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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 Tax Guide

Credit

Texas participates in the Multistate Tax Compact, which allows credit for legally imposed similar motor vehicle sales or use tax paid to another state, Puerto Rico or any U.S. possession or territory when a motor vehicle becomes subject to the Texas motor vehicle use tax.

Legally imposed sales or use tax paid to another state includes state tax and any taxes imposed by a legal subdivision of the state, such as a city, county or parish.

Some states refer to the tax imposed on sales transactions as an "excise" tax, which is available as credit toward the Texas motor vehicle tax. For example, Oklahoma and New Mexico call their sales taxes "excise" taxes.

U.S. Possessions and Territories

The U.S. possessions and territories include the following (as of 2020):

  • American Samoa
  • Guam
  • Howland, Baker and Jarvis Islands
  • Commonwealth of Puerto Rico
  • U.S. Virgin Islands
  • Commonwealth of the Northern Mariana Islands
  • Midway Islands
  • Navassa Island
  • Palmyra Atoll
  • Johnston Atoll
  • Kingman Reef
  • Wake Island

Credit Not Allowed

Credit is not allowed for property tax, value-added tax (VAT), motor vehicle inventory tax, tax paid to a foreign country, custom or duty tax, or import tax.

Verification of Credit

To allow any credit, a county tax assessor-collector (CTAC) must view a receipt, invoice or other document verifying the amount of tax paid to another state, Puerto Rico or any U.S. possession or territory with the owner’s name. The credit is dollar-for-dollar. States may differ on the tax base used to calculate the motor vehicle tax.

Tax Paid to Out-of-State Dealer

Many states require a selling dealer to collect motor vehicle tax at the time of sale, regardless of whether the motor vehicle is titled and registered in that state. Consequently, an individual may purchase a motor vehicle out of state, pay a legally imposed sales or use tax and subsequently bring the motor vehicle into Texas with a Manufacturer’s Certificate of Origin (MCO) or assigned out-of-state title.

When this happens, the buyer is allowed credit against the Texas motor vehicle use tax for the tax paid to the out-of-state dealer. The CTAC should verify the amount of tax paid.

New Residents

Credit for tax paid to another state is not allowed against the new resident tax since it is not a qualifying similar tax.

Texas Emissions Reduction Plan (TERP) Surcharge

Credit for tax paid to another state is not allowed against the Texas Emissions Reduction Plan (TERP) surcharge since it is not a qualifying similar tax.

Leased Motor Vehicles

If a Texas resident or a person who is domiciled or doing business in Texas leases a motor vehicle outside of Texas and brings it into Texas for use in this state, credit is allowed for legally imposed sales or use tax paid to another state, Puerto Rico or any U.S. possession or territory. Either the lessor or the lessee must document the tax payments. The credit applies to taxes paid by the lessor or the lessee.

Some states collect any motor vehicle tax due in full at the time of lease while other states allow the tax to be paid as part of the monthly lease payments. Credit is allowed for tax paid on a monthly basis up to the time the motor vehicle is brought for use into Texas, if paid by the same lessee. The credit is limited to tax paid prior to the motor vehicle’s entry into Texas. Credit cannot be allowed at time of registration for tax payments not yet made to the other state. At the end of the lease, however, the lessee may request a refund from the Comptroller’s office of up to the amount of additional tax paid to the other state.

Calculating Tax Due on Vehicle Purchased Outside Texas

Example
Item Amount
Total Sales Price $ 15,000.00
Less Trade-In - 6,000.00
Taxable Value $ 9,000.00
Tax Rate x .0625
Use Tax Due $ 562.50
Less Credit for Tax Paid in another state - 180.00
Net Texas Use Tax $ 382.50

96-254
(09/2021)

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