SECTION 3.74. Seller Responsibility

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Application for Texas Title and/or Registration--Form 130-U, its electronic equivalent, or a successor form, promulgated jointly by the comptroller and the Texas Department of Motor Vehicles, used to apply for a motor vehicle title and registration and to pay any motor vehicle sales or use tax due. The Application for Texas Title and/or Registration is available at comptroller.texas.gov.

(2) Cash discount--An actual reduction of the price required to be paid by the purchaser to the dealer. The term includes, but is not limited to, separately stated manufacturers' rebates, dealers' rebates, and cash rebates passed directly to the purchaser at the time of sale, and discounts allowed for payment within a specified time.

(3) Date of sale--The day the purchaser takes possession of a motor vehicle unless otherwise specified by written agreement.

(4) Dealer--A person who holds a general distinguishing number or operates under similar regulatory requirements of another state or jurisdiction. The term includes a franchised motor vehicle dealer, a nonfranchised motor vehicle dealer, an independent mobility motor vehicle dealer, and a wholesale motor vehicle dealer. The term does not include a salvage vehicle dealer licensed under Occupations Code, Chapter 2302 (Salvage Vehicle Dealers).

(5) Distributor--A person, other than a manufacturer, who:

(A) distributes or sells new motor vehicles to a franchised motor vehicle dealer; or

(B) enters into franchise agreements with franchised motor vehicle dealers, on behalf of the manufacturer.

(6) Extended warranty or service contract--A policy sold to the purchaser of a motor vehicle for an additional amount, the provisions of which become effective after the manufacturer's warranty expires.

(7) Franchised motor vehicle dealer--A person who:

(A) holds a franchised motor vehicle license issued under Occupations Code, Chapter 2301 (Sale or Lease of Motor Vehicles); and

(B) is engaged in the business of buying, selling, or exchanging new motor vehicles at an established and permanent place of business under a franchise agreement with a manufacturer or distributor; or

(C) is licensed under similar regulatory requirements of another state or jurisdiction.

(8) General distinguishing number--A dealer license issued by the Texas Department of Motor Vehicles under Transportation Code, Chapter 503 (Dealer's and Manufacturer's Vehicle License Plates).

(9) Independent mobility motor vehicle dealer--A dealer who is not a franchised motor vehicle dealer who:

(A) holds a general distinguishing number issued by the Texas Department of Motor Vehicles;

(B) holds a converter's license issued under Occupations Code, Chapter 2301;

(C) is engaged in the business of buying, selling, or exchanging mobility motor vehicles defined by Occupations Code, §2301.002(20-a) (Definitions) and servicing or repairing the devices installed on mobility motor vehicles at an established and permanent place of business in Texas; and

(D) is certified by the manufacturer of each mobility device that the dealer installs, if the manufacturer offers that certification.

(10) Lease--An agreement other than a rental, by an owner of a motor vehicle to give for longer than 180 days exclusive use of a motor vehicle to another for consideration. For more information on motor vehicle leases, see §3.70 of this title (relating to Motor Vehicle Leases and Sales).

(11) Manufacturer--A person who manufactures or assembles new motor vehicles and holds a manufacturer's license issued under Occupations Code, §2301.259 (Application for Manufacturer's License). The term does not include a person operating only as an ambulance manufacturer, chassis manufacturer, fire-fighting vehicle manufacturer, motor home manufacturer, or a converter as those terms are defined in Occupations Code, §2301.002 (Definitions).

(12) Motor vehicle--A vehicle described by Tax Code, §152.001(3) (Definitions). In general, a motor vehicle includes a self-propelled vehicle designed to transport persons or property upon the public highway and a vehicle designed to be towed by a self-propelled vehicle while carrying property. The term includes, but is not limited to: automobiles; buses; vans; motor homes; motorcycles; trucks and truck tractors; truck cab and chassis; semitrailers; trailers and travel trailers, as defined by §3.72 of this title (relating to Trailers, Farm Machines, and Timber Machines); trailers sold unassembled in a kit; dollies; jeeps; stingers; auxiliary axles; converter gears; and park models, as defined by §3.481 of this title (relating to Imposition and Collection of Manufactured Housing Tax). The term does not include a vehicle to which the certificate of title has been surrendered in exchange for a salvage vehicle title or a nonrepairable vehicle title issued under Transportation Code, Chapter 501 (Certificate of Title Act).

(13) New motor vehicle--A motor vehicle that, without regard to mileage, has not been the subject of a retail tax.

(14) Nonfranchised dealer--A person who holds an independent motor vehicle dealer's general distinguishing number, an independent mobility motor vehicle dealer's general distinguishing number, or a wholesale motor vehicle dealer's general distinguishing number issued by the Texas Department of Motor Vehicles.

(15) Related finance company--A person in which at least 80% of the ownership is identical to the ownership of a dealer, as defined by Transportation Code, §503.001 (Definitions).

(16) Rental--An agreement:

(A) by the owner of a motor vehicle to give exclusive use of that motor vehicle to another for consideration, for a period of time not to exceed 180 days under any one agreement;

(B) by an original manufacturer of a motor vehicle to give exclusive use of the motor vehicle to another for consideration; or

(C) by the owner of a motor vehicle to give exclusive use of the motor vehicle to another for re-rental purposes, regardless of the period of time covered by the agreement.

(17) Retail sale--A sale of a motor vehicle other than:

(A) a sale for resale; or

(B) a sale for lease, meaning a sale to a franchised motor vehicle dealer of a new motor vehicle removed from the franchised motor vehicle dealer's inventory for the purpose of entering into a contract to lease the motor vehicle to another person if, within seven days of executing the lease contract, the franchised motor vehicle dealer transfers title of the motor vehicle and assigns the lease contract to the lessor of the motor vehicle. If the title is not transferred and the lease assigned within seven calendar days, the dealer's purchase and use will be presumed to be a retail purchase and taxable. The presumption may be overcome by showing evidence of intent.

(18) Sale for resale--The sale of a motor vehicle to a purchaser who acquires the motor vehicle either for the exclusive purpose of sale in a manner provided by law, or for purposes allowed by the Texas Department of Motor Vehicles under Transportation Code, Chapter 503, when the purchaser is:

(A) a distributor;

(B) a manufacturer;

(C) a franchised motor vehicle dealer who is authorized by law and by a franchise agreement to offer a motor vehicle for sale as a new motor vehicle; or

(D) a nonfranchised motor vehicle dealer who is authorized by law to offer a motor vehicle for sale as a used motor vehicle.

(E) The following are examples of uses allowed under Transportation Code, Chapter 503, that do not disqualify a purchase as a sale for resale:

(i) when a dealer uses the motor vehicle on public highways with a metal dealer's plate issued under Transportation Code, §503.061 (Dealer's License Plates);

(ii) when a manufacturer or distributor removes a motor vehicle from its inventory and tests the motor vehicle on public highways with a manufacturer's plate issued under Transportation Code, §503.064 (Manufacturer's License Plates); and

(iii) when a manufacturer or distributor loans the motor vehicle to a consumer for a purpose described by Occupations Code, §2301.605 (Rebuttable Presumption--Reasonable Number of Attempts).

(19) Seller-financed sale--A retail sale of a motor vehicle by a dealer in which the selling dealer collects all or part of the total consideration in periodic payments and retains a lien on the motor vehicle until all payments have been received. The term does not include a:

(A) retail sale of a motor vehicle in which a person other than the seller provides the total consideration for the sale and retains a lien on the motor vehicle as collateral;

(B) lease; or

(C) rental.

(20) Seller-financed sales tax report--The Texas Motor Vehicle Seller-Financed Sales Tax Report, Form 14-117, its electronic equivalent, or a successor form, promulgated by the comptroller. The seller-financed sales tax report is available at comptroller.texas.gov.

(21) Texas Registration for Motor Vehicle Related Finance Company--Form AP-222, its electronic equivalent, or a successor form, promulgated by the comptroller, used to apply for a related finance company registration. Texas Registration for Motor Vehicle Related Finance Company is available at comptroller.texas.gov.

(22) Total consideration--

(A) The amount paid or to be paid for a motor vehicle and its accessories attached on or before the sale, without deducting:

(i) the cost of the motor vehicle;

(ii) the cost of material, labor or service, interest paid, loss, or any other expense;

(iii) the cost of transportation of the motor vehicle before its sale; or

(iv) the amount of manufacturers' or importers' excise tax imposed on the motor vehicle by the United States.

(B) The amount paid or to be paid includes anything of monetary value, such as cash or the equivalent; a book entry reflecting cash received or paid; the forgiveness or assumption of debt; book entries reflecting accounts receivable or accounts payable for an item; the performance of a service; or real or tangible personal property.

(C) The term does not include:

(i) separately stated cash discounts;

(ii) a full cash or credit refund to a customer of the sales price of, meaning the amount paid for, a motor vehicle that the customer returns to the seller;

(iii) the amount charged for labor or service rendered in installing, applying, remodeling, or repairing the motor vehicle sold;

(iv) separately stated finance or interest charges on credit extended under a conditional sale or other deferred payment contract;

(v) the value of a motor vehicle taken by a seller as all or a part of the consideration for sale of another motor vehicle;

(vi) the fair market value of a motor vehicle titled in Texas in the name of a dealer or a person who is in the business of renting or leasing motor vehicles, as provided by §3.73 of this title (relating to Qualifying for Fair Market Value Deduction and Determination of Fair Market Value for Replaced Vehicles);

(vii) a charge for transportation of the motor vehicle after the sale of the motor vehicle;

(viii) motor vehicle inventory tax, separately stated charges to prepare and process documents related to the transfer of a motor vehicle, fees to register and/or apply for a certificate of title, fees or charges prescribed by law in connection with the sale or inspection of the motor vehicle, and any additional fees charged by the deputy of a county tax assessor-collector; or

(ix) separately stated charges for the sale of an extended warranty, maintenance agreement, service contract, insurance, automobile club membership, roadside assistance program, or a debt cancellation agreement.

(23) Wholesale motor vehicle dealer--A dealer who sells motor vehicles only to persons who hold a dealer's general distinguishing number.

(b) Motor vehicle seller-financed sales tax permit. Every dealer making seller-financed sales must apply to the comptroller and obtain a Motor Vehicle Seller-Financed Sales Tax Permit.

(1) To obtain a permit, the dealer must complete a Texas Application for Motor Vehicle Seller-Financed Sales Tax Permit, Form AP-169, its electronic equivalent, or its successor, promulgated by the comptroller. The application is available at comptroller.texas.gov.

(2) A separate permit is not required for each location. The comptroller issues one Motor Vehicle Seller-Financed Sales Tax Permit to each dealer making seller-financed sales, regardless of the number of locations or dealerships the dealer operates.

(3) Each dealer (corporation, partnership, sole proprietor, etc.) must apply for its own permit. The permit cannot be transferred from one dealer to another.

(c) Collection and remittance of motor vehicle tax.

(1) Seller-financed sales.

(A) A dealer who makes a seller-financed sale must apply to the appropriate county tax assessor-collector to title and register the motor vehicle by filing an Application for Texas Title and/or Registration no later than the 45th day after the date the motor vehicle is delivered to the purchaser.

(B) A dealer making a seller-financed sale must also:

(i) collect and remit motor vehicle tax on the total consideration for the motor vehicle at the time the Application for Texas Title and/or Registration is presented to the county tax assessor-collector; or

(ii) collect and remit the motor vehicle tax to the comptroller as the payments are received, as explained in subsection (d) of this section. A dealer making a seller-financed sale must include its 11-digit Seller-Financed Sales Tax Permit Number on the Application for Texas Title and/or Registration if the dealer intends to remit the motor vehicle tax on a report to the comptroller instead of remitting the motor vehicle tax at the time the Application for Texas Title and/or Registration is presented to the county tax assessor-collector.

(2) Retail sales other than seller-financed sales.

(A) A dealer must collect motor vehicle tax on each retail sale, unless an exemption applies. The tax is imposed on the total consideration for the motor vehicle.

(B) The dealer must remit the motor vehicle tax due to the appropriate county tax assessor-collector at the time the dealer submits the Application for Texas Title and/or Registration. Motor vehicle tax is due within 30 calendar days after the date of the sale.

(C) A dealer is not required to collect motor vehicle tax on the sale of a motor vehicle with a gross weight in excess of 11,000 pounds. If the dealer does not collect the motor vehicle tax, the dealer must provide the purchaser with an Application for Texas Title and/or Registration, signed by both the dealer and purchaser, and all other documents required by the Texas Department of Motor Vehicles to apply for title or register the motor vehicle. The purchaser must remit motor vehicle tax to the county tax assessor-collector within 30 calendar days after the date of sale.

(D) If a dealer sells a commercial motor vehicle that is required to be equipped with a body or other necessary equipment before the motor vehicle can be registered under the Transportation Code, then the dealer must remit the motor vehicle tax within 30 calendar days after the date on which the motor vehicle becomes eligible for registration.

(3) The dealer must retain copies of the documentation provided to the purchaser and all other records pertaining to the sale. The specific records each dealer is required to keep are listed in Tax Code, §152.063 (Records) and §152.0635 (Records of Certain Sellers). The dealer must keep the records for a minimum of four years from the date on which the record is made, and throughout any period in which any tax, penalty, or interest may be assessed, collected, or refunded by the comptroller or in which an administrative hearing or judicial proceeding is pending, unless the comptroller authorizes in writing a shorter retention period.

(4) The motor vehicle tax due is 6.25% of the total consideration. Except as provided in paragraph (2)(C) of this subsection, the motor vehicle tax is a debt of the purchaser to the dealer until paid. Unpaid motor vehicle tax is recoverable by the dealer in the same manner as the total consideration for the motor vehicle, if unpaid, would be recoverable. The comptroller may proceed against either the dealer or purchaser, or both, until all applicable motor vehicle tax, penalty, and interest due has been paid.

(d) Remittance of motor vehicle tax on seller-financed sales as payments are received.

(1) Each dealer making seller-financed sales who collects motor vehicle tax as the payments are received from the purchaser must remit the motor vehicle tax collected to the comptroller on or before the 20th day of the month following each reporting period. The dealer must file a consolidated report with the comptroller, together with the motor vehicle tax collected for seller-financed sales made at all locations owned by the dealer.

(2) The dealer must file a consolidated seller-financed sales tax report for seller-financed sales made at all locations owned by the dealer, together with the motor vehicle tax collected. The report must be signed by the dealer or the dealer's authorized agent. The fact that the dealer does not receive the form or does not receive the correct form from the comptroller for the filing of the report does not relieve the dealer of the responsibility of filing a report and remitting motor vehicle tax. The report is available at comptroller.texas.gov.

(3) A dealer making seller-financed sales may file reports and remit motor vehicle tax electronically, such as through Webfile at comptroller.texas.gov. Dealers who paid $100,000 or more in motor vehicle tax to the comptroller during the preceding fiscal year must remit motor vehicle tax electronically, as provided by Tax Code, §111.0625 (Electronic Transfer of Certain Payments). Dealers who paid $50,000 or more to the comptroller during the preceding fiscal year must file report data electronically, as provided by Tax Code, §111.0626 (Electronic Filing of Certain Reports). For more information on electronic filing and payments, see §3.9 of this title (relating to Electronic Filing of Returns and Reports; Electronic Transfer of Certain Payments by Certain Taxpayers).

(4) A dealer completing a seller-financed sales tax report must allocate the motor vehicle tax paid on a motor vehicle to the county in which the dealer submitted the Application for Texas Title and/or Registration for the vehicle.

(5) A dealer who remits less than readtac$ext.TacPage?sl=T&app=9&p_dir=F&p_rloc=199016&p_tloc=19539&p_ploc=9808&pg=3&p_tac=&ti=34&pt=1&ch=3&rl=74,500 in motor vehicle tax per quarter may file reports quarterly. The quarterly reporting periods end on March 31st, June 30th, September 30th, and December 31st.

(6) A dealer who remits readtac$ext.TacPage?sl=T&app=9&p_dir=F&p_rloc=199016&p_tloc=19539&p_ploc=9808&pg=3&p_tac=&ti=34&pt=1&ch=3&rl=74,500 or more in motor vehicle tax per quarter must file monthly reports, except a dealer making seller-financed sales who chooses to prepay the motor vehicle tax, as provided in paragraph (7) of this subsection.

(7) Discounts and prepayments of the motor vehicle tax.

(A) Each dealer making seller-financed sales may claim a discount for timely filing a seller-financed sales tax report and remitting motor vehicle tax due as reimbursement for the expense of collecting and remitting the motor vehicle tax. The discount is equal to 0.5% of the amount of the motor vehicle tax due and may be claimed on the report for each reporting period. The discount is computed on the amount of motor vehicle tax timely reported and remitted for each reporting period.

(B) A dealer making seller-financed sales who makes a timely prepayment of at least 90% of the total amount of motor vehicle tax currently due, or an amount equal to the actual motor vehicle tax liability due and paid for the same reporting period of the immediately preceding year, may retain an additional 1.25% of the amount of motor vehicle tax due.

(i) The monthly prepayment must be made on or before the 15th day of the month for which the tax is due.

(ii) The quarterly prepayment must be made on or before the 15th day of the second month of the quarter for which the tax is due.

(iii) The dealer must file a seller-financed sales tax report showing the actual liability and remit any amount due in excess of the prepayment on or before the 20th day of the month following the quarter or month for which a prepayment was made.

(iv) If there is an additional amount due when the seller-financed sales tax report is filed, the dealer may claim the 0.5% discount for timely filing, including on the additional amount of motor vehicle tax due, provided that both the seller-financed sales tax report and the additional amount of motor vehicle tax due are filed timely. If the prepayment exceeded the actual liability, the dealer will be mailed a notice of overpayment or a refund warrant.

(v) A remittance that is less than 90% of the total amount of motor vehicle tax currently due, or less than the amount of actual motor vehicle tax due and paid for the same reporting period of the immediately preceding year, is not a valid prepayment and the 1.25% discount will not be allowed.

(8) Penalties and interest.

(A) If a dealer does not file a seller-financed sales tax report together with payment on or before the due date, the dealer forfeits all discounts and incurs a mandatory 5.0% penalty. After the first 30 days delinquency, an additional mandatory penalty of 5.0% is assessed against the dealer. After the first 60 days delinquency, interest begins to accrue at the prime rate, as published in the Wall Street Journal on the first business day of each calendar year, plus 1.0%.

(B) A dealer who fails to timely file a seller-financed sales tax report when due must pay an additional penalty of $50. The penalty is due regardless of whether motor vehicle taxes are due for the reporting period.

(e) General principles of seller-financed sales.

(1) The total downpayment is subject to motor vehicle tax unless the payment is itemized to indicate nontaxable charges.

(2) If the finance agreement bears interest, it is presumed that interest accrues and is paid by the purchaser on a straight line basis.

(3) A transaction is considered paid in full when the purchaser of a seller-financed motor vehicle trades-in that motor vehicle to the dealer as consideration for the purchase of another motor vehicle from the same dealer. The remainder of motor vehicle tax owed on the initial sale must be reported on the first seller-financed sales tax report due no later than the 20th day of the month following the end of the reporting period in which the trade-in occurred.

(4) Motor vehicle tax remitted to the county tax assessor-collector at the time the Application for Texas Title and/or Registration is submitted is considered to satisfy the tax liability for that transaction and no refund is available if the purchaser fails to satisfy their total liability to the dealer making the seller-financed sale.

(5) If a dealer making a seller-financed sale fails to submit the Application for Texas Title and/or Registration to apply for title and registration within 60 days from the date of sale, the dealer becomes liable for all unremitted motor vehicle tax based on the total consideration for the motor vehicle. The dealer must remit all unremitted motor vehicle tax on the first seller-financed sales tax report due no later than the 20th day of the month following the end of the reporting period in which the expiration of the 60 days occurred.

(6) Unless excluded from acceleration of motor vehicle tax by paragraph (7) of this subsection, if the dealer sells, factors, assigns, or otherwise transfers the right to receive payments on a seller-financed sale, the dealer is liable for all unremitted motor vehicle tax due on the total consideration for the motor vehicle. The dealer must report and remit any motor vehicle tax due on the seller-financed sales tax report due no later than then 20th day of the month following the end of the reporting period in which the transfer of the right to receive payments occurred. The dealer may not take a deduction in the amount of motor vehicle tax due, even if the dealer sells the right to receive payments at a discount or grants the purchaser of the notes a right of recourse.

(7) Motor vehicle tax remittance does not accelerate if a dealer sells, factors, assigns, or otherwise transfers the right to receive payments on a seller-financed sale to a person registered with the comptroller's office as a related finance company or when the dealer grants a security interest in a purchaser's account, but retains custody and control of the account and the right to receive payments in the absence of a default under the security agreement.

(8) If the dealer remits the motor vehicle tax due in accordance with paragraph (6) of this subsection, and the motor vehicle purchaser fails to make payments to the dealer's transferee or assignee, then no bad debt deduction for any amount that the transferee or assignee determines to be uncollectible on the purchaser's account may be taken against any motor vehicle tax that the transferee or assignee may owe.

(f) Registration of related finance companies.

(1) To register with the comptroller's office as a related finance company, a person must complete a Texas Registration for Motor Vehicle Related Finance Company.

(2) The registration remains in effect until canceled by the registration holder or the comptroller.

(g) Resale certificates and exemption documentation.

(1) A seller may accept a Texas Motor Vehicle Resale Certificate, Form 14-313, its electronic equivalent, or its successor, promulgated by the comptroller only from a dealer as defined in this section. A motor vehicle resale certificate for the sale of a new motor vehicle purchased for resale may only be accepted from a franchised motor vehicle dealer. To be valid, the motor vehicle resale certificate must show the dealer license issued under Transportation Code, Chapter 503. The resale certificate is available at comptroller.texas.gov. See §3.95 of this title (relating to Motor Vehicle Sales Tax Resale Certificate; Sales for Resale).

(2) A seller may accept a properly completed Texas Motor Vehicle Sales Tax Exemption Certificate--For Vehicles Taken Out of State, Form 14-312, its electronic equivalent, or its successor, promulgated by the comptroller, in lieu of collecting tax on motor vehicles that will be removed from this state without being operated other than to remove the motor vehicle from this state. The exemption certificate is available at comptroller.texas.gov. See §3.90 of this title (relating to Motor Vehicles Purchased for Use Outside of Texas).

(3) A purchaser claiming an exemption on the purchase of a motor vehicle that qualifies for an exemption under Tax Code, Chapter 152, Subchapter E, must indicate the exemption claimed on the Application for Texas Title and/or Registration at the time of purchase. The Application for Texas Title and/or Registration noting the exemption claimed is submitted to the county tax assessor-collector in lieu of tax.

(h) Unremitted tax paid to seller, transfer of certificate of title.

(1) A county tax assessor-collector may accept an Application for Texas Title and/or Registration without the payment of motor vehicle tax from a purchaser who paid the motor vehicle tax to a dealer who failed to remit the motor vehicle tax as described in subsection (c) of this section.

(2) The purchaser must present acceptable evidence of motor vehicle tax payment at the time an Application for Texas Title and/or Registration is submitted to the county tax assessor-collector. Acceptable evidence includes, but is not limited to, a sales contract or bill of sale that identifies the dealer and the amount of motor vehicle tax paid.

(3) The Application for Texas Title and/or Registration must contain the dealer's Motor Vehicle Seller-Financed Sales Tax Permit number (if applicable and available) and must indicate that motor vehicle tax has been paid to the dealer and no additional motor vehicle tax is due from the purchaser.

(4) The county tax assessor-collector shall notify the comptroller of the dealer's failure to remit the motor vehicle tax through the automated Registration-Title System (RTS) and include the document indicating motor vehicle tax paid to the dealer in the title application material.

(i) Prohibited advertising. A dealer may not directly or indirectly advertise, hold out or state to a customer or the public that he will assume, absorb or refund a part of the motor vehicle tax imposed on the sale of a motor vehicle, or will not add tax to the sales price.

Source Note: The provisions of this §3.74 adopted to be effective December 9, 1998, 23 TexReg 12449; amended to be effective April 17, 2000, 25 TexReg 3289; amended to be effective April 2, 2002, 27 TexReg 2535; amended to be effective May 1, 2005, 30 TexReg 2401; amended to be effective May 18, 2017, 42 TexReg 2564; amended to be effective April 19, 2020, 45 TexReg 2420