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Ezel / Tax Rulings / TX
TX 7804L2015B01 Motor Vehicle Tax 1978-04-10

Who owed Texas motor vehicle tax on courtesy vehicles loaned by a dealership to a public school district?

Short answer: The result depended on title. When the dealership held title and loaned the vehicles to the school district, the dealership owed historical motor vehicle sales tax on its purchase price. If the district instead held title and used exempt license plates, it could register the vehicles tax free as a public agency, but had to remove the exempt plates before returning them.

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 an April 10, 1978 taxpayer-response letter. STAR expressly warns that the four-percent rate is not current. Courtesy-vehicle tax treatment, dealer use, public-school and public-agency exemptions, title ownership, exempt license plates, registration, return procedures, and purchase-price tax may also have changed. The letter addressed only the two title arrangements described. STAR documents may no longer represent current policy even when not marked superseded. School and dealer 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

The title owner determined the historical tax result for courtesy vehicles loaned to a public school district.

When the dealership held title and loaned the vehicles to the district, the dealership owed motor vehicle sales tax on the price it paid.

If the school district instead held title and operated the vehicles with exempt plates, it could register them tax free as a public agency. The district had to remove the exempt plates before returning each vehicle to the dealership.

What this means for you

The public school's use did not by itself exempt a dealer-owned vehicle. The exemption described in the letter required the school district to be the title owner.

Common questions

Q: Did the dealer owe tax when it held title?
A: Yes.

Q: Could the district register a district-titled vehicle tax free?
A: Yes, with exempt license plates.

Q: What happened when the vehicle went back to the dealer?
A: The exempt plates had to be removed.

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

April 10, 1978

Dear ***:

I appreciate ***'s inquiry concerning the courtesy vehicles loaned to your agriculture department.

The current arrangement between your school district and the dealership causes tax to be due on the vehicles. When the vehicles are titled in the name of the dealership and used to loan to the school district the dealership owes a four percent (4%) sales tax on the price it paid for the vehicle.

If, however, the school district should title the vehicles in its name and operate the vehicles with exempt license plates, the district, as title owner, is entitled to register the vehicles tax free as a public agency. Please be certain that you have the exempt plates removed on each vehicle when you return it to the dealership.

Sincerely,

Robert Mott

Motor Vehicle Sales Tax Division

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