Did a Texas seller owe sales tax on off-road vehicles sold to Arkansas residents?

Plain-English summary

The Comptroller said a Texas seller had to collect Texas sales tax when an Arkansas customer took possession or delivery of an off-road vehicle in Texas. Collecting Arkansas motor-vehicle tax did not eliminate that Texas liability. Because Arkansas participated in the multistate tax compact, the letter said Arkansas should allow credit for the Texas sales tax legally due and paid.

Texas sales tax did not apply when the vehicle was exported from Texas. When the seller delivered it into Arkansas using its own transportation, it had to retain trip tickets, truck logs, or comparable records identifying the particular vehicle and its out-of-state destination, as required by Rule 3.323(c).

For a farm or ranch purchase, the seller still had to collect Texas tax unless the customer supplied both a properly completed exemption certificate and the Comptroller's letter approving the agricultural exemption. The attached approval explained that qualifying machinery or equipment had to be used exclusively on a farm or ranch to produce agricultural products for sale; transportation or mixed agricultural and nonagricultural use did not qualify.

Common questions

What if the Arkansas buyer picked up the vehicle in Texas? The seller had to collect Texas sales tax.

Did paying Arkansas motor-vehicle tax cancel the Texas tax? No. The letter instead said Arkansas should credit the Texas tax legally due and paid.

What made the sale an export from Texas? Delivery outside Texas supported by the records required under Rule 3.323(c).

Was every vehicle used on a farm exempt? No. The customer needed the required certificate and Comptroller approval, and the vehicle had to satisfy the exclusive agricultural-use conditions described in the attached letter.

Citations and references

• 34 Tex. Admin. Code Rule 3.323(c) — documentation for vehicles exported from Texas.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8604L0717D02

Original ruling text

April 1, 1986

Dear ***:

Thank you for your letter of March 15, 1986, concerning the taxation of off-road vehicles (vehicles) sold to Arkansas residents.

Texas taxes the vehicles under the sales tax law while Arkansas, as you say, taxes them under its motor vehicle tax law. The Texas sales tax law requires you collect sales tax on sales of vehicles when Arkansas customers take possession or delivery of the vehicles in Texas. You will not be relieved of your Texas sales tax liability when Arkansas customers take delivery of the vehicles in Texas even if you collect the Arkansas motor vehicle tax.

As a member of the multi-state tax compact, Arkansas should allow as credit against the Arkansas motor vehicle tax due the amount of sales tax legally due and paid to Texas.

You are not required to collect Texas sales tax on vehicles exported from this state. You are required to retain in your records the documentation required under section (c) of Rule 3.323. If you deliver the vehicles into Arkansas by your own mode of transportation, you must keep in your records trip tickets, truck log records, or other documentation reflecting the specific item (e.g. vehicle identification number, etc.) and the out-of-state destination.

You must collect the Texas sales tax when an Arkansas customer purchases vehicle for use on a farm or ranch unless the customer issues a properly completed exemption certificate with the Comptroller's letter approving the agricultural exemption.

This opinion is based on the facts presented. If there are additional or different facts, the opinion may change.

If you have any questions or need more information, please call us at 1-800-252-5555 toll free from anywhere in Texas. You may write us at the Tax Administration Division.

Sincerely,

Tax Policy Section

Tax Administration Division

COMPTROLLER OF PUBLIC ACCOUNTS

STATE OF TEXAS

AUSTIN, 78774

February 27, 1986

Dear ***:

Thank you for your recent letter in regard to your purchase of an off-road vehicle.

Based upon the information you supplied, this vehicle qualifies for the agricultural exemption. The sales tax exempts machinery and equipment used exclusively on a farm or ranch in the production of agricultural products sold in the regular course of business. The sales tax law does not exempt machinery or equipment used for both agricultural and nonagricultural purposes. Use of machinery or equipment for transportation is not agricultural use.

You must present a copy of this letter and a properly completed exemption certificate to the dealer to obtain your sales tax refund. We am enclosing an exemption certificate for your convenience.

Please feel free to contact us if you have additional questions. You may write us or call toll free 1-800-252-5555 from anywhere in Texas.

Sincerely,

Tax Policy Section

Tax Administration Division