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Ezel / Tax Rulings / TX
TX 7801L2015C01 Motor Vehicle Tax 1978-01-23

Could Washington sales tax paid on lease payments reduce Texas use tax on a vehicle leased outside Texas?

Short answer: Yes. Texas based historical use tax on the lessor's acquisition price rather than later lease payments, but credited sales tax already paid to Washington on those payments. The operator owed the Texas amount less qualifying sales or use tax paid to another state and had to present proof of payment.

Apply this to your situation

This page answers the general question as of 1978. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1978
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 a January 23, 1978 taxpayer-response letter. STAR expressly warns that the four-percent rate is not current. Lease-vehicle tax bases, title-owner and operator liability, lease-payment tax, Washington reciprocity, other-state credits, proof requirements, vehicle movement, and refund procedures may also have changed. The letter addressed a vehicle leased outside Texas and Washington tax already paid on lease payments. STAR documents may no longer represent current policy even when not marked superseded. Taxpayer details are redacted. This summary is informational only and is not legal or tax advice.
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

Texas credited Washington sales tax already paid on lease payments against the historical Texas use tax.

Texas taxed a lease vehicle using the title owner's acquisition price, not the later lease payments. Washington apparently taxed the payments instead.

The operator of the out-of-state leased vehicle owed Texas motor vehicle use tax, reduced by sales or use tax paid to another state. Proof of the Washington payment had to be presented to claim the credit.

What this means for you

The two states used different tax bases, but the letter allowed documented Washington payment to offset the Texas amount rather than taxing without credit.

Common questions

Q: Did Texas tax the lease payments?
A: No, under this historical letter.

Q: What was the Texas base?
A: The lessor's acquisition price.

Q: Was proof required for the credit?
A: Yes.

Citations and references

  • No statute or rule was cited in the letter.

Source

Original ruling text

ALERT: The tax rates cited in this article are no longer the current motor vehicle sales tax
or motor vehicle rental tax rates.

COMPTROLLER OF PUBLIC ACCOUNTS

STATE OF TEXAS

AUSTIN, 78774

January 23, 1978

Dear ***:

Thank you for your letter dated January 17, 1978. I hope we're not asking the impossible from you but our requirements are as follows: In Texas, lease vehicles are taxed on the acquisition price the title owner (lessor) paid for the vehicle. The subsequent lease payments are not taxed.

You are moving from a state (Washington) that apparently charges sales tax on the lease payments. We will reciprocate for the sales tax already paid to the State of Washington against our 4% use tax which is based on the purchase price the lessor paid for the vehicle.

In summary, as the operator of a vehicle leased outside of Texas your obligation to pay Texas Motor Vehicle Use Tax less any sales or use tax paid to another state. Proof of tax payment must be presented when claiming tax credit.

If you have any questions you may write the Motor Vehicle Sales Tax Division or call me toll free, 1-800-252-5555.

Yours very truly,

Tom Gay

Motor Vehicle Sales Tax Division

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