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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

Lien Assumptions

When a person assumes an existing lien on a motor vehicle, they owe motor vehicle tax. The taxable amount is the total amount required to release the lien, commonly referred to as "net payoff," plus any other consideration paid by the person assuming the lien.

Since this is a private-party transaction the lien assumption is a sale. Standard presumptive value (SPV) procedures may apply.

Unrelated Lien

The existing title owner may record or delete a lien without motor vehicle tax being due, as long as the lien is unrelated to the motor vehicle’s purchase. For example, if a person takes out a loan for a vacation and uses a motor vehicle as collateral for the loan, this is not a taxable event. The county tax assessor-collector (CTAC) may request documentation to substantiate the unrelated lien.

Refinancing

Refinancing a motor vehicle is not a taxable event.

Refinancing a motor vehicle does not include adding a person to a new loan. The assumption of a debt is consideration paid for an ownership interest in the motor vehicle and motor vehicle sales tax is due on that consideration (e.g., the amount of the debt being refinanced).

Sale and Repurchase

To lower the amount of existing car payments on a motor vehicle, a vehicle’s owner may choose to refinance the vehicle with a manufacturer-related financing company through a dealer. A dealer takes the motor vehicle into its inventory and pays off the first lien. A vehicle’s owner signs a new purchase agreement for that vehicle with the dealer for a new loan contract for the payoff amount, plus inventory tax, registration fees and documentary fee. A motor vehicle refinancing transaction has not occurred.

In this case, when the vehicle’s owner assigned the motor vehicle to the dealer for the dealer’s inventory, a sales transaction occurs. The dealer purchased the motor vehicle from the vehicle owner for resale purposes. The dealer’s resale of that motor vehicle back to the original owner is a second taxable transaction. The original owner owes motor vehicle tax on the repurchase of the motor vehicle.


96-254
(09/2021)

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