Texas Car Dealer Deferred Sales Tax Attorney
The deferred sales tax law enables buy-here-pay-here (BHPH) dealers to pay sales tax based on the payments received from buyers, rather than paying the full sales tax upfront at the time of the vehicle transfer. It also ensures that dealers are not required to pay sales tax on any portion of the sale price that remains unpaid by the buyer. However, dealers must be cautious to avoid losing the benefits of deferred sales tax. Below is a summary of two key issues related to deferred sales tax:
The 60-Day Rule
During negotiations with the Texas Comptroller’s office regarding deferred sales tax reform, it was agreed that dealers must transfer the vehicle title to qualify for sales tax deferral and avoid paying the full sales tax upfront. A critical condition was established: the right to defer sales tax is forfeited if the title is not transferred within 60 days of the sale date. This 60-day rule applies solely to taxation and does not affect other legal requirements for title transfers. Importantly, the title must still be transferred even if the vehicle is repossessed within the 60-day period. During audits, the Comptroller’s office compares the sale date to the title transfer date to identify any violations of the 60-day rule. If violations are found, the full sales tax becomes due as of the 60th day, and the dealer is assessed for the total sales tax minus any amounts already paid. Penalties and interest are then added to the assessment.
Sales or Assignment of Contracts
To ensure that deferred sales tax benefits only BHPH dealers and not banks or financial institutions, the Comptroller included a “due on sale” provision when the deferred sales tax law was enacted. If a dealer sells or assigns a contract to a third party (other than a related finance company), the deferred sales tax is accelerated, and the dealer must pay the full amount immediately. Auditors actively check for evidence that contracts, on which dealers are deferring sales tax, have been assigned to third parties. If such assignments are discovered, the deferred sales tax benefit is revoked, and the dealer becomes liable for the full sales tax amount.
By adhering to these rules, dealers can maintain the advantages of deferred sales tax while avoiding costly penalties and interest.
Texas Car Dealer Deferred Sales Tax Attorney
