How did Texas document a dealer or lessor's fair-market-value deduction for a replacement business vehicle?

Plain-English summary

A qualifying dealer or lessor used a new joint affidavit to claim a replaced vehicle's fair-market-value deduction without trading it to the replacement seller.

The historical deduction reduced the replacement vehicle's purchase price by the fair market value of a vehicle titled to the business for business or personal use. The replacement also had to be titled to and used by that business.

Eligibility required the business to be regularly and actively engaged primarily in selling or leasing motor vehicles and to separately sell or lease five different vehicles within a 12-month period. The business maintained records supporting the replaced vehicle's value.

Form 2C00-2.11 applied when the replaced vehicle was not traded to the seller. Form 2C00-2.09 applied to an actual trade-in. Permit holders registering rental vehicles tax free used Form 2C00-2.10, which also allowed a trade-in or fair-market-value deduction.

What this means for you

The bulletin tied the deduction to business qualification, title and use, documented value, and the correct transaction-specific form.

Common questions

Q: Who qualified?
A: A dealer or lessor primarily and actively selling or leasing vehicles and meeting the five-vehicle test.

Q: Could the collector accept an incomplete affidavit?
A: No.

Q: Who kept valuation support?
A: The dealer, leasing company, or rental company claiming the deduction.

Citations and references

• No statute or rule was cited in the bulletin.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/7803L2023E10

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller March 20, 1978

Motor Vehicle Sales & Use Tax Bulletin No. 1978-A

All Tax Assessor-Collectors

Ladies and Gentlemen:

Subject: SELLER, DONOR, OR TRADER'S AFFIDAVIT
FOR DEALERS AND LESSORS (Form 2C00-2.11)

Introduction

Effective September 1, 1977, a dealer, leasing company, or rental
company may deduct the fair market value of a vehicle titled in
his name for business or personal use from the purchase price of a
replacement vehicle. The replacement vehicle must be titled in
his name and used for business or personal use. The motor vehicle
tax is computed on the difference.

Since the fair market value deduction is taken without the replaced
vehicle being traded to a seller, a new affidavit is necessary to
document the transaction.

New Affidavit

The Seller, Donor, or Trader's Affidavit for Dealers and Lessors
(Form 2C00-2.11) is a new joint affidavit used exclusively by
dealers and lessors when taking a fair market value deduction on
a vehicle they are buying for business or personal use.

NOTE: The Seller, Donor, or Trader's Affidavit (Form 2C00-2.09)
is used when a dealer or lessor trades a vehicle to a seller
when purchasing a replacement vehicle.

Rental Certificate/Affidavit

The Motor Vehicle Rental Certificate/Affidavit (Form 2C00-2.10)
is used to register rental vehicles tax free by Motor Vehicle
Retailer's Permit holders. This affidavit allows for a vehicle
traded to a seller or for the fair market value deduction.

Requirements for Fair Market Value Deduction

To qualify for the fair market value deduction, a dealer or lessor
must:

(a) be regularly and actively engaged in selling or leasing motor
vehicles as a primary function of his business and

(b) separately sell or lease five (5) different motor vehicles
within any twelve (12) month period.

Responsibility

It is a dealer, leasing company, or rental company's responsibility
to maintain records that will document the accuracy of the fair
market value of the replaced vehicle.

Rule

You must refuse to accept the Seller, Donor, or Trader's Affidavit
for Dealers and Lessors (Form 2C00-2.11) until it is properly
completed.

NOTE: If you are in doubt that a dealer or lessor qualifies to use
the affidavit, you may call this office for verification.

Form 11

• The Seller, Donor, or Trader's Affidavit for Dealers and
  Lessors (Form 2C00-2.11) is furnished by the State Comptroller
  and distributed by the County Tax Assessor-Collectors.

• Your initial supply of the new affidavit is being shipped.

• Additional affidavits should be ordered by calling toll free
  1-800-252-5555.

Example

An example of a completed Seller, Donor, or Trader's Affidavit for
Dealers and Lessors and a Form 31 tax receipt is attached.

Disposition

The Seller, Donor, or Trader's Affidavit for Dealers and Lessors
(Form 2C00-2.11) will be mailed to the Comptroller by attaching it
to the Comptroller's copy of the Form 31 tax receipt.

Assistance

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

Yours very truly,
Richard Montgomery, Director
Motor Vehicle Sales Tax Division