Texas Sales Tax Audit for Vehicle Repossession and Title Transfers
What happens when a buy-here-pay-here car dealership does not transfer the title within the 60-day period and the vehicle gets repossessed for nonpayment?
Motor vehicle sales tax is due on each retail sale of a vehicle even if the vehicle was subsequently repossessed. In addition, with regard to dealers who make seller-financed sales, the Comptroller has specifically stated that dealers who fail to register the vehicles within the 60-day time period will owe tax on the full consideration even if the vehicles are repossessed within the 60-day period.
A tax is imposed on every retail sale of every motor vehicle sold in this state. Tex. Tax Code §§ 152.001(1), .021(a). The tax is imposed on the total consideration paid or to be paid for a motor vehicle. Id. § 152.002(a). A retail sale completed by a motor vehicle dealer in which the seller 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 is defined as a seller-financed sale.
Generally, the seller of a motor vehicle will report and pay the tax on a seller‑financed sale to the Comptroller on the seller’s receipts from the seller-financed sales in the same manner as sales tax is reported and paid under Chapter 151. Id. § 152.047(a). If the seller fails to apply, not later than the 60th day after the date the motor vehicle is delivered to the purchaser, for registration and a Texas certificate of title for a motor vehicle sold in a seller‑financed sale, the seller is liable for all unpaid tax on the total consideration, and the tax is due and must be sent to the Comptroller with the first report after the expiration of the prescribed period.
Applicable Law:
- A tax is imposed on every retail sale of every motor vehicle sold in this state. Tex. Tax Code §§ 152.001(1), .021(a).
- The tax is imposed on the total consideration paid or to be paid for a motor vehicle. Tex. Tax Code § 152.002(a).
- A retail sale completed by a motor vehicle dealer in which the seller 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 is defined as a seller-financed sale. Tex. Tax Code § 152.001(15).
- Generally, the seller of a motor vehicle shall report and pay the tax imposed on a seller‑financed sale to the Comptroller on the seller’s receipts from the seller-financed sales in the same manner as sales tax is reported and paid under Chapter 151. Tex. Tax Code § 152.047(a).
- If the seller fails to apply, not later than the 60th day after the date the motor vehicle is delivered to the purchaser, for registration and a Texas certificate of title for a motor vehicle sold in a seller-financed sale, the seller is liable for all unpaid tax on the total consideration, and the tax is due and must be sent to the Comptroller with the first report after the expiration of the prescribed period. Tex. Tax Code § 152.047(f); 34 Tex. Admin. Code § 3.74(e)(5).
- Motor vehicle sales tax is due on each retail sale of a vehicle even if the vehicle was subsequently repossessed.
- Dealers who fail to register the vehicles within the 60-day time period will owe tax on the full consideration even if the vehicles are repossessed within the 60-day period. See State Tax Automated Research Document No. 9309L1257C04 (September 10, 1993).
Facing a sales tax audit in Texas? Contact our attorney for a consultation.
