Texas law imposes motor vehicle sales and use tax on the total consideration paid, or to be paid, for a motor vehicle. Total consideration includes anything given as payment and includes the receipt of a boat, airplane, land, livestock, services, labor, cash or the forgiveness or assumption of a lien or debt.
The following items are part of total consideration (i.e., taxable) and are not deductions from the selling price:
The following items are not part of total consideration (i.e., not taxable) and are deductions from the selling price:
Both manufacturer’s and dealer’s rebates passed directly to customers reduce the total consideration when computing the taxable value of a motor vehicle.
When a manufacturer provides a rebate to a selling dealer and the dealer passes the identifiable rebate-or any portion of it to the customer, it should be considered a cash discount and deducted from the total consideration.
When signed by both the selling dealer and the purchaser, Form 130-U, Application for Texas Title and/or Registration (PDF) is acceptable documentation for proof of total consideration paid for the motor vehicle purchased in Texas. If the CTAC has reason to question the truth of the information in a statement, or if any material fact fails to meet the guidelines promulgated by the Comptroller, the CTAC may require any party to the statement to furnish substantiation of information contained in the statement, including a copy of the dealer’s invoice or buyer’s orders.
For private-party transactions, the seller is not required to sign Form 130-U (PDF) provided the seller does not hold a general distinguishing number (GDN) under Transportation Code Chapter 503, and the seller has complied with Transportation Code Sections 501.028, Signatures, and 501.072, Odometer Disclosure Statement, as applicable.
Section 501.028 requires the owner of a motor vehicle write their name in ink in the space provided on the certificate of title upon receipt of the certificate.
Upon transfer of ownership, the seller must complete assignment of title by signing and printing the seller's name, printing the date of transfer, and printing the purchaser's name and address on the title.
Section 501.072 requires the transferor of a motor vehicle transferred in this state to provide to the transferee a disclosure of the vehicle's odometer reading at the time of the transfer in compliance with 49 U.S.C. Section 32705; except for a vehicle that is exempt from odometer disclosure requirements under 49 C.F.R. Part 580.
When a person assumes a lien on a motor vehicle, and they pay an amount to the seller as equity, the sum of both amounts is the total consideration and is taxable. Standard presumptive value (SPV) procedures may apply.
When a person assumes a lien and no equity is paid to the seller or lienholder, the amount to be paid to release the lien, commonly called "net payoff," is the total consideration for the sale. SPV procedures may apply.
For more information, see Lien Assumptions in this guide.
Sometimes a person purchases a motor vehicle but retains the same loan that applied to a previously financed vehicle. The CTAC should not accept a Form 130-U (PDF) indicating no tax is due because of a "substitution of collateral" or "transfer of equity." The purchase of a motor vehicle is a taxable sale, regardless of whether an existing loan has a different vehicle associated with it as the collateral.