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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

Glossary of Terms


B

Bad Debt

Any amount determined to be uncollectable on a rental agreement that is written off as uncollectable. The amount must be entered on the rental company’s books as a bad debt and claimed as a deduction for federal income tax purposes.

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).

C

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.

F

Fair Market Value (FMV)

The total consideration a purchaser would agree to pay a seller on the open market to purchase a motor vehicle. The fair market value of a specific motor vehicle may be determined by consulting a nationally recognized motor vehicle value guide service or a nationally recognized motor vehicle value guide publication; or by a written appraisal prepared by a qualified appraiser employing generally accepted appraisal methods and techniques, setting forth an opinion as to the current market value of the identified motor vehicle and any accessories or equipment affixed to the motor vehicle.

Fair Market Value Deduction (FMVD)

A method by which the taxable value of a vehicle purchased for dealer use, lease or rental may be reduced.

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.

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.

G

General Distinguishing Number (GDN)

A dealer license issued by the TxDMV under Transportation Code Chapter 503, Dealers and Manufacturer’s Vehicles License Plates.

Gross Rental Receipts

Any amount of money or the value of property received by or due the owner of a motor vehicle as consideration for the rental of the vehicle to another including a reimbursement charge for property tax, title fee, and registration fee expenses. Gross rental receipts does not include, and tax is not due on, the following:

  • a separately stated fee or charge for insurance;
  • an assessment for damage to the vehicle which occurred during a rental agreement period;
  • separately stated receipts for motor fuel sold by the owner of the vehicle;
  • discounts; or
  • any amount of gross rental receipts tax collected by or due the owner of the vehicle.
Gross Rental Receipts Tax (Motor Vehicle Rental Tax)

Tax imposed on the gross rental receipts derived from the rental of a motor vehicle without a driver. The tax rate is 10 percent on a contract of 1-30 days and 6.25 percent on a contract for 31-180 days.

M

Minimum Gross Rental Receipts Tax (Minimum Motor Vehicle Rental Tax or Minimum Rental Tax)

A tax liability that is equal to 6.25 percent of a vehicle’s taxable value. If the rental vehicle was registered tax free, the minimum motor vehicle rental tax is the amount of tax the rental vehicle must generate in order to relieve the owner of the tax liability established at registration.

Mobile Office

A self-contained transportable structure built on a permanent chassis, with or without wheels, axles, and a towing device, that is designed to be used as an office, sales outlet, or other workplace; such as a self-contained portable bathroom or a portable on-site dressing room. A food and beverage concession trailer is an example of a towable structure designed to be used as a sales outlet or other workplace.

Motor Vehicle

A vehicle described by Tax Code Section 152.001(3), Definitions. In general, a motor vehicle includes a self-propelled vehicle designed to transport persons or property upon the public highway and a vehicle designed to be towed by a self-propelled vehicle while carrying property. The term includes but is not limited to

  • automobiles;
  • buses;
  • vans;
  • motor homes;
  • motorcycles;
  • trucks and truck tractors;
  • truck cabs and chassis;
  • semitrailers;
  • trailers and travel trailers;
  • trailers sold unassembled in a kit;
  • dollies;
  • jeeps;
  • stingers;
  • auxiliary axles;
  • converter gears; and
  • park models, as defined by Rule 3.481, Imposition and Collection of Manufactured Housing Tax.

The term does not include a vehicle for which the certificate of title has been surrendered in exchange for a salvage vehicle title or a nonrepairable vehicle title issued under Transportation Code Chapter 501, Certificate of Title Act.


O

Out-of-State Rental

A rental where the customer takes delivery of a vehicle outside the state of Texas. The receipts from an out-of-state rental are not subject to motor vehicle rental tax for the entire period of the original agreement even if the customer brings the vehicle into Texas. If the rental agreement is renewed or extended while the vehicle is in Texas it is considered a Texas rental and Texas tax is due on these receipts.

P

Person

Includes an individual, officer, director, member, partner, partnership, limited liability partnership, corporation, limited liability company, association or other legal entity.

Possession Owner

Someone who rents a motor vehicle for re-rental. The possession owner does not have title to the vehicle but must collect and remit tax on the re-rentals.

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.

Q

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.

R

Rental

An agreement by the owner of a motor vehicle to give, for no longer than 180 days, the exclusive use of that vehicle to another for consideration; an agreement by the original manufacturer of a motor vehicle to give exclusive use of the motor vehicle to another for consideration; or an agreement to give exclusive use of a motor vehicle to another for re-rental purposes, regardless of the period of time covered by the agreement.

Replaced Motor Vehicle

For purposes of the fair market value deduction, a motor vehicle titled in Texas and taken out of service in Texas. A replaced motor vehicle is no longer used for business or personal purposes in Texas and is either sold or offered for sale in the regular course of business.

T

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.

Taxable Value

The total consideration less the value of a trade-in vehicle or the fair market value of a replaced vehicle. Total consideration is the amount paid for a motor vehicle and all accessories that are attached to it at the time of sale.

Texas Rental

When a customer takes delivery of a rental vehicle in Texas. The receipts from the entire rental agreement are subject to Texas motor vehicle rental tax even if the customer takes the vehicle out of state. A renewal or extension of the agreement while the vehicle is out of state is not a Texas rental and the receipts are not subject to Texas motor vehicle rental tax.

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.

Title Owner

The person/entity named as the owner of a motor vehicle on the Certificate of Title. It also includes a person/entity who is the legal owner because of a lease/purchase or conditional sales contract where the seller retains title until full payment is made.

V

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.


96-143
(06/2021)