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Ezel / Tax Rulings / TX
TX 9211L1205G11 Motor Vehicle Tax 1992-11-30

Were a trailer manufacturer's annual leases treated as rentals, and did Texas tax contracts for out-of-state use?

Short answer: The annual leases were rentals because the owner was the trailers' manufacturer, regardless of contract length. Texas rental tax applied when the customer took possession in Texas, even if the trailer was used elsewhere. Delivery outside Texas or to a common carrier for out-of-state delivery was not a Texas rental.

Apply this to your situation

This page answers the general question as of 1992. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1992
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 official Texas Tax Administration letter issued on one trailer manufacturer's 1992 contracts. The quoted 10% and 6.25% rental rates are historical and must not be used today. The source's numeric rental-duration text contains an OCR artifact, so this page relies only on its clear manufacturer and delivery-location holdings. It predates modern Private Letter Ruling reliance terms and cannot bind the Comptroller for unrelated taxpayers. Manufacturer, rental, delivery, common-carrier, rate, and sourcing rules may have changed. Taxpayer-identifying 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 Texas Tax Administration Division treated the trailer manufacturer's annual leases as motor vehicle rentals because an original manufacturer's possession-for-consideration agreement was a rental regardless of contract length.

The point of customer possession determined sourcing. Delivery to the renter in Texas made the contract a Texas rental subject to gross rental receipts tax, even when the trailer was used only outside Texas.

Delivery to the renter outside Texas, or to a common carrier for transportation to the renter outside Texas, made it an out-of-state rental under the letter.

What this means for you

Trailer manufacturers and rental companies

The historical classification turned on original-manufacturer status, and sourcing followed delivery rather than later use.

Out-of-state renters and fleet accountants

Document where possession transferred and whether a common carrier handled delivery.

Common questions

Q: Were annual manufacturer leases treated as leases?

A: No. The letter treated them as rentals.

Q: Did out-of-state use prevent Texas tax after Texas delivery?

A: No.

Q: Are the stated rates current?

A: No.

Citations and references

  • The letter did not identify a statute or administrative rule by number.

Source

Original ruling text

November 30, 1992

Dear ****:

Thank you for your letter regarding motor vehicle rental tax.

Motor vehicle gross rental receipts tax is assessed on the rental of a motor
vehicle in Texas. The term "rental" (or renting) means the agreement of an
owner to give exclusive use of a motor vehicle to another for a consideration
and for a period of time not to exceed 1X0 days under any one agreement. Rental
also is an agreement between the manufacturer of a motor vehicle and another to
give exclusive use of the motor vehicle for a consideration, regardless of the
length of the contract. As manufacturer of the trailers, the "annual leases"
you refer to are actually motor vehicle rentals.

You stated that many of the rentals are for out-of-state use. Your clients
often use their own transporting equipment to take possession of the trailers,
and then transport the trailers out of state for use. Since the trailers are
used strictly out of state, you feel that these rentals should not be
considered Texas rentals. The determining factor for whether a rental is a
"Texas rental" is the point of possession by the client. A vehicle is "rented
in Texas" when it is delivered to the renter in Texas (renter takes possession
in Texas); the motor vehicle gross rental receipts tax must be collected on
these contracts. A vehicle is "rented outside of Texas" if the vehicle is
delivered to the renter outside of Texas or to a common carrier for
transportation to the renter outside of Texas.

The motor vehicle rental tax rate is 10% for contracts of 1-30 days. For rental
contracts in excess of 30 days, the tax rate is 6-1/4%.

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

If you have any questions, please don't hesitate to write the Tax
Administration Division or call one of our tax specialists toll free at
1-800-252-1382.

Sincerely,

J. Hale
Tax Administration Division

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