Could a Texas rental company separately charge customers for title, registration, property-tax, and toll-road costs?

Plain-English summary

The Texas Comptroller said a motor vehicle rental company could separately charge its customers for title fees, registration fees, and property taxes paid on its fleet in the preceding calendar year.

Those costs were imposed on the rental company as overhead rather than directly on the renter. To avoid presenting the charge as a tax assessment on the customer, the rental agreement had to label it as a reimbursement.

The letter also described a historical 10% motor vehicle rental tax for contracts of 30 days or less. It said the taxes and fees applied to all rental customers and were not aimed at out-of-state guests.

The Harris County toll-road charge was different: it was a user fee financing the construction, operation, and maintenance of the toll roads, without legislative tax appropriations.

What this means for you

Vehicle rental companies

The historical guidance emphasized accurate invoice labeling when passing fleet overhead to customers.

Vehicle renters and travel managers

A separately stated amount could reimburse the rental company's own costs rather than represent a tax directly imposed on the renter.

Rental fleet accountants

Keep rental tax, fleet-cost reimbursements, and toll-road user fees in separate categories.

Common questions

Q: Could the company pass through title, registration, and property-tax costs?

A: Yes, as a separately stated reimbursement.

Q: Was the reimbursement itself described as a tax on the renter?

A: No.

Q: Was the toll-road charge a tax?

A: The letter described it as a user fee used exclusively for the toll roads.

Citations and references

• The letter did not identify a statute or administrative rule by 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/9708671L

Original ruling text

August 14, 1997

Dear ***:

Thank you for your recent letter regarding taxes and fees you recently paid
when renting a motor vehicle in Texas.

There is a 10% motor vehicle rental tax assessed on the rental of a motor
vehicle when the contract is for a period of 30 days or less. Motor vehicle
rental companies may make a separate charge on each customer's rental agreement
for title fees, registration fees, and property taxes paid in the preceding
calendar year on their vehicle fleet. These are assessments made to the rental
company and become part of their overhead, cost of doing business. So that
this charge is not construed to be a tax assessment on the rental company's
customer, the invoice should show the charge to be a reimbursement.

None of the taxes or fees you encountered are intended as anti-business
practices. These assessments are made to all motor vehicle rental customers
and are not aimed at out-of-state guests.

Joan Williams of my office contacted the Harris County Toll Road Authority for
additional information regarding the toll road charge. The toll charge is a
fee used to finance, construct and run the toll roads. The roads are operated
and maintained exclusively by this user fee; no taxes appropriated by the
Legislature are involved.

Thank you again for your concerns. If you have any tax questions, please do
not hesitate to call Joan Williams in the Tax Policy Division toll free at
1-800-531-5441, extension 34663. Her direct number is 512/463-4663. For
additional information regarding toll road charges in Houston, you may contact
the Harris County Toll Road Authority at 330 Meadowfern, Suite 200, Houston,
Texas 77067. The phone number is 281/875-1400.

Sincerely,

JOHN SHARP
Comptroller of Public Accounts