No sale has occurred when an insurance company obtains the title to a motor vehicle in return for an insurance settlement.
Motor vehicle tax is not due when the title of an insured motor vehicle is transferred into the insurance company’s name if they have determined the motor vehicle to be a total loss or the motor vehicle has been stolen, even if the stolen motor vehicle is later recovered.
Motor vehicle tax is not due on the sale of a vehicle that has been declared a total loss by the insurance company pursuant to the settlement or adjustment of an insurance claim. Instead, limited sales and use tax is due because a vehicle declared a total loss by the insurance company is no longer a motor vehicle, even if the vehicle still retains its regular title.
A retailer who holds a Texas limited sales and use tax permit (or a similar permit for another state) may issue a sales and use tax resale certificate (PDF) to purchase a total loss vehicle tax free for the purposes of reselling that unit. For more information, see Salvage and Non-Repairable Vehicles.
Motor vehicle tax is not due when the purchaser of a total loss vehicle repairs the vehicle so that it is eligible to be a motor vehicle again, and then titles it in that purchaser’s name. The county tax assessor-collector can request documentation from the purchaser that the motor vehicle was previously declared a total loss by the insurance company.
The sale and any subsequent sales of a repaired total loss motor vehicle are subject to motor vehicle tax.
Motor vehicle tax is due when an insurance company purchases a replacement motor vehicle for an insured person as a result of a claim for total loss, or an insured person purchases a replacement motor vehicle with insurance settlement money. A purchaser cannot use an insurance cash settlement to reduce the taxable amount of a replaced motor vehicle. Standard presumptive value (SPV) procedures may apply if the purchase of the replacement motor vehicle is a private-party purchase and the transaction does not involve a licensed motor vehicle dealer.