Who collects Texas tax when a storage facility auctions vehicles for the U.S. Marshals Service, and how are salvage vehicles treated?

Plain-English summary

The Texas Comptroller's 1997 letter treated a storage-lot auction as involving two distinct transactions: taxable parking or storage services and the separate sale of a vehicle.

For a taxable motor vehicle auctioned by an auctioneer acting for the U.S. Marshals Service, the letter said the Marshals Service was not a licensed dealer and the auctioneer therefore did not collect motor vehicle sales tax. The buyer received title paperwork and paid the applicable motor vehicle tax to the county when registering.

A salvage vehicle was different. The letter treated it as tangible personal property rather than a motor vehicle, so the auctioneer collected limited sales tax or accepted a resale certificate.

The towing-policy portion is superseded. STAR says the statement was inaccurate and points to STAR 200807143L. This page therefore does not repeat the old proportional towing/storage tax examples as current guidance.

What this means for you

Vehicle auctioneers

Identify the seller's dealer status and the vehicle's title classification. Those facts determined whether the auctioneer collected limited sales tax, transferred paperwork for county motor vehicle tax, or accepted resale documentation.

Storage facilities

Do not rely on the 1997 fee-allocation examples. STAR expressly replaced the towing policy in 2008.

County tax offices

Under the historical Marshals scenario, the purchaser paid motor vehicle tax at registration because the government seller was not a licensed dealer collecting it at auction.

Common questions

Q: Did the U.S. Marshals auctioneer collect motor vehicle tax?

A: Not under the stated facts; the buyer paid at county registration.

Q: How was a salvage vehicle treated?

A: As tangible personal property subject to limited sales tax, unless bought for resale with a resale certificate.

Q: Are the towing and storage examples current?

A: No. STAR expressly superseded the towing policy and identifies STAR 200807143L as the later guidance.

Citations and references

• The letter cites no specific statute or administrative rule.
• STAR 200807143L is named by the supersession notice as later towing guidance; no unverified internal link is supplied.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/9701001L

Original ruling text

NOTE: This document is also indexed as a sales tax document as STAR 9701255L.

STAR SUPERSEDED INFORMATION

Accession No. -

Supersede type - partial

Document superseded on - August 22, 2008

Issue that caused the document to be superseded - Towing

Reason - Inaccurate statement of policy. For current statement of policy please refer to Accession No. 200807143L

January 17, 1997

Dear **:

Thank you for your letter of December 31, 1996, concerning the tax due on motor vehicles sold at public auctions by storage facilities.

You asked that the taxability under the following scenarios be addressed:

1. Vehicles that are taken into custody by a police department of which the storage facility is an agent of the police department by contract and/or city ordinance.

Response. I think it is important that we realize that there are two transactions in each of these scenarios. The first is the provision of taxable motor vehicle parking or storage fees. The second is the sale of the motor vehicle at auction. The sale of the motor vehicle is subject to motor vehicle sales tax unless it is sold on a salvaged title (subject to sales tax) or sold to a dealer for resale.

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 the auctioneer is acting as an agent for the U.S. Marshals Service (who is not a licensed dealer), they would not be obligated to collect the motor vehicle sales tax on the motor vehicle sales. They would be required to provide to the purchaser the paperwork needed for the purchaser to transfer title and pay the tax. The purchaser of the vehicle would pay applicable motor vehicle taxes on the total sales price when registering it with the county.

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 sold by the auctioneer, they must collect limited sales tax or secure a resale certificate from the purchaser.

The amount of tax that is due on the taxable storage or parking fees will depend upon how much is collected from the public auction. Let me answer by the following examples:

If a storage lot operator has an unpaid bill for $45 wrecker fee, $212.25 storage fee, which includes tax ($200 + $12.25 tax) and $25 legal fees (fees to send letter of notices to vehicle owner) or a total unpaid bill of $282.25.

If this vehicle is sold for $300 at public auction (less $10 fee to the auctioneer) -- tax is due on the entire amount $200 or $12.25 tax) and should be reported.

If the vehicle only brings $200 at the public auction -- then you should report and pay this tax proportionately to the total unpaid bill. For example: the total unpaid bill was $282.25, you received $190 ($200 less $10 auction fee) then only sixty-seven percent (67%) on the tax is due ($190/$282.25) or $8.21 (67% x $12.25)

If you do not receive a bid at this public auction or you buy this vehicle yourself, no tax would be due.

Even though you have stored the vehicle at the request of the city (a tax exempt entity), the storage charges are considered paid by the vehicle's owner (a taxable entity) when you receive auction payouts. Any amounts received directly from the city or other political subdivision are exempt.

2. Vehicles that are stored at the request of a private property owner and then sold at auction.

Response. Same as first response.

3. If a vehicle in l or 2 is sold at auction and the vehicle sells for more than the towing and notification charges is there tax on the amount over those charges.

Response. The buyer of the motor vehicle will owe motor vehicle tax on the entire purchase price unless they are a motor vehicle dealer purchasing for resale. All taxes on taxable storage charges will be due. Additional sales tax will not be due on overages generated by the auction of a motor vehicle.

4. If a political sub-division stores its vehicles taken into custody by its police department and charges storage, is tax due on the storage of those vehicles if released back to the owner. Is there tax on the overage of the charges collected at a political sub-division auction of those vehicles as compared to number l or 2.

A. To explain this a little farther, when a vehicle is sold at auction to a motor vehicle dealer, tax is not collected on storage because that dealer sells the vehicle and transfers it to the owner and motor vehicle tax is collected. If it is sold to a salvage yard, sales tax is collected when a part is sold off of that vehicle.

B. Vehicles that are sold at auctions are sold by definition to be a motor vehicle and motor vehicle tax is collected by the county of registration, if tax is due on the storage also that would be double taxation. Vehicles are sold at auction not storage.

Response. There is no double taxation. There are two independent transactions in each of these scenarios. The first is the provision of taxable motor vehicle parking or storage fees. The second is the sale of the motor vehicle at auction. The proceeds of one transaction is simply used to satisfy the debt of another. Once again, tax would not be due when you receive storage fees paid directly be check of a political subdivision.

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

You may call me toll free at 1-800-531-5441, ext. 5-0613. The direct line is 512/475-0613. You may also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Kevin Koller

Tax Policy Division