SECTION 3.64. Motor Vehicle Transferred on Incorporation

(a) Except as provided in subsection (b) of this section, motor vehicle sales and use tax is due upon the transfer of title to a motor vehicle between corporations or between a corporation and an individual or a partnership. Taxable transfers include those between parent and subsidiary corporations, and the purchase by one corporation of the entire assets, including motor vehicles, of another corporation.

(b) The following are exceptions to the principle stated in subsection (a) of this section.

(1) Initial incorporation-change in form of doing business. Motor vehicle sales and use tax is not due if, in connection with the incorporation of a partnership or sole proprietorship, title to a motor vehicle is transferred from the partnership or proprietorship into the new corporation's name for no consideration other than stock in the new corporation.

(2) Formation of a subsidiary corporation. Motor vehicle sales and use tax is not due if, in connection with the initial incorporation of a subsidiary, title to a motor vehicle is transferred from the parent corporation or another subsidiary corporation into the name of the new subsidiary for no consideration other than stock in the new corporation.

(3) Dividend. Under present law, a corporation may declare a dividend in the form of cash or other property. Motor vehicle sales and use tax is not due on the transfer to a shareholder of title to a motor vehicle pursuant to a corporation's formal declaration of the motor vehicle as a dividend.

(4) Dissolution. Motor vehicle sales and use tax is not due upon the transfer of title to a motor vehicle into a shareholder's name in connection with the distribution of assets upon formal dissolution of a corporation. However, for purposes of this rule, forfeiture of a corporate charter for nonpayment of franchise taxes does not constitute formal dissolution; therefore, all transfers of motor vehicles to shareholders upon forfeiture of the corporate charter will be subject to the motor vehicle sales and use tax.

(5) Merger or consolidation. Motor vehicle sales and use tax is not due upon the transfer of title to a motor vehicle into the name of a surviving corporation when such transfer is made pursuant to a statutory merger or consolidation of two or more corporations.

Source Note: The provisions of this §3.64 adopted to be effective January 1, 1976; amended to be effective August 8, 1979, 4 TexReg 2592.