Was the 1991 federal automobile luxury tax included in Texas's motor vehicle sales tax base?

Plain-English summary

The Texas Comptroller said the federal automobile excise or "luxury" tax effective January 1, 1991 was excluded from the Texas motor vehicle sales tax base when the retailer separately stated it and identified it to the customer.

The letter also said a federal luxury tax could apply to a long-term lease, but the long-term lease itself was not subject to Texas motor vehicle sales tax. Instead, the lessor's vehicle purchase was taxed.

Finally, it said Texas cities, counties, and special districts could not impose sales tax on motor vehicles.

What this means for you

Vehicle dealers

Separate statement and identification of the federal tax controlled the 1991 tax-base result.

Vehicle lessors and lessees

The source is historical. Verify current federal charges and Texas lease treatment rather than using the 1991 rules operationally.

Common questions

Q: Was the federal luxury tax always excluded from the Texas base?

A: The letter conditioned exclusion on separately stating and identifying it to the customer.

Q: Were long-term lease payments subject to Texas motor vehicle sales tax?

A: No, according to the 1991 letter; the lessor's purchase was taxed.

Q: Could local governments impose sales tax on motor vehicles?

A: The letter said no.

Citations and references

• The letter cited no federal or Texas statute or administrative rule by number.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/9103L1095D06

Original ruling text

John Sharp
Comptroller of Public Accounts
Austin, Texas 78774

March 21, 1991

Dear *****:

Thank you for your letter concerning the new federal excise tax (or
"luxury"
tax) on motor vehicles. You asked if the amount of this tax would be
included
in the tax base for the computation of motor vehicle sales tax.

The federal tax, effective January 1, 1991, is a tax on the first retail
sale of
qualifying automobiles. If the retailer separately states this tax and
identifies
it as such to the customer, it will not be included in the tax base for
the motor
vehicle sales tax.

Federal "luxury" tax may be imposed on a long-term lease, but a long-term
lease is not subject to motor vehicle sales tax. The lessor's purchase
is taxed.

Local Government units (cities, counties, special, districts) may not
impose a
sales tax on motor vehicles.

You may wish to contact the State Property Tax Board, Valuations
Division, for
information on the effect of the tax on local personal property taxes.
The
address is 4301 Westbank Drive, Building B, Suite 100, Austin, Texas
78746.

If you have any questions or if we can be of assistance please call toll
free
1-800-252-5555, or write Lucy Glover in the Tax Administration Division.

Sincerely,
JOHN SHARP
Comptroller of Public Accounts