Tax Policy News

In Texas, a farm trailer bought for and used on a qualified farm or ranch is exempt from motor vehicle tax. To be considered a farm trailer, it must be used primarily (meaning at least 80 percent of its operating time) on a farm or ranch:

• in producing:
  • food for human consumption;
  • grass (for either animal feed or for selling);
  • animal feed;
  • livestock; or
  • other agricultural products that are sold in the regular course of business; or
• for livestock or agricultural:
  • processing;
  • packing; or
  • marketing.

A farm trailer used by an agricultural cooperative in processing, packing or marketing agricultural products is taxable, unless the cooperative can prove it is the original producer of all agricultural products being processed, packed or marketed. The cooperative must perform the functions at a location it operates.

Home gardens, wildlife management operations and preserves, and animal boarding facilities are not qualified farms or ranches.

Trailers designed with human accommodations are not exempt from motor vehicles taxes, even if used to transport livestock or other agricultural products.

Transporting horses or livestock to and from competitions or shows is not an exempt use.

Documentation

On Form 130-U (PDF) under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Agricultural exemption” and the 11-digit Texas Ag/Timber Number.

To be considered a farm machine, a motor vehicle must be specially adapted and used primarily (meaning at least 80 percent of its operating time) on a qualified farm or ranch.

The motor vehicle cannot be used for transporting people or property and must be specially adapted for distributing and applying:

• plant-food materials;
• agricultural chemicals; or
• feed for livestock.

Qualifying farm machines include:

• a truck cab chassis with a tank and equipment designed to apply liquid fertilizer;
• a truck cab chassis with a hopper and auger designed to distribute feed in a feedlot; and
• a truck modified with a flat bed, feed distributor, and hay bale roll-out distribution device.

A flatbed truck modified solely with a hay spear/spike, hay bale roll-out distribution device, or cube feeder of a size allowing the truck bed to be used for transporting people or property does not qualify as a farm machine.

A standard pickup truck is not a farm machine, even though it can have a farm registration and be operated with farm plates. Likewise, the cab type and tonnage do not determine the pickup truck’s eligibility.

Documentation

On Form 130-U (PDF) under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Agricultural exemption” and the 11-digit Texas Ag/Timber Number.

A specially adapted motor vehicle used primarily in commercial timber operations is a timber machine.

Timber machines and trailers used in commercial timber operations qualify for exemption when used to:

• prepare the land for timber production; or
• plant, cultivate or harvest timber to sell.

Qualifying timber machines include:

• a cab chassis with grappling arm for moving logs; and
• a wheeled chassis with timber equipment attached that is not designed to transport people or property.

Documentation

On Form 130-U (PDF) under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Timber exemption” and the 11-digit Texas Ag/Timber Number.

A dealer-provided, driver training motor vehicle is exempt from tax if the vehicle is:

• titled in a dealership’s name;
• bought in Texas;
• loaned free of charge to a public school for use in an approved standard driver training course; and
• operated with exempt license plates.

Documentation

On Form 130-U (PDF) under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Driver training.”

These organizations are exempt from motor vehicle taxes by various federal laws or court rulings:

• American Red Cross
• Boy Scouts of America, Girl Scouts, Camp Fire, Boys & Girls Clubs of America, Big Brothers Big Sisters of America
• Federal Credit Unions
• Federal Deposit Insurance Corporation (FDIC)
• Federal Home Loan Mortgage, Inc. and other Federal Home Loan Banks
• Federal Land Credit Associations
• Federal Production Credit Association

Documentation

On Form 130-U (PDF) under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as the name of the qualifying organization.

These organizations are exempt from motor vehicle taxes by various state laws other than Tax Code Chapter 152:

• Cotton Growers’ Boll Weevil Eradication Foundation and its board
• Cultural Education Facilities Finance Corporations
• electric cooperatives
• Health Facilities Development Corporation
• Hospital Laundry Cooperative Association
• housing authority (local, cities and counties)
• Local Government Transportation Corporations
• Local Organizing Committees (LOC)
• Public Facility Corporations
• telephone cooperatives
• TexAmericas Center and its nonprofit corporations
• Texas Citrus Pest and Disease Management Corporation, Inc. and its board

Documentation

On Form 130-U (PDF) under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as the name of the qualifying organization.

Fire trucks or other motor vehicles used exclusively for fire-fighting purposes or for emergency medical services are exempt from motor vehicle tax when rented to or purchased by:

• a volunteer fire department;
• a nonprofit emergency medical service provider that receives a federal income tax exemption under Internal Revenue Code (IRC) Section 501(a) as an organization described by Section 501(c)(3); or
• an emergency medical service provider to which Transportation Code, Section 502.456 applies. The exemption also applies to an emergency medical services chief or supervisor vehicle if used exclusively as an emergency services vehicle.

Documentation

On Form 130-U (PDF) under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as:

• “Fire trucks or other motor vehicles used exclusively for fire-fighting purposes;” or
• “Emergency services vehicle or other motor vehicles used exclusively for emergency medical services.”

A qualifying hydrogen-powered motor vehicle that meets Phase II standards established by the California Air Resources Board (ARB) as of Sept. 1, 2007, for an ultra-low-emission vehicle II or stricter established Phase II emission standards is exempt from motor vehicle tax.

Electric cars and trucks, such as those powered by large format Li-Ion or similar batteries, do not qualify for the exemption.

Documentation

On Form 130-U (PDF) under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Hydrogen-power” or “Hydrogen-powered vehicle.”

In Texas, interstate motor vehicles such as trucks, tractors (pulling units) and trailers are exempt from tax if they are registered with apportioned plates under the International Registration Plan (IRP) in a state or country that is a member of IRP and apportioned into Texas.

To qualify for the interstate motor vehicle exemption, the vehicle must be:

• either purchased in Texas or purchased outside of Texas and apportioned into Texas; or
• a trailer operated interstate on token plates and pulled by an apportioned-plated; or
• a charter bus operated interstate.

Units rented by contract for 180 days or less are subject to motor vehicle rental tax.

An interstate motor vehicle includes any motor vehicle with a gross registered weight in excess of 26,000 pounds (calculated either separately or in combination with a trailer or semitrailer) that operates in Texas and some other state or foreign country. This includes:

• a truck;
• truck tractor; or
• any other motor vehicle.

The exemption is lost when:

• a motor vehicle is diverted from interstate use within one year of:
  • purchase in Texas with apportionment to Texas; or
  • entry into and use in Texas after purchase outside of Texas with apportionment to Texas.
• a leased motor vehicle is diverted from interstate use, regardless of when it is diverted.
  • The owner must pay motor vehicle tax and is responsible for remitting the tax directly to the Comptroller’s office.
  • The amount used to calculate motor vehicle sales or use tax is the lessor’s book value for the vehicle.

Obtaining non-apportioned registration may be proof a unit is being diverted from interstate use. The IRP cab card(s) also indicate(s) use in Texas.

Tax is due and payable to the county tax office at the time the vehicle is titled and/or registered.

No tax credit or allowance is given for depreciation or time operated as an apportioned vehicle.

Documentation

On Form 130-U (PDF) under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “For interstate use” or “Interstate motor vehicle with apportioned plates.”

Note: Loss of the interstate motor vehicle sales tax exemption within the first year of registration means tax is due and payable to the county tax office at the time the vehicle was originally titled and/or registered with penalties and interest assessed based on that date.

The federally recognized Alabama-Coushatta, Kickapoo and Tigua Native American tribes are exempt from motor vehicle tax.

To qualify, the vehicle must be sold to the tribe (tribal council), not to an individual member of the tribe.

Documentation

On Form 130-U (PDF) under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as the qualifying tribe’s name.

A public agency is exempt from motor vehicle tax.

A public agency is:

• the federal government;
• a department, commission, board, office, institution or other agency of the state of Texas or of a county, city, town, school district, hospital district, water district or other special district, authority or political subdivision created by or under Texas law; or
• an open enrollment charter school.

The motor vehicle must be titled in the public agency’s name.

The motor vehicle must also be operated with exempt license plates, unless sold to:

• the federal government; or
• a local center providing services under the authority of the Texas Health and Human Services Commission.

Documentation

On Form 130-U (PDF) under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Public agency.”

A motor vehicle bought in Texas for exclusive use outside Texas is exempt from motor vehicle sales tax. The buyer must:

• not use the vehicle in Texas, except to drive it directly out of state; and
• not register the vehicle in Texas.

The county tax office can accept a Form 130-U (PDF) for a certificate of title only.

Documentation

On Form 130-U (PDF) under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Transported out of state.”

At the time of sale, the buyer completes and gives the seller Form 14-312, Texas Motor Vehicle Sales Tax Exemption Certificate – For Motor Vehicles Taken Out of State (PDF).

A motor vehicle bought by an entity (such as a healthcare facility) or an individual is exempt from motor vehicle tax when it is used primarily by or for transporting an orthopedically handicapped person, if the vehicle is modified or will be modified to:

• enable orthopedically handicapped persons to operate the vehicle; or
• allow orthopedically handicapped persons to enter the vehicle.

Please note that running boards and ramps for scooters do not qualify for the exemption.

Documentation

On Form 130-U (PDF) under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Orthopedically handicapped.” Then submit Form 14-318, Texas Motor Vehicle Orthopedically Handicapped Exemption Certificate (PDF) with Form 130-U (PDF).

When an entity such as a healthcare facility or retirement community buys a vehicle that will be used primarily to transport multiple orthopedically handicapped passengers, the entity-buyer is not required to:

• identify a particular eligible orthopedically handicapped person in the Purchaser’s information of Section 1 on Form 14-318, Texas Motor Vehicle Orthopedically Handicapped Exemption Certificate (PDF), or
• provide a copy of either the:
  • restricted Texas Driver License or
  • licensed practitioner of the healing arts statement.

A motor vehicle purchased, used or rented by a qualified residential child-care facility is exempt from tax.

To qualify for the exemption, the child-care facility must:

• be licensed under Chapter 42 of the Human Resources Code; and
• provide residential care 24 hours a day to both:
  • children who do not require specialized treatment or services; and
  • children who are emotionally disturbed

Motor vehicle purchased, used, or rented by day care centers, group day care centers, registered family homes or those residential childcare facilities that are not for 24-hour care are not exempt from motor vehicle tax.

Documentation

On Form 130-U (PDF) under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Child-care facility.”