Did Texas motor vehicle tax apply when trucks and trailers were transferred to newly formed corporations for stock and then to new partnerships for interests?

Plain-English summary

The Texas Comptroller approved a two-step transfer of trucks and trailers within a newly formed corporate and partnership structure without motor vehicle tax.

First, the existing company would transfer vehicles to newly formed subsidiaries when they were incorporated, receiving no consideration other than stock in those corporations. Second, the subsidiaries would transfer the vehicles to newly formed partnerships, receiving no consideration other than partnership interests.

No tax was due on either formation-stage transfer under the letter. The original company would ultimately hold a 100% interest in the partnerships because it wholly owned all of the partners.

The Comptroller separately stated that transferring a vehicle apportioned for interstate use was exempt from Texas motor vehicle tax.

What this means for you

Corporate tax departments

The result depended on transfers at formation and consideration limited to stock or partnership interests. Different timing or additional consideration could change the answer.

Transportation companies

The letter provided a separate exemption statement for vehicles apportioned for interstate use.

Fleet managers

Preserve incorporation, partnership-formation, ownership, consideration, title, and apportioned-registration records for each vehicle.

Common questions

Q: Was the transfer to a new corporation taxable?

A: No, where the only consideration was stock in that corporation.

Q: Was the transfer to a new partnership taxable?

A: No, where the only consideration was an interest in that partnership.

Q: Were apportioned interstate vehicles exempt?

A: Yes, according to the letter.

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/9906509L

Original ruling text

June 28, 1999

Dear Mr. *:

Thank you for your request for motor vehicle tax information.

As I understand from your letter and our telephone conversation, your client is
in the business of delivering petroleum and petrochemical products across the
United States. This client owns various terminals and wants to transfer trucks
and trailers for no consideration other than stock to newly formed subsidiaries
(upon incorporation). These subsidiaries would in turn transfer the trucks and
trailers to one or more partnerships upon formation (again for no consideration
other than partnership interest). Your client would ultimately have a 100%
interest in the partnerships that own the trucks and trailers, as all of the
partners are 100% owned subsidiaries. You ask if tax is due on any of these
transfers.

As we discussed, no tax is due when a vehicle is transferred to a newly formed
corporation for no consideration other than stock in the corporation, or when a
vehicle is transferred to a newly formed partnership for no consideration other
than interest in the partnership. In addition, the transfer of a vehicle
apportioned for interstate use is exempt from Texas motor vehicle tax.

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

If you have any questions, please do not hesitate to call one of our tax
specialists toll free at 1-800-252-5555. 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