Related Finance Companies and Seller-Financed Sales

When a seller-financed motor vehicle dealer sells an account receivable or “note” relating to the sale of a motor vehicle to another entity, the motor vehicle sales tax due on the transaction accelerates. This means the dealer must remit the tax on the next motor vehicle seller-financed tax return.

There is one exception: When a seller-financed dealer sells a note to a qualifying related finance company (RFC), the remaining tax due will not accelerate. The dealer will continue to collect and remit the remaining tax due as each payment is received. A qualifying RFC is one in which at least 80 percent of the ownership is identical to the ownership of the dealer who sells the note.

Each qualifying RFC to which the dealer sells notes must submit a completed registration form, Form AP-222, Texas Registration for Motor Vehicle Related Finance Company (PDF), to the Comptroller’s office. The registration is effective the first day of the month in which the registration application is submitted.

Tax due will continue to accelerate when a note is sold to an unrelated lender, a non-qualifying RFC or an RFC that is not registered with the Comptroller’s office at the time of the sale.