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Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts

taxes

Motor Vehicle Rental Tax Guide

Exemptions

Some customers may be able to claim an exemption from paying tax when they rent a vehicle from you. Any customers claiming an exemption must give you documentation to support their claim.

If you charge a customer rental tax because they do not have the documentation you need to rent to them tax free, you can refund them the tax if they bring you proper documentation within four years from the date you collected the tax. The tax must be recovered from the rental company.

Exempt Rentals

There is no tax on the rentals shown below. The receipts from exempt rentals must be included as total contract receipts on your rental tax return, but are not included in your taxable contract receipts.

Exempt Rentals
Rental Type Explanation
Rentals to a Public Agency A public agency is exempt from motor vehicle rental tax. A public agency includes the federal government; an open-enrollment charter school; a department, commission, board, office, institution or other agency of the state of Texas or of a county, city, town, school district, hospital district, water district or other special district, authority or political subdivision created by or pursuant to the constitution or the statutes of Texas. An organization can receive federal or state funds and still not be entitled to an exemption from motor vehicle rental tax.
Rentals to a Church or Religious Society A qualified church or religious society is exempt from paying motor vehicle rental tax if the motor vehicle is used primarily (at least 80 percent of the time) by the church or religious society and not used primarily for the personal or official use of a minister. A church or religious society is an organized group of people regularly associating for the sole purpose of holding, conducting and sponsoring religious worship according to the rites of the group.
Rentals for Re-Rental Any entity in the business of renting motor vehicles can rent a vehicle tax free to hold for re-rental, if they have an active rental permit account.
Rentals to Farmers and Ranchers Farm machines and farm trailers used primarily (at least 80 percent of the time) for farming and ranching, including the raising of poultry and operation of feedlots, are exempt from motor vehicle rental tax. The qualified farm trailer/vehicle must be used on a farm or ranch. in the production of crops, livestock or other agricultural products to be sold in the regular course of business. A farm or ranch includes a dairy farm, commercial orchard, commercial greenhouse, feedlot or a similar commercial agricultural operation that is the original producer of agricultural products. Renters must provide a current Texas Agricultural and Timber Exemption Registration Number (Ag/Timber Number) issued by the Comptroller’s office in order to claim this exemption. Tax is due if the renter does not have an Ag/Timber Number.
Rentals to Timber Operators Timber machines and trailers used primarily (at least 80 percent of the time) in timber operations are exempt from motor vehicle rental tax. Timber machines and trailers qualify for exemption if they are used in the production of timber, including land preparation, planting, maintenance and gathering of trees commonly grown for commercial timber. Renters must provide a current Ag/Timber Number issued by the Comptroller’s office in order to claim this exemption. Tax is due if a renter does not have an Ag/Timber Number.
Rentals to a Child Care Facility Motor vehicles used or rented by a qualified residential child care facility and used primarily to transport children residing at the facility are exempt from motor vehicle rental tax. A qualifying residential child care facility is a facility that is licensed by the Texas Department of Family and Protective Services (DFPS) under Human Resources Code Chapter 42 to provide residential care 24 hours a day and provides this care in a single residential group to children who do not require specialized services or treatment, and to children who are emotionally disturbed. Use the DFPS online search to find qualified facilities.
Rentals to a Volunteer Fire Department and Certain Emergency Medical Service Providers Rental tax does not apply to the rental of a fire truck; emergency medical services vehicle as defined by Health and Safety Code Section 773.003, Definitions; or other motor vehicles used exclusively for firefighting purposes or for emergency medical services when purchased by a volunteer fire department; a nonprofit emergency medical service provider that receives a federal income tax exemption under Section 501(a), Internal Revenue Code (IRC) of 1986, as an organization described by Section 501(c)(3), IRC of 1986; or an emergency medical service provider to which Transportation Code Section 502.456, Emergency Services Vehicles, applies.
Exemption Certificates

When renting tax-free to someone who can claim an exemption, you must attach Form 14-305 (Back), Motor Vehicle Rental Tax Exemption Certificate (PDF) to your rental contract.

Exemption certificates show information about the vehicle and the renter, including the reason the renter is claiming the exemption. For a certificate to be valid it must be completed and signed by your customer or their authorized representative.

Customers claiming the rental for re-rental exemption must include their motor vehicle rental tax permit number. Use the Comptroller’s online Motor Vehicle Taxpayer Status Search to verify that your customer’s rental tax permit is active.

Customers claiming the farm and timber related exemptions must include their Ag/Timber Number. Use the Comptroller’s online Ag/Timber Number Search to verify that your customer’s Ag/Timber Number is active.

If you frequently make exempt rentals to the same customer, you do not have to get an exemption certificate for each rental. You must link specific invoices or rental contracts to the exempt customer in your records.

Refunding Tax

If your customer does not give you an exemption certificate, you must charge them rental tax. If they are able to provide you a valid exemption certificate within four years from the date you collected rental tax, you can refund the tax.

With your customer’s written permission, you may credit the tax refund to your customer’s account.

Once you have either refunded your customer or credited their account, there are two ways you can be reimbursed for the tax you remitted:

  1. Amend your rental tax return for the period you originally collected the tax.
  2. Take credit for the tax when you file your next rental tax return.

96-143
(06/2021)

Public Agency

Includes the following:

  • a department, commission, board, office, institution or other agency of this state, or of a county, city, town, school district, hospital district, water district or other special district, authority or political subdivision created by or under the constitution or the statutes of this state, or an unincorporated agency or instrumentality of the U.S. A public agency can include any college or university created or authorized by the Texas constitution or Texas statutes;
  • all independent boards, commissions, agencies, or corporations that are instrumentalities of the U. S. and are wholly owned by the U.S. or by another corporation wholly owned by the U.S., including organizations specifically exempted as an instrumentality of the U.S. by federal statute, such as a federal credit union, federal reserve bank, or federal home loan bank; and
  • open-enrollment charter schools.

Church or Religious Society

A regularly organized group of people associating for the sole purpose of holding, conducting and sponsoring, according to the rights of the sect, religious worship. An organization supporting and encouraging religion as an incidental purpose or an organization with the general purpose of furthering religious work or instilling its membership with a religious understanding is not sufficient to qualify such an entity as a church or religious society.

Business Entity or Legal Entity (Entity)

A form of business with distinct and independent existence, that is recognized by law and includes, but is not limited to, a sole proprietorship, partnership, limited partnership (LP), limited liability partnership (LLP), corporation or limited liability company (LLC).

Farm Machine

A self-propelled motor vehicle specially adapted for, and whose primary use is in, the production of crops or rearing of livestock, including poultry or use in feedlots. The term includes a self-propelled motor vehicle specially adapted for distributing and applying plant-food materials, agricultural chemicals, or feed for livestock. The term does not include pickup trucks, or any self-propelled motor vehicle specifically designed, or specially adapted, to transport property other than the property being applied or for the sole purpose of transporting or setting in place agricultural products, plant-food materials, agricultural chemicals, or feed for livestock. A flatbed truck modified solely with a hay spear/spike, hay bale roll-out distribution device, or cube feeder of a size allowing the truck bed to be used for general purposes is an example of a vehicle that does not qualify as a farm machine.

Farm Trailer

A trailer or semitrailer designed and whose primary use is as a farm or ranch vehicle. This does not include a motor vehicle designed for human habitation, including, but not limited to, any vehicle designed for sleeping, dressing, lounging, restroom use, or meal preparation, even though the vehicle may also be used to transport livestock or agricultural products.

Farm or Ranch

One or more tracts of land used, either wholly or in part, in the production of crops, livestock, and/or other agricultural products held for sale in the regular course of business. The term includes feedlots, dairy farms, poultry farms, commercial orchards, commercial nurseries, and similar commercial agricultural operations that are original producers of agricultural products. The term does not include, among other operations, home gardens, wildlife management, and timber operations.

Texas Agricultural and Timber Exemption Registration Number (Ag/Timber Number)

The 11-digit registration number issued by the Comptroller’s office to farmers, ranchers, agricultural producers and timber operations.

Timber Machine

A self-propelled motor vehicle specially adapted to perform a specialized function for use primarily in timber operations, such as land preparation, planting, maintenance, and harvesting of trees. The term does not include any self-propelled motor vehicle specifically designed or adapted for the primary purpose of transporting timber or timber products, including a self-propelled motor vehicle designed to transport cargo and adapted with a cargo-loading device. The term also does not include field service vehicles, such as those used to fuel or maintain other vehicles or crew vehicles.

Timber Operations

The production of timber, meaning the activities to prepare the production site or to plant, cultivate, or harvest commercial timber that will be sold in the regular course of business.

Qualified Residential Child Care Facility

A facility that is licensed by the Texas Department of Family and Protective Services (DFPS) under Human Resources Code Chapter 42 to provide residential care 24 hours a day and provides this care in a single residential group to children who do not require specialized services or treatment and to children who are emotionally disturbed.

Volunteer Fire Department

A company, department, or association whose members receive no or nominal compensation and which is organized for the purpose of answering fire alarms and extinguishing fires or answering fire alarms, extinguishing fires, and providing emergency medical services.