Motor Vehicle Tax Guide

Total Consideration

Texas law imposes motor vehicle sales and use tax on the total consideration paid, or to be paid, for a motor vehicle. Total consideration includes anything given as payment and includes the receipt of a boat, airplane, land, livestock, services, labor, cash or the forgiveness or assumption of a lien or debt.

The following items are part of total consideration (i.e., taxable) and are not deductions from the selling price:

cost of the motor vehicle
cost of material, labor, service, interest, loss or any other expense
all accessories or attachments that are affixed to the motor vehicle at the time of sale
cost of transportation of the motor vehicle prior to its sale or purchase
taxes imposed in the chain of distribution prior to the sale, such as the importer excise tax assessed by the United States

Deductions from Total Consideration

The following items are not part of total consideration (i.e., not taxable) and are deductions from the selling price:

separately stated manufacturer rebates
separately stated cash discounts or rebates allowed on a sale
sales price of a motor vehicle returned by a customer when the seller refunds the full sales price either in cash or credit (failure of sale)
amount charged for labor or services rendered in installing, remodeling or repairing the motor vehicle after the sale
separately stated amount charged for finance charges, carrying charges, service charges or interest from credit extended on the sale of a motor vehicle under a conditional sales contract or other contract providing for deferred payment of the purchase price
value of a motor vehicle taken in trade as all or part of the consideration for the other motor vehicle
separately stated charges for transportation of a motor vehicle after the sale
separately stated charges for an extended service contract (warranty) or maintenance agreement
fair market value deduction of a motor vehicle titled in Texas in the name of a dealer or a person who is in the business of renting or leasing motor vehicles
separately stated charges for roadside assistance programs, which are services performed after the sale, such as jump-starting a battery, unlocking a door, changing a flat tire or providing towing
separately stated federal retail sales tax (imposed on heavy trucks; often referred to as federal excise tax)
separately stated charge for preparing and processing documents related to the transfer of a motor vehicle, usually called a documentary fee
separately stated fees or charges prescribed by law in connection with the sale or inspection of the motor vehicle, and any additional fees charged by the deputy of a county tax assessor-collector (CTAC)
separately stated reimbursement charges for the dealer’s vehicle inventory tax
separately stated insurance, automobile club membership, or charge for debt cancellation agreement

Rebates

Both manufacturer’s and dealer’s rebates passed directly to customers reduce the total consideration when computing the taxable value of a motor vehicle.

When a manufacturer provides a rebate to a selling dealer and the dealer passes the identifiable rebate-or any portion of it to the customer, it should be considered a cash discount and deducted from the total consideration.

Proof of Total Consideration

When signed by both the selling dealer and the purchaser, Form 130-U, Application for Texas Title and/or Registration (PDF) is acceptable documentation for proof of total consideration paid for the motor vehicle purchased in Texas. If the CTAC has reason to question the truth of the information in a statement, or if any material fact fails to meet the guidelines promulgated by the Comptroller, the CTAC may require any party to the statement to furnish substantiation of information contained in the statement, including a copy of the dealer’s invoice or buyer’s orders.

For private-party transactions, the seller is not required to sign Form 130-U (PDF) provided the seller does not hold a general distinguishing number (GDN) under Transportation Code Chapter 503, and the seller has complied with Transportation Code Sections 501.028, Signatures, and 501.072, Odometer Disclosure Statement, as applicable.

Section 501.028 requires the owner of a motor vehicle write their name in ink in the space provided on the certificate of title upon receipt of the certificate.

Upon transfer of ownership, the seller must complete assignment of title by signing and printing the seller's name, printing the date of transfer, and printing the purchaser's name and address on the title.

Section 501.072 requires the transferor of a motor vehicle transferred in this state to provide to the transferee a disclosure of the vehicle's odometer reading at the time of the transfer in compliance with 49 U.S.C. Section 32705; except for a vehicle that is exempt from odometer disclosure requirements under 49 C.F.R. Part 580.

When Form 130-U (PDF) is presented, the transferee must record the odometer reading on the application.
Texas Department of Motor Vehicles (TxDMV) must provide for use consistent with 49 C.F.R. Part 580:
- a secure power of attorney form; and
- a secure reassignment form for licensed motor vehicle dealers.
"Transferee" and "transferor" mean the following (under 49 C.F.R. Section 580.3):
- Transferee means any person to whom ownership of a motor vehicle is transferred, by purchase, gift, or any means other than by the creation of a security interest, and any person who, as agent, signs an odometer disclosure statement for the transferee.
- Transferor means any person who transfers their ownership of a motor vehicle by sale, gift, or any means other than by the creation of a security interest, and any person who, as agent, signs an odometer disclosure statement for the transferor.

Liens

When a person assumes a lien on a motor vehicle, and they pay an amount to the seller as equity, the sum of both amounts is the total consideration and is taxable. Standard presumptive value (SPV) procedures may apply.

When a person assumes a lien and no equity is paid to the seller or lienholder, the amount to be paid to release the lien, commonly called "net payoff," is the total consideration for the sale. SPV procedures may apply.

For more information, see Lien Assumptions in this guide.

Substitution of Collateral or Transfer of Equity

Sometimes a person purchases a motor vehicle but retains the same loan that applied to a previously financed vehicle. The CTAC should not accept a Form 130-U (PDF) indicating no tax is due because of a "substitution of collateral" or "transfer of equity." The purchase of a motor vehicle is a taxable sale, regardless of whether an existing loan has a different vehicle associated with it as the collateral.

96-254
(09/2021)

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