislaturedid not authorize the giving of credit or reimbursement formotor vehicle tax paid upon theoriginalpurchaseprice,

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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 andpaid, 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 ofpayment of the rental charges.
A drop-charge or similar charge is subject to tax under Chapter6, Title 122A,V.C.S., as part of the total charge paid for the rental of the motor vehicle. ,7

Preparedby R. L. Lattimore and Harriet D. Burke AssistantAttorneys General
APPROVED: OPINION COMMITTEE
Kerns Taylor, Chairman W. E. Allen, Co-Chairman Marietta Payne Harold Kennedy James Quick Jim Swearingen

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MEADE F. GRIFFIN Staff Legal Assistant

ALFRED WALKER ExecutiveAssistant
NOLA WHITE First Assistant (M-913)

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