~July29, 1971
Honorable Robert S. Calvert Opinion No. M-913
Comptroller of Public Accounts
State of Texas Re: Questions concerning
Austin, Texas Article 6.01, et seq.,
Title 122A, V.C.S.,
and .amendments thereto
contained in H.B. 730,
Acts 1971, 62nd Leg.,
Dear Mr. Calvert,: R.S.
~You have requested an oplnlon on the following questions
concerning the Motor Vehicle Retail Sales and Use Tax Act,
as amended.1
"1. A purchaser who buys a motor vehicle for' "leas-
ing" as that term is defined In Article 6.03(f)
(added by H.B. 730) must pay motor vehicle tax
upon the purchase price of the vehicle at the time,
of registration thereof. If such person there-
after "leases" this motor vehicle to another person
for two (2) months, then.elects to "rent" (as that
term is defined in Article 6.03(E), added by H.B.
730) the same vehicle to others for a series of
dally or weekly rentals is the owner entitled to
any credit or reimbursement due to the fact that
he has paid motor vehicle tax upon the original
purchase price?
"2. Does Article 6.04, as amended by H.B. 730, make
applicable to motor vehicle tax reports the penalty
and interest provisions, the one per cent (1%) re-
tailer reimbursement provisions, direct pay provision,
and the prepayment discount provisions contained in
Article 20.05, Limited Sales, Excise and Use Tax Act?
1 All articles herein referred to are comprehended within
Chapter 6, Title 122A, Taxation-General, Vernon's Civil Statutes,
unless otherwise stated.
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Honorable Robert S. Calvert, page 2 (M-913)
"3. In many Instances, a deposit is required of a
person desiring to rent a car. When the car is
returned, the deposit is credited toward the amount
of rental due. Is this office correct In assuming
that the motor rental tax is to be collected at
the time the vehicle Is returned and at the tine
any deposit is credited toward the rental due?
"4. If a car rental agency has no office or
operation at the place at which the car is to be
left at the conclusion of a rental, it is common
for such agency to levy a "drop-charge' to recompense
i;~ ;;ycy for its expense involved In picking up
. Is such drop-charge, or similar charge,
subject to tax under Article 6.01(l), as amended
by H.B. 730, or other provisions of that Chapter
as so amended?
The amendments to Chapter 6, Title 122A, Taxation-
General, Vernon's Civil Statutes, became effective on July
1, 1971. Prior to these amendments, the Motor Vehicle
Retail Sales and Use Tax Act did not tax rentals of motor
vehicles. The above mentioned amendments impose a tax
under Chapter 6 on the receipts from such rentals and on
the total consideration paid or to be paid on a lease of a
motor vehicle. Pertinent provisions of the Motor Vehicle
Act as related to this opinion are hereafter quoted:
Relevant sections'of Article 6.01 read as follows:
"(1) There Is hereby levied a tax upon every
retail sale of every motor vehicle sold in this
State, such tax to be equal to four per cent (4%)
of the total consideration paid or to be paid for
said motor vehicle. In the case of a motor vehicle
purchased to be rented or held for rental, the tax
is levied on the gross rental receipts of the renting
of such motor vehicle at the same rataas that tax
levied In Article 20.02 of this title. Provided,
however, that where the period for rental is intended
to be for more than 31 days, such rental is deemed
to be a lease as defined In this Article and the
purchaser-lessor must pay the tax on total con-
sideration paid or to be paid for said motor vehicle.
The tax on rental receipts shall be collected by the
owner from the renter who has exclusive use of the
-4447-
Honorable Robert S. Calvert, page 3 (M-913)
motor vehicle for a period of time and has the
right ,to direct the manner of use of the vehicle,
whether exercised or not, for that period. ...'
II
...
“(6) In the renting of motor vehicles, .... the
purchaser shall furnish the County Assessor and
Collector of Taxes with a resale certificate in
accordance with the provisions of Article 6.04 of
this Chapter, whereupon the Tax Collector shall
accept the motor vehicle for registration or
transfer.
“(7) Motor vehicles purchased to be rented or to
be held for renting must be purchased by an owner
for use In a business where the renting of motor
vehicles Is an established business. Every motor
vehicle used In a business which either rents or
leases motor vehicles to others, as those terms
are defined insthis Article; and for consideration,
must have paid the tax on total consideration at the
time of purchase of those motor vehicles,intended
for leasing or must be collecting and paying the
gross rentals receipts tax on renting those motor
vehicles. Any motor vehicle leased in this State
and owned by the original manufacturer must be
registered in this State and taxed in accordance
with the provisions of this Article. If a person
engages in both renting and leasing of motor vehicles,
he shall keep complete and adequate records,
segregating or enabling the segregration of both
types of transactions.
“(8) When the owner of a motor vehicle changes the
status of the motor vehicle from a rental unit to
a lease unit, the owner shall so inform the State
Comptroller of Public Accounts of such change on a
form to be supplied by the Comptroller, and the
owner shall then pay the tax on such motor vehicle
based on the owner's book value and at the rate
provided in this Article."
The relevant portions of Article 6.03 read as follows:
"The following words shall have the following
meaning unless a different meaning clearly appears
from the context.
-4448-
Honorable Robert S. Calvert, page 4 (M-913)
11
. . .
"(B) Retail Sale. The term 'retail sale' as herein
used shall include all sales of motor vehicles except
those whereby the purchaser acquires a motor vehicle
for the exclusive purpose of resale and not for use
and shall not include those operated under and in
accordance with the terms of Article 6686, Revised
Civil Statutes of Texas, 1925, as amended. The
term 'retail sale' also shall include rentals the
gross receipts from which are subject to the tax
imposed by this Chapter, and purchases used or to
be held for in such rentals shall be considered
purchases for resale."
11
...
"(D)(3) Any person purchasing motor vehicles for
resale at retail who has obtained a certificate of
title to a motor vehicle which he uses for personal
or business purposes may deduct the fair market
value of such vehicle from the 'total consideration'
when such person purchases another motor vehicle
upon which he obtains a certificate of title as
a substitute vehicle for personal or business use
and the original vehicle is offered for sale at
retail."
"(E) Rental or Renting. Those terms as herein
used shall mean the agreeing by the owner to give
exclusive use of a motor vehicle to another for a
consideration and for a period of time not to
exceed 31 days under any one agreement.
"(F) Lease or Leasing. Those terms as herein used
shall mean the agreeing by the other to give
exclusive use of,a motor vehicle to another for a
consideration and for a period of time exceeding
31 days under such agreement."
"Article 6.04. Collection of Taxes.
"The taxes on total consideration paid or to be paid
levied In this Chapter shall be collected by the
Assessor and Collector of Taxes of the county in
which any such motor vehicle Is first registered
-4449-
Honorable Robert S. Calvert, page 5 (M-913)
or first transferred after such a sale; the Tax
Collector shall refuse to accept for registration or
for transfer ,anymotor vehicle until the tax
thereon is paid or he is furnished with a resale
c,ertlflcatein accordance with Article 6.01(6) of
this Chapter.
"The taxes on gross rental receiwts levied In this
Chapter shall be reported and paid to the State
Comptroller of Public Accounts in the same manner
that the Limited Sales, Excise and Use Taxes of this
State are reported and paid by retailers under
Chapter 20, Article 20.05. Motor vehicle owners
required to collect, report and pay the taxes on
gross rental receipts Imposed by this Chapter
shall register as sellers with the State Comptroller
of Public Accounts and obtain from him a Motor
Vehicle Retail Seller's Permit in the same manner
as required under the Limited Sales, Excise and Use
Tax laws of this State, Article 20.031 of this title.
...The tax shall .be paid at the time application is
made for registration of said motor vehlole, and
the Tax Collector shall refuse to issue the registration
license until the tax Is paid or he is furnished with
a resale certificate in accordance with Article 6.01(6)
of this Chapter."
Under these amendments, the tax imposed on every retail
sale of a motorvehicle in Texas was raised from three per
cent (3%) of the total consideration paid or to be paid for
such motor vehicle to four per cent (4%). In case of a motor
vehicle purchased to be rented or hela for rental for
periods not exceeding 31 days in any one agreement, the tax
is levied on the gross rental receipts. When a motor vehicle
is purchased for rental for more than 31 days, the rental
Is considered a lease and not a rental. The tax due on the
motor vehicle by the purchaser-lessor Is the total consideration
paid or to be paid for it.
If a motor vehicle owner changes the status of his motor
vehicle from a rental unit to a lease unit, the act provides
that the owner will be taxed on such vehicle according to its
book value Instead of the receipts from the rental of such
vehicle. Question number one poses a question with regard
to the reverse factual situation, that is, whether any credit
-4450-
Honorable Robert S. Calvert, Page 6 (M-913)
or reimbursement nay be allowed when a person leases a
motor vehicle and then later desires to rent the same
vehicle, having paid the motor vehicle tax upon the
original purchase price. The law In question is silent
as to any credit or reimbursement that may be granted
or Is due to an owner in a situation where there is a
lease and then a rental of the same motor vehicle. The
owner has the option at the time of purchase to choose the
rental unit use for his vehicle and be accorded the change
in tax mus authorized by Article 6.01(8). If he selects
the lease unit use, he must pay the tax as.provided In
Chap- without a change. Therefore, it is the opinion
of this office that the question of any relief that may
be given to the owner in such instances by way of credit on
or reimbursement from hls taxes paid was within the purview
of the Legislature, and we must assume from the absence of
any language in the statute that nay reasonably be interpreted
to grant such relief, that the Legislature did not authorize
the giving of such credit or reimbursement. Therefore your
Question Number 1 is answered in the negative.
Your Question Number 2 concerns the applicability of
the penalty and interest provisions, the one per cent
retailer reimbursement provisions, direct pay provisions
and the prepayment discount provisions of Article 20.05 of
the Limited Sales, Excise and Use Tax Act, Chapter 20,
Title 122A, Taxation-General, Vernon's Civil Statutes, to
the reports and payments required under the Motor Vehicle
Retail Sales and Use Tax Act here under discussion. In
view of the provisions of Article 6.04 requiring the taxes
levied on gross rental receipts to be reported and paid in
the same manner as the general sales and use taxes are so
reported and paid, we deem such provisions of Article 20.05
of the Limited Sales, Excise and Use Tax Act, which are
designed to facilitate the collection of such taxes, to be
equally applicable to the Motor Vehicle Sales and Use Taxes.
Therefore your Question Number 2 is answered in the
affirmative.
We are of the opinion that the motor vehicle tax on
rentals is due at the time of payment of the rental charges.
This answers your Question Number 3 in the affirmative.
-4451-
Honorable Robert S. Calvert, page 7 (M-913)
Article 6.03(D)(l) defines "total consideration" as:
"the amount paid or to be paid for said motor
vehicle ... at the time of sale ...'
Under Article 6.03(B) a "Retail Sale" Is defined to include
rentals "the gross receipts from which are subject to the
tax imposed by this Chapter ...' Therefore, since a rental
is a retail sale, the definition of total consideration for
a sale in Article 6.03(D)(l) now would cover a rental. In
your Question Number 4, you ask whether a "drop-charge" as
stated In that question Is taxable under Article 6.01(l).
Apparently the charge is paid by the person renting the
vehicle at the time that he rents it or at some time
thereafter.
Under Article 6.03(D)(l), the total rental consideration
includes all amounts paid or to be paid for the rental at the
time 'of rental, unless otherwise excluded. Article 6.03(D)
(2) lists items not included within the meaning of total
consideration. Among these items and the only one seen to
be possibly applicable herein Is:
"(f) charges for transportation of motor vehicles
after sale."
There are no facts to indicate that a "drop-ch-rPe' is
in effect a transportation charge within Subsectior (f). Article
10, Vernon's Civil Statutes, provides that the provisions of
statutes shall be liberally construed with a view to effect
their objects. Calvert v. Rritlsh American 011 Producing
co.2 397 S.W.2d 839, (Tex.Sup., 1966) The purpose of H.B.
730 as stated in the enacting clause is to raise revenue
to support the government of Texas. It would appear that a
"drop-charge" is just an amount imposed by the rental agency
as part of the total charge for renting the vehicle.
Therefore, the opinion of this office is that such charges
are taxable under Article 6.01(l) as part of the tctal
charge paid for the rental.
SUMMARY
In the absence of any language in the statute that
might reasonably be interpreted to grant such relief,
it is assumed that the Legislature did not authorize
the giving of credit or reimbursement for motor
vehicle tax paid upon theoriginal purchase price,
-4452-
Honorable Robert S. Calvert, page 8 (M-913)
when the status of the vehicle is changed from a
lease unit to a rental unit. Chapter 6, Title 122A,
Taxation-General, V.C.S.
Since Article 6.04, Title 122A, Taxatlon-
General, V.C.S., requires the taxes levied on gross
rental receipts to be reported and paid in the sane
manner as the general sales and use taxes are so
reported and paid, the provisions of Article 20.05,
Limited Sales, Excise and Use Tax Act, which are
designed to faoilitate the collection of such taxes,
are deemed to be equally applicable to the Motor
Vehicle Sales and Use Tax Act.
The motor vehicle tax on rentals is due at the
time of payment of the rental charges.
A drop-charge or similar charge is subject to
tax under Chapter 6, Title 122A, V.C.S., as part
of the total charge paid for the rental of the
motor vehicle. ,7
Prepared by R. L. Lattimore
and Harriet D. Burke
Assistant Attorneys General
APPROVED:
OPINION COMMITTEE
Kerns Taylor, Chairman
W. E. Allen, Co-Chairman
Marietta Payne
Harold Kennedy
James Quick
Jim Swearingen
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Honorable Robert S. Calved, page 9 (M-913)
MEADE F. GRIFFIN
Staff Legal Assistant
ALFRED WALKER
Executive Assistant
NOLA WHITE
First Assistant
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