How did Texas treat use tax and later title transfer when a vehicle bought and taxed in another state was brought into Texas?

Plain-English summary

The Texas Comptroller's 1998 letter addressed two separate events for a vehicle bought through the taxpayer's brother-in-law in Michigan, titled in the brother-in-law's name, taxed by Michigan, and then brought into Texas.

The letter said Texas use tax became due when the vehicle first entered Texas for use, with credit for the motor vehicle tax paid to Michigan.

It then treated the later transfer of title from the brother-in-law to the taxpayer as a $10 gift. That second result is superseded. STAR states that House Bill 2654, effective September 1, 2009, limited gift-tax eligibility to specified people and entities. The notice does not state the modern tax result for this exact relationship, so this page does not guess one.

STAR also warns that the numerical tax rate quoted in the old letter is no longer current.

What this means for you

Buyers bringing an out-of-state vehicle to Texas

Keep proof of tax legally paid to the other state. The historical letter allowed a credit against Texas use tax, but current rate and credit rules must be verified.

Family title transfers

Do not rely on the old $10 outcome. A no-consideration transfer must fit the post-2009 statutory gift categories.

Title processors

Separate the vehicle's entry into Texas from a later ownership transfer. They can be distinct taxable events with different rules.

Common questions

Q: Did the letter allow credit for Michigan tax?

A: Yes, against the Texas use tax due when the vehicle was brought into Texas.

Q: Is the letter's $10 gift-tax result still valid?

A: It is expressly superseded by the 2009 statutory change described in STAR.

Q: What is the current rate?

A: This page does not state one because STAR warns that the rate in the 1998 letter is stale.

Citations and references

• Tex. Tax Code ch. 152
• Texas House Bill 2654, 81st Legislature (effective September 1, 2009)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/9802423L

Original ruling text

ALERT: The tax rates cited in this article are no longer the current motor vehicle sales tax
or motor vehicle rental tax rates.

STAR SUPERSEDED INFORMATION

Accession No. -

Supersede type - partial

Document superseded on - 5/20/2013

Issue(s) that caused the document to be superseded - Motor vehicle gift

tax Reason(s): Statutory change - House Bill 2654, 81st Regular Legislative

Session amended Texas Tax Code Section 152 to limit the motor vehicle gift tax

to a limited group of individuals or entities. (Effective Sept. 1, 2009)

February 24, 1998

Dear Mr. **:

Thank you for your letter requesting motor vehicle tax information.

Facts: As I understand your situation, you purchased a motor vehicle in Michigan approximately one (1) year ago. The vehicle was purchased through your brother-in-law, and titled in his name. You paid for the vehicle, along with 6% Michigan motor vehicle tax. You brought the vehicle into Texas last year and are now transferring the title into your name. You ask what is the appropriate motor vehicle tax.

Response: The appropriate handling of the tax in your situation is two-fold. First, the 6-1/4% use tax was due when you first brought the vehicle into Texas for use. Credit is allowed for the tax paid to Michigan. Secondly, when you later transfer the vehicle from your brother-in-law's name into your name, the $10 gift tax is due.

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 do not hesitate to call me toll free at 1-800-531-5441, extension 34663. My direct number is 512/463-4663. You may also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Joan Hale

Tax Policy Division