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Ezel / Tax Rulings / TX
TX 200509306L Motor Vehicle Tax 2005-09-15

Is a vehicle rental to a Texas state employee on official business exempt when made under a state master contract?

Short answer: Yes. A state employee's official-business rental was exempt when made under a state master contract and supported by a Motor Vehicle Rental Exemption Certificate. The rule applied to IBA, CLIBA, and CBA payment arrangements.

Apply this to your situation

This page answers the general question as of 2005. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 2005
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The Texas Comptroller ruled that a motor vehicle rented to a Texas state employee on official business was not taxable when the rental was made under a state master contract.

The employee had to complete a Motor Vehicle Rental Exemption Certificate and give it to the rental company. The ruling expressly covered rentals paid through an Individual Bill Account (IBA), Corporate Liability Individual Bill Account (CLIBA), or Central Bill Account (CBA).

What this means for you

State employees

Official-business status must be paired with the state master contract and completed exemption certificate. Keep the certificate with travel records.

Rental companies

Retain the employee's exemption certificate and documentation connecting the rental to the state master contract and listed account arrangement.

State travel managers

This is the later guidance identified by STAR as clarifying the older 1998 employee-rental rule.

Common questions

Q: Which account types did the letter include?

A: IBA, CLIBA, and CBA.

Q: Was official business alone enough?

A: No. The rental also had to be under a state master contract, with an exemption certificate provided.

Q: Which form did the letter enclose?

A: Motor Vehicle Rental Exemption Certificate, Form 14-305.

Citations and references

  • The letter cites no specific statute or administrative rule.

Source

Original ruling text

September 15, 2005

Ms. Gerry Pavelka
State Travel Program
Texas Building & Procurement Commission

Dear Ms. Pavelka:

We have recently reviewed the taxability of motor vehicle rentals to state
employees and to state agencies.

We have determined that the rental of a motor vehicle to a state employee on
official business is not subject to tax provided the rental is made under a
master contract with the state. This determination applies to a rental paid for
with an Individual Bill Account (IBA), a Corporate Liability Individual Bill
Account (CLIBA) and a Central Bill Account (CBA). A Motor Vehicle Rental
Exemption Certificate must be completed by the employee renting the vehicle and
provided to the rental company.

I have enclosed a copy of the Motor Vehicle Rental Certificate, Form 14-305.

Please do not hesitate to contact me if you have any questions. My direct
phone number is 512-463-4684.

Sincerely,

Curt Swenson
Tax Policy Division

cc: Jim Railey, TBPC
Melissa Hernandez, TBPC
Bo Overstreet, CPA, Budget/Internal Accounting
Tina Stritzinger, CPA, Budget/Internal Accounting

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