Can a Texas county issue vehicle title without collecting tax again when a closed dealer took the buyer's tax but failed to remit it?

Plain-English summary

The Texas Comptroller told county tax offices that a vehicle buyer should not have to pay motor vehicle sales tax twice when a licensed dealer collected the tax and then closed without remitting it or filing the title application.

The buyer had to prove tax payment with a sales contract or invoice itemizing the tax. The county then had to notify the Comptroller in writing of the dealer's failure, including the seller's name and address and the payment documentation, by the 31st day after accepting the title application.

When those conditions were met, the county could accept the application without additional tax and would not be responsible for the missing amount, unless the dealer or collector had been acting as the county's deputy or representative.

What this means for you

Buyers whose dealer closed

Keep the purchase contract or invoice showing the tax as a separate paid charge. That documentation is the key to avoiding a second collection at title.

County tax offices

The buyer-proof and written-notice requirements work together. Accepting title without new tax requires timely reporting to the Comptroller with the supporting documents.

Common questions

Q: What proves the buyer paid the dealer?

A: A sales contract or invoice that itemizes the motor vehicle sales tax was sufficient under the letter.

Q: How quickly must the county notify the Comptroller?

A: By the 31st day after accepting the title application.

Q: When could the county still be responsible?

A: If the dealer or person collecting tax was acting as the county's deputy or representative.

Citations and references

• Tex. Tax Code § 152.041(e)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/200904366L

Original ruling text

Dear County Tax Assessor-Collector:

In the last year, some motor vehicle dealers have closed their businesses. In a
number of these situations, the dealers collected the motor vehicle sales tax
that was due, but failed to remit the tax or title application to your office.
Texas Tax Code Section 152.041(e) allows the county tax assessor-collector to
accept application for title without additional tax being submitted, when a
title applicant paid motor vehicle sales tax to a licensed Texas dealer, but
the dealer failed to remit the tax. Based on the statute, the Comptroller’s
office has no objection to county tax assessor-collectors accepting these title
applications without additional tax being collected, if two conditions are met:

The title applicant must provide documentation of tax paid to the dealer. A
copy of the sales contract or invoice itemizing the tax paid is sufficient
documentation.

The county tax assessor-collector must notify the Comptroller’s office in
writing of the dealer’s failure to remit the tax, as required by the Tax Code.
The notice should contain the name and address of the seller and include
documentation of the payment of the tax to the seller. The notice must be
submitted by the 31st day after the date the application for title is accepted.
This notice requirement would also be satisfied if title applications accepted
under 152.041(e) are sent to the Texas Department of Transportation (TxDOT)
under separate cover with the appropriate back-up documentation as directed by
TxDOT.

You will not be held responsible for the motor vehicle sales tax on
transactions under the conditions described above, provided the dealer or
person collecting the tax was not acting as a deputy or representative for the
county at the time of collection. If you have any questions, please call our
office toll free at (800) 252-1382 or send an e-mail to
[email protected]. Sincerely, Curt Swenson Tax Policy Division