Is the preservation (administrative) fee a city's auto pound charges to release an impounded vehicle subject to Texas sales tax?

Subject

Impounded Motor Vehicles — Preservation Fee Taxable as a Parking/Storage Charge

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9401L1282E05

Plain-English Summary

A taxpayer wrote to the Comptroller asking whether a "preservation fee" charged by the Auto Pound Division of a Texas city is subject to sales tax. The city's Auto Pound Division impounds motor vehicles and charges this fee as part of getting the vehicle released.

The Comptroller's answer is short and direct: sales tax is due on parking and storage fees for a motor vehicle, including the preservation fee charged for impounded vehicles. In other words, the Comptroller classified the preservation fee as a type of parking/storage charge, and parking and storage fees for motor vehicles are taxable — so the preservation fee itself is taxable.

The letter does not cite a specific statute or rule, does not break out a dollar amount, and does not explain in more detail why a preservation fee is treated as a parking/storage fee rather than, say, a fee for a nontaxable service. It simply states the conclusion and reminds the reader that the opinion is based on the facts submitted, and that other facts — even if similar — could produce a different result.

A note at the bottom of the letter indicates it carries (or is cross-referenced to) "Previous Accession Number 9402030L.2 and/or 9402030L," suggesting this ruling is linked to a related or renumbered STAR document.

What This Means For You

If you operate a municipal or private vehicle impound/auto pound facility in Texas: This letter indicates that fees you charge in connection with releasing an impounded vehicle — described here as a "preservation fee" — can be taxed as a parking or storage fee for the vehicle. Don't assume that relabeling a storage-related charge (e.g., as an "administrative" or "preservation" fee) removes it from the sales tax base; the Comptroller looked through the label to the underlying parking/storage nature of the charge.

If you are a vehicle owner charged this type of fee: The letter supports the position that sales tax on a preservation/administrative fee tied to an impounded vehicle's storage is not an error — the Comptroller has treated this specific fee as taxable.

Caveat: Because the underlying facts (how the fee is calculated, what specific services it covers, which city imposed it) are redacted, and no statute is cited, you should not assume this letter automatically covers every "preservation" or "administrative" fee an impound lot might charge. The letter states plainly that "other facts, though similar, may yield different results," so a fee structured differently could be analyzed differently.

Q&A

Q: Is the preservation fee charged by a city's Auto Pound Division subject to Texas sales tax?
A: Yes. The letter states that sales tax is due on parking and storage fees for a motor vehicle, including the preservation fee charged for impounded motor vehicles.

Q: Does this ruling explain why the preservation fee counts as a parking/storage fee?
A: No. The letter states the conclusion without walking through the reasoning or citing a specific statute or rule.

Q: Can a taxpayer with a differently structured "preservation" or "administrative" fee rely on this letter?
A: Not necessarily. The letter itself cautions that it is based on the facts submitted and that other, even similar, facts may yield different results. It was also addressed to a specific taxpayer, so under STAR's reliance rules it can only be the basis of a detrimental reliance claim for that taxpayer.

Original ruling text

January 4, 1994

Dear ***:

Thank you for your letter concerning the taxability of a preservation
fee charged by the Auto Pound Division of the City of **.

Sales tax is due on parking and storage fees for a motor vehicle
including the preservation fee charged by the City of ***
for impounded motor vehicles.

This opinion is based on the facts you submitted. Other facts, though
similar, may yield different results.

You may call me toll free at 1-800 531-5441, ext. 5-0030. The direct
line is 512/475-0030. You may also write to Tax Administration,
Comptroller of Public Accounts.

Sincerely,

David Somerville
Tax Administration Division

NOTE: Previous Accession Number 9402030L.2 and/or 9402030L