Texas Administrative Code › Title 34 - PUBLIC FINANCE › Part 1 - COMPTROLLER OF PUBLIC ACCOUNTS › Chapter 3 - TAX ADMINISTRATION › Subchapter F - MOTOR VEHICLE SALES TAX › Section 3.70 - Motor Vehicle Leases and Sales

Current through Reg. 49, No. 28; July 12, 2024
(a) Except for
				  purchases by franchised dealers described in this subsection, motor vehicles
				  that are purchased by a lessor to be leased are subject to motor vehicle sales
				  or use tax based upon the purchase price of the motor vehicle to the lessor.
				  Such tax is due from the lessor at the time of purchase. Subsequent lease
				  payments are not subject to the tax. The purchase of a new motor vehicle by a
				  franchised dealer who removes the motor vehicle from inventory for the purpose
				  of leasing the vehicle to another person, and who immediately after executing
				  the lease contract transfers title of the vehicle and assigns the lease
				  contract to a lessor, is not a retail purchase and is not subject to tax. If
				  the title is not transferred and the lease assigned within seven calendar days,
				  the dealer's purchase and use will be presumed to be a retail purchase and
				  taxable. The presumption may be overcome by showing evidence of intent. The
				  lessor to whom the dealer transfers title and assigns the lease contract is
				  liable for motor vehicle sales and use tax.
(b) If, at the termination of a lease, a
				  motor vehicle is sold by the lessor to the lessee and the lease contained an
				  "option to purchase" at less than fair market value or a "must purchase" clause
				  or if the vehicle is sold to the lessee at less than fair market value, the
				  amount subject to the motor vehicle sales and use tax will be the total
				  consideration paid the lessor by the lessee under the agreement, since the
				  agreement will be considered a sale rather than a lease agreement. "Total
				  consideration" means the amount paid or to be paid for a motor vehicle and all
				  accessories attached to it at the time of the sale; total consideration does
				  not include separately stated finance charges, carrying charges, service
				  charges, or interest.
(c) If the
				  transaction is considered to be a sale and not a lease, as described in
				  subsection (b) of this section, no additional motor vehicle sales tax is due at
				  the time the initial lessee/purchaser takes title to the vehicle, provided the
				  correct amount of tax was previously paid on the total consideration. If the
				  correct amount of tax was not paid on the total consideration, the
				  lessee/purchaser must pay the difference when the vehicle is titled in his
				  name.
(d) If the motor vehicle is
				  sold to a person not privy to the lease or if it is sold to the lessee at fair
				  market value, the amount subject to the motor vehicle sales and use tax is the
				  agreed-upon sales price. (See Attorney General Opinion WW-711
				  (1959).)
(e) Motor vehicle use tax
				  is due on a motor vehicle purchased outside of the State of Texas and leased
				  and brought into the state for use upon the highway. The lessee of the motor
				  vehicle is liable for such tax. If the lessee is a resident of this state or is
				  domiciled or doing business in this state the tax is based upon the
				  consideration paid outside the state by the purchaser of the motor vehicle,
				  regardless of any use or depreciation of the vehicle subsequent to its purchase
				  and prior to its use in this state. If the lessee is a new resident of this
				  state as described in §
										3.71
				  of this title (relating to Definition of "Resident" and "New Resident"), the
				  new resident may pay a new resident use tax of $90 imposed by Tax Code, §
										152.023,
				  in lieu of the 6.25% use tax.
(f) A
				  lessee may take credit for legally imposed sales, use, or similar tax paid to
				  another state by the lessee or the lessor on the leased motor vehicle before
				  that vehicle becomes subject to the Texas motor vehicle use tax imposed by Tax
				  Code, §
										152.022.
				  If the lessee purchases the leased vehicle, credit will be allowed for Texas
				  motor vehicle use tax imposed by Tax Code, §
										152.022,
				  and paid by the lessee when the vehicle was brought into this state.
(g) An owner of a motor vehicle that was
				  purchased to be leased for interstate use, tax exempt under Tax Code, §
										152.089, is
				  liable for motor vehicle sales/use tax if the motor vehicle is no longer held
				  for interstate use or held exclusively for resale. The tax is imposed at a rate
				  prescribed by Tax Code, §
										152.021(b),
				  and based on the owner's book value at the time the vehicle was removed from
				  interstate use.