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Ezel / Tax Rulings / TX
TX 7904L2021D06 Motor Vehicle Tax 1979-04-11

Did a dealership employee owe Texas motor vehicle tax on a purchase-price rebate, title fees, or the dealer's commission?

Short answer: No. Under the described employee purchase plan, the rebate reduced what the buyer was actually charged and was not taxable consideration. Separately stated title and license fees also were excluded. The dealer's commission did not increase taxable consideration, but it also could not reduce it.

Apply this to your situation

This page answers the general question as of 1979. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1979
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 11, 1979 taxpayer-response letter applying former Texas Tax-General Annotated article 6.03(D) to a specific employee vehicle-purchase plan. STAR expressly warns that the four-percent rate is not current. The definition of taxable consideration, rebate and discount treatment, title and license fees, dealer commissions, plan terms, and procedures may also have changed. The response was limited to the presented facts. STAR documents may no longer represent current policy even when not marked superseded. Names 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 employee's purchase-price rebate and separately stated title and license fees were not part of historical taxable consideration.

Former article 6.03(D) looked to the total consideration the buyer was actually charged or would be charged. Under the described manufacturer employee plan, the rebate reduced that amount.

The dealer's commission did not affect the buyer's purchase price, so it was not added to taxable consideration. For the same reason, the commission could not be used to reduce taxable consideration.

What this means for you

The letter focused on the buyer's actual charge. A buyer-side price reduction mattered; a separate manufacturer commission paid to the dealer did not.

Common questions

Q: Was the employee rebate taxable?
A: No.

Q: Were separately stated title and license fees taxable?
A: No.

Q: Could the dealer commission reduce taxable consideration?
A: No.

Citations and references

  • Texas Tax-General Annotated art. 6.03(D)

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.

April 11, 1979

Dear Mr. **:

Thank you for your letter of April 6, 1979, requesting information about the application of Motor Vehicle Sales Tax to the purchase of a motor vehicle by a dealership employee under the ** Motor Company "A" Plan.

As we discussed on the telephone, the Motor Vehicle Sales Tax is due on the total consideration paid or to be paid for a motor vehicle. I have included a copy of the statute for your information, and refer you to TEX. TAX.-GEN. ANN. art. 6.03(D), which defines total consideration. That provision makes clear that the purchaser is only liable for tax on the amount he has actually been charged, or will actually be charged, for the motor vehicle. Thus, under the facts you have presented, a rebate on the purchase price which the employee-purchaser is allowed under the ** Motor Company "A" Plan is not part of the taxable consideration, nor are separately stated fees for titling and licensing. Since the commission on the sale received by the dealership in no way affects the purchase price, it is not taxable, nor may it be used to reduce the taxable consideration.

I hope that this discussion will provide you with some useful guidelines. I have limited the response to the facts as you presented them; other facts, although similar, may call for a different result.

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

Yours very truly,

Patricia Brockway

Motor Vehicle Sales Tax Division

April 6, 1979

Patricia Brockway

State Controllers Office

Motor Vehicle Sales Tax Division

Capital Station

Austin, Texas 78711

Dear Patricia,

Early today we discussed the matter of rebates to a dealership and whether or not those rebates are taxable. I've cited an example below in hopes that a written opinion can be issued, which will serve as a guideline for the future.

The hypothetical buyer is an employee, who is purchasing a car on the ** Motor Company "A" Plan. The "A" Plan provides that the employee may purchase a car at the dealers invoice cost, less the "holdback"; (which is 2% of suggested retail sales price, less freight charges). The selling dealer is credited with a 6% commission on the net selling price.

Example:

Invoice Price (Dealer Cost): $6,000.00

"Holdback": ($112.00)

Net Selling Price: $5,888.00

Sales Tax at 4% Rate: $235.52

Net Selling: $5,888.00

Sales Tax: $235.52

License & Reg.: $25.30

TOTAL: $5,913.30

Commission to Dealer (6% x $5,888.00): $353.28

Please respond as to whether the tax shown ($235.52) is correct, and as to whether the 6% commission to the dealer is taxable.

Thank you for your assistance in this seemingly easy question.

Sincerely,

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