Did a contractor auctioning seized vehicles for the U.S. Marshals Service have to collect Texas motor vehicle or salvage-vehicle tax?

Plain-English summary

The Texas Comptroller addressed a contractor acting for the U.S. Marshals Service in public auctions of seized vehicles.

Because the contractor acted as agent for the Marshals Service, which was not a licensed motor vehicle dealer, the contractor did not have to collect motor vehicle sales tax on ordinary vehicle sales. It did have to give the purchaser the documents needed to transfer title and pay tax.

The result differed for salvage vehicles. Effective January 1, 1996, the letter said a salvage vehicle was no longer considered a motor vehicle and was taxed as tangible personal property. The contractor therefore had to collect sales tax or obtain a resale certificate from the purchaser.

What this means for you

Government contractors and vehicle auction companies

The historical collection duty depended on whether the sale involved an ordinary motor vehicle or salvage property and on the principal's dealer status.

Salvage vehicle sellers

The letter required sales-tax collection or a resale certificate for salvage vehicles.

Common questions

Q: Did the contractor collect motor vehicle tax on ordinary seized vehicles?

A: No, under the described agency relationship.

Q: Did the buyer still need to pay tax?

A: The contractor had to provide paperwork enabling title transfer and tax payment.

Q: What did the contractor do on salvage sales?

A: Collect sales tax or obtain a resale certificate.

Citations and references

• The letter referred to an enclosed tax bulletin without identifying its 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/9602001L

Original ruling text

NOTE: This document is also indexed as a sales tax document as STAR 9602L1397G09.

February 26, 1996

Dear**:

I have received your letter requesting tax information.

Facts: Your corporation is under contract with the U.S. Marshals Service to tow, store and dispose of seized motor vehicles in Texas. You have been performing this function for approximately 8 years. The vehicles are sold by open, verbal auction methods to the public. The government determines some vehicles to be sold as salvage to licensed salvage dealers only.

Question: Since the recent change in the tax law regarding tax collection (effective January 1, 1996), you ask what your obligation is to collect sales tax on the sale of these vehicles.

Response: I am enclosing a copy of a tax bulletin regarding these specific changes. It outlines the tax collection responsibilities of a licensed motor vehicle dealer, as well as anyone selling salvage vehicles. Effective January 1, 1996, all licensed motor vehicle dealers (licensed through the Texas Department of Transportation) are required to collect and remit motor vehicle sales tax on taxable sales of a motor vehicle. If you are acting as an agent for the U.S. Marshals Service (who is not a licensed dealer), you would not be obligated to collect the motor vehicle sales tax on the motor vehicle sales. You would be required to provide to the purchaser the paperwork needed for the purchaser to transfer title and pay the tax.

Also effective January 1, 1996, a salvage vehicle is no longer considered a motor vehicle. It is treated and taxed the same as any other tangible personal property. For any salvage vehicles you sell, you must collect limited sales tax or secure a resale certificate from the purchaser.

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 call one of our tax specialists toll free at 1-800-252-1382. The direct number is 512/463-4600. You may also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Joan Hale

Tax Policy Division

NOTE: Previous Accession Number 9602069L