Could a Texas vehicle rental or leasing business split one retired vehicle's fair market value deduction between two replacement vehicles?

Plain-English summary

The Texas Tax Administration Division said a business selling, renting, or leasing motor vehicles could not divide one retired vehicle's fair market value deduction between two replacement vehicles.

Under Texas Tax Code § 152.002(c), the fair market value could be used only once to reduce one replacement vehicle's taxable value. Any excess value was lost rather than carried to another vehicle.

What this means for you

Vehicle rental and leasing companies

Choose the replacement vehicle against which the historical deduction will be applied; the letter did not permit splitting.

Fleet managers and accountants

Unused value could not carry forward under the ruling.

Common questions

Q: Could the deduction be split?

A: No.

Q: Could unused value be carried forward?

A: No.

Q: How many times could the retired vehicle's value be used?

A: Once.

Citations and references

• Texas Tax Code § 152.002(c) — quoted for the fair-market-value deduction.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/9408L1324G11

Original ruling text

August 16,1994

Dear**:

Your recent correspondence addressed to Tom Soto of this office has been
referred to me for response. Your letter requested a ruling on a particular
motor vehicle sales tax issue. The facts you submitted are restated below,
followed by your ruling request and our response.

Facts: Taxpayer is in the business of renting or leasing motor vehicles.
Taxpayer obtains the title to motor vehicle 1 (a Texas titled vehicle) and
leases the vehicle to a customer. Motor vehicle 1 has a Texas certificate of
title. The taxpayer later purchases motor vehicles 2 and 3 as replacements for
motor vehicle 1 (which is offered for sale). Taxpayer would like to apply the
fair market value of motor vehicle 1 to reduce the taxable values of motor
vehicles 2 and 3 (for motor vehicle tax purposes).

Ruling Request: You ask if the fair market value of motor vehicle 1 may be
split between motor vehicles 2 and 3 in order to take full credit for the
replaced motor vehicle.

Response: 152.002(c) allows that "A person who is in the business of selling,
renting, or leasing motor vehicles, who obtains the certificate of title to a
motor vehicle, and who uses that motor vehicle for business or personal
purposes may deduct its fair market value from the total consideration paid for
a replacement vehicle....". There is no allowance for the fair market value to
be split between two replacement vehicles. The statute allows that the fair
market value of a vehicle may be used only once in reducing the taxable value
of a replacement vehicle. Any excess value cannot be carried forward to other
vehicles.

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

If you have any questions, you may call me at 463-4663. You may also write to
Tax Administration, Comptroller of Public Accounts.

Sincerely,

Joan Hale
Tax Administration Division

NOTE: Previous Accession Number 9408720L