TITLE 34. PUBLIC FINANCE

PART 1. COMPTROLLER OF PUBLIC ACCOUNTS

CHAPTER 3. TAX ADMINISTRATION

SUBCHAPTER F. MOTOR VEHICLE SALES TAX

34 TAC §3.83

The Comptroller of Public Accounts proposes new §3.83, concerning sales and use of motor vehicles purchased or leased by public agencies; and sales and use of motor vehicles purchased by commercial transportation companies. This section implements Senate Bill 724 (SB 724), 84th Legislature, 2015. Effective June 17, 2015, this legislation amended Tax Code, §152.082 (Sale of Motor Vehicle to or Use of Motor Vehicle by Public Agency) to allow commercial transportation companies who provide transportation services under a contract with the board of county school trustees, school district board of trustees, or the governing body of an open-enrollment charter school, to purchase a motor vehicle tax-free when the motor vehicle is operated with exempt license plates. This section also memorializes long-standing comptroller policies not previously addressed by this section.

Subsection (a) contains definitions of key terms. Paragraph (1) defines "Application for Texas Title and/or Registration."

Paragraph (2) defines "lease." The definition is based on Tax Code, §152.001(6) (Definitions).

Paragraph (3) defines the term "motor vehicle" and provides specific examples. This definition is based, in part, on Tax Code, §152.001(3) and (4) (Definitions), and the definition of the term given in §3.80 of this title (relating to Motor Vehicles Transferred as a Gift or for No Consideration).

Paragraph (4) defines "public agency" in accordance with Tax Code, §152.001(7), and provides specific examples of entities considered public agencies that have previously not been addressed for purposes of this section. These examples are taken, in part, from §3.322(c) of this title (relating to Exempt Organizations) and attorney general (AG) opinions. See, for example, STAR Accession Nos. 7112A2002A10 (AG Opinion No. M-1033 1971) (community centers for mental health and mental retardation services are political subdivisions when created by a city, a hospital district, or a school district); 8303498A (AG Opinion JM-12 1983) (community centers for mental health and mental retardation centers may be operated by counties, cities, hospital districts, school districts, or any combination); 4912A2003C06 (AG Opinion V-955 1949) (navigation districts and flood districts are public agencies); and 8504L0653C09 (April 4, 1985) (Federal Intermediate Credit Bank, Federal Credit Union, Federal Reserve Banks, and Federal Home Loan Mortgage, Inc. are public agencies for the purposes of motor vehicle tax).

Subsection (b) addresses the sale or use of a motor vehicle purchased by a public agency or an entity exempted by another statute. Paragraph (1) identifies the requirements that must be met in order for a public agency to qualify for the exemption from motor vehicle tax under Tax Code, §152.082. Subparagraph (A) addresses motor vehicles operated with an exempt license plate issued pursuant to Transportation Code, §502.451 (Exempt Vehicles). Subparagraph (B) addresses motor vehicles that are exempted from inscription requirements by Transportation Code, §721.003 (Exemption from Inscription Requirement for Certain State-Owned Motor Vehicles) or §721.005 (Exemption from Inscription Requirement for Certain Municipal and County-Owned Motor Vehicles), and may be operated without an exempt license plate. Subparagraph (C) addresses motor vehicles operated with regularly designed license plates issued pursuant to Transportation Code, §502.451(f) (Exempt Vehicles), because the vehicles are dedicated to law enforcement activities. Subparagraph (D) addresses motor vehicles purchased by the federal government, which are exempt from Texas tax regardless of the type of license plate displayed. Subparagraph (E) addresses motor vehicles purchased by an entity exempt from taxation by other Texas statutes or federal statutes. Examples of entities exempted by other Texas statutes include, but are not limited to, the Cotton Growers' Boll Weevil Eradication Foundation created under Agriculture Code, Chapter 74 and an electric cooperative created under Utilities Code, Chapter 161.

Paragraph (2) provides that when a motor vehicle is purchased to be leased to a public agency, and operated with an exempt license plate issued under Transportation Code, §502.451, it is exempt from the motor vehicle tax pursuant to Tax Code, §152.083 (Lease of Motor Vehicle to Public Agency). Tax is due if the vehicle is not operated with exempt license plates. See STAR Accession No. 9602L1397G14 (February 22, 1996), ("Sections 152.082 and 152.083 of the Texas Tax Code exempts the lease or purchase of a motor vehicle by a public agency from tax if they carry an exempt license plate…").

Paragraph (3) provides the requirements for a seller and purchaser claiming an exemption pursuant to Tax Code, §152.083. It also provides the requirements for a seller and purchaser to file a joint statement with the tax assessor-collector of the county pursuant to Tax Code, §152.062.

Paragraph (4) provides that motor vehicle tax is due if a motor vehicle ceases to be leased to a public agency and is not held for sale. Paragraph (4) further describes how the tax is calculated and how to pay the tax, as provided by Tax Code §152.083.

Subsection (c) implements SB 724, allowing a commercial transportation company to purchase motor vehicles tax-free when it provides transportation services under contract with certain public agencies.

Paragraph (1) addresses motor vehicles purchased for use by a commercial transportation company under contract with the board of county school trustees, the school district board of trustees, or governing body of an open-enrollment charter school, and operated with an exempt license plate issued under Transportation Code, §502.451.

Paragraph (2) provides the requirements for a commercial transportation company to claim a tax exemption under this section.

Paragraph (3) provides that the tax exemption does not apply to motor vehicles purchased for lease to a commercial transportation company, regardless of whether the commercial transportation company provides transportation services under a contract with certain public agencies. This is based on the plain language of the statute. SB 724 only amended the provisions of sales or use of a motor vehicle by a public agency in Tax Code, §152.082, and not Tax Code, §152.083, which addresses the lease of motor vehicles to a public agency.

Tom Currah, Chief Revenue Estimator, has determined that for the first five-year period the rule will be in effect, there will be no significant revenue impact on the state or units of local government.

Mr. Currah also has determined that for each year of the first five years the rule is in effect, the public benefit anticipated as a result of enforcing the rule will be by implementing current statutory provisions and clarifying agency tax policy. This rule is proposed under Tax Code, Title 2, and does not require a statement of fiscal implications for small businesses. There is no significant anticipated economic cost to individuals who are required to comply with the proposed rule.

Comments on the proposal may be submitted to Teresa G. Bostick, Director, Tax Policy Division, P.O. Box 13528, Austin, Texas 78711-3528. Comments must be received no later than 30 days from the date of publication of the proposal in the Texas Register.

This new section is proposed under Tax Code, §111.002 (Comptroller's Rules; Compliance; Forfeiture), which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of Tax Code, Title 2.

This section implements Tax Code, Chapter 152 (Taxes on Sale, Rental, and Use of Motor Vehicles), including, but not limited to, §152.082 (Sale of Motor Vehicle to or Use of Motor Vehicle by Public Agency) and §152.083 (Lease of Motor Vehicle to Public Agency).

§3.83.Sales and Use of Motor Vehicles Purchased or Leased by Public Agencies; and Sales and Use of Motor Vehicles Purchased by Commercial Transportation Companies.

(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, which is used by a person to apply for a 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) 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).

(3) 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; truck tractors; truck cab/chassis; semitrailers; trailers and travel trailers, as defined by §3.72 of this title (relating to Trailers, Farm Machines, and Timber Machines). 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 pursuant to Transportation Code, Chapter 501 (Certificate of Title Act).

(4) Public agency--A department, commission, board, off ice, institution, or other agency of this state or of a county, city, town, school district, hospital district, water district, or other special district or authority or political subdivision created by or under the constitution or the statutes of this state, or an unincorporated agency or instrumentality of the United States. The term includes:

(A) any college or university created or authorized by the Texas constitution or Texas statutes; and

(B) all independent boards, commissions, agencies, or corporations that are instrumentalities of the United States and are wholly owned by the United States or by another corporation wholly owned by the United States, including organizations specifically exempted as an instrumentality of the United States by federal statute, such as a federal credit union, federal reserve bank, or federal home loan bank.

(b) Motor vehicles purchased or leased by a public agency or an entity exempted by another statute.

(1) The sale or use of a motor vehicle is exempt from the taxes imposed by Tax Code, Chapter 152 (Taxes on the Sale, Rental, and Use of Motor Vehicles), when the motor vehicle is:

(A) purchased and used by a public agency and operated with an exempt license plate issued under Transportation Code, §502.451 (Exempt Vehicles);

(B) purchased and used by a public agency and exempted from inscription requirements as provided by Transportation Code, §721.003 (Exemption from Inscription Requirement for Certain State-Owned Motor Vehicles) or §721.005 (Exemption from Inscription Requirement for Certain Municipal and County-Owned Motor Vehicles), regardless of whether the vehicle is operated with an exempt or regularly designed license plate;

(C) purchased and used by a public agency and issued a regularly designed license plate, pursuant to Transportation Code, §502.451(f), because the motor vehicle is dedicated to law enforcement activities;

(D) purchased by the federal government, its agencies, and its instrumentalities, regardless of whether the vehicle is operated with an exempt or regularly designed license plate; or

(E) purchased and used by an entity who is exempted from the taxes imposed by Tax Code, Chapter 152 or by another Texas or federal statute, regardless of whether the vehicle is operated with an exempt or regularly designated license plate.

(2) The sale or use of a motor vehicle is exempt from taxes imposed by Tax Code, Chapter 152, when the motor vehicle is purchased to be leased to a public agency, including the federal government, its agencies, and its instrumentalities; and operated with an exempt license plate issued under Transportation Code, §502.451.

(3) To claim an exemption under this section, a Texas seller and purchaser must complete and sign an Application for Texas Title and/or Registration and any other documents required by the Texas Department of Motor Vehicles to apply for title or register the motor vehicle in Texas. The purchaser must indicate the reason an exemption is claimed on the Application for Texas Title and/or Registration at the time of purchase. For example, when a motor vehicle is purchased by public agency, the purchaser may write "exempt as a public agency," or "exempt as a public agency, as provided by §152.082 Sale of Motor Vehicle to or Use of Motor Vehicle by Public Agency." When a motor vehicle is purchased to be leased to a public agency, the purchaser may write, for example, "leased to a public agency" or "exempt as a lease to a public agency, as provided by §152.083 Lease of Motor Vehicle to Public Agency." The Application for Texas Title and/or Registration is submitted to the county tax assessor-collector.

(4) When a motor vehicle purchased tax-free and leased to a public agency ceases to be leased to a public agency, and is not held for sale, the owner must remit motor vehicle tax directly to the comptroller by completing Motor Vehicle Sales/Use Tax Payment, Form 14-112, its electronic equivalent, or a successor form, promulgated by the comptroller. The amount of motor vehicle tax due is based on the owner's book value of the motor vehicle at that time. For more information concerning lease vehicles, see §3.70 of this title (relating to Motor Vehicle Leases and Sales).

(c) Sale, use, or lease of a motor vehicle by a commercial transportation company.

(1) The sale or use of a motor vehicle is exempt from taxes imposed by Tax Code, Chapter 152 (Taxes on Sale, Rental, and Use of Motor Vehicles), when the motor vehicle is operated with an exempt license plate issued under Transportation Code, §502.451 and purchased by a commercial transportation company to provide transportation services under a contract with:

(A) a board of county school trustees or school district board of trustees under Education Code, §34.008 (Contract with Transit Authority, Commercial Transportation Company, or Juvenile Board); or

(B) the governing body of an open-enrollment charter school.

(2) To claim an exemption under this section, a Texas seller and purchaser must complete and sign an Application for Texas Title and/or Registration and any other documents required by the Texas Department of Motor Vehicles to apply for title or register the motor vehicle in Texas. The purchaser must indicate the reason an exemption is claimed on the Application for Texas Title and/or Registration at the time of purchase. For example, a commercial transportation company agency may write "exempt as a commercial transportation company, as provided by §152.082." The Application for Texas Title and/or Registration is submitted to the county tax assessor-collector.

(3) This exemption under this section does not apply to a motor vehicle leased to a commercial transportation company, or a motor vehicle purchased by a third party to be leased to a commercial transportation company, even if the commercial transportation company uses the motor vehicle to provide transportation services under a contract with the board of county school trustees, the school district board of trustees, or the governing body of an open-enrollment charter school. For more information concerning lease vehicles, see §3.70 of this title.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on December 6, 2016.

TRD-201606300

Don Neal

Chief Deputy General Counsel

Comptroller of Public Accounts

Earliest possible date of adoption: January 22, 2017

For further information, please call: (512) 475-0387