34 Tex. Admin. Code § 3.73 - Qualifying for Fair Market Value Deduction and Determination of Fair Market Value for Replaced Vehicles

(a) A person is engaged in the business of selling, renting or leasing motor vehicles if the person regularly and actively sells motor vehicles as a primary function of his business and sells at least five different vehicles acquired for the exclusive purpose of resale and not for use within any given 12-month period, or regularly and actively rents or leases motor vehicles, as defined by the Tax Code, § 152.001, as a primary function of his business, and rents or leases at least five different motor vehicles in any given 12-month period.

(b) For purposes of computing motor vehicle sales tax, a person who is engaged in the business of selling, renting, or leasing motor vehicles may deduct the fair market value of a replaced motor vehicle that is titled in Texas from the total consideration that is paid for a replacement motor vehicle.

(c) Determining the fair market value of a replaced motor vehicle.

(1) If the replaced motor vehicle is sold before the purchase of a replacement motor vehicle, then the total consideration that is received from the sale of the replaced motor vehicle is the fair market value of the replaced motor vehicle.

(2) If the replaced motor vehicle is not sold before the purchase of the replacement motor vehicle, then the fair market value of the replaced motor vehicle is the title owner's book value of that motor vehicle at the time the motor vehicle is retired from business or personal use, provided that the owner's book value is based on generally accepted accounting principles. If the comptroller determines that the title owner's book value is not based on generally accepted accounting principles, then the fair market value shall be the total purchase price of the vehicle, less depreciation, which is calculated by applying a 2.0% rate per month for the first 36 months following the date of purchase, and then a 1.0% rate per month for the remainder of the depreciable life of the vehicle.

(d) Deducting the fair market value of a replaced motor vehicle that is titled to another person.

(1) A lessor that is described in paragraph (2) of this subsection may deduct the fair market value of a replaced motor vehicle that has been leased for longer than 180 days and that is titled in Texas to another person, if the replaced motor vehicle is offered for sale and if either one of the following requirements is met:

(A) the lessor that wants to claim the fair market value deduction holds at least 80% beneficial ownership interest in the titled owner of the replaced vehicle, or the titled owner of the replaced vehicle holds at least 80% beneficial ownership interest in the lessor; or

(B) the lessor that wants to claim the fair market value deduction acquires all of its vehicles exclusively from franchised dealers whose franchisor shares common ownership with the titled owner of the replaced vehicle, or the titled owner of the replaced vehicle acquires all of its vehicles exclusively from franchised dealers whose franchisor shares common ownership with the lessor.

(2) The following lessors may qualify for fair market value deduction under paragraph (1) of this subsection:

(A) A lessor that holds a lessor license that the Motor Vehicle Board of the Texas Department of Transportation has issued under the Texas Motor Vehicle Commission Code, Article 4413(36);

(B) A lessor that is a state or federally chartered financial institution or a regulated subsidiary of a state or federally chartered financial institution;

(C) A lessor that holds a franchised dealer license that the Motor Vehicle Board of the Texas Department of Transportation has issued under the Texas Motor Vehicle Commission Code, Article 4413(36), and that is engaged in the business of leasing motor vehicles that the lessor is licensed to sell; or

(D) Any other lessor that is specifically not required to obtain a lessor license under Texas Motor Vehicle Commission Code, Article 4413(36), §4.01(a).

(3) A person who is in the business of renting motor vehicles for a period not to exceed 180 days under a single agreement and who holds a motor vehicle rental permit that is issued under Tax Code, § 152.065, may deduct the fair market value of a replaced motor vehicle that is titled in Texas to another person if the replaced motor vehicle is offered for sale and if either one of the following requirements is met:

(A) the renter that wants to claim the fair market value deduction holds at least 80% beneficial ownership interest in the titled owner of the replaced vehicle, or the titled owner of the replaced vehicle holds at least 80% beneficial ownership interest in the renter; or

(B) the renter that wants to claim the fair market value deduction acquires all of its vehicles exclusively from franchised dealers whose franchisor shares common ownership with the titled owner of the replaced vehicle, or the titled owner of the replaced vehicle acquires all of its vehicles exclusively from franchised dealers whose franchisor shares common ownership with the renter.

(4) A lessor or rental company may not use the fair market value of a replaced motor vehicle to reduce total consideration paid for a replacement motor vehicle if the fair market value of that vehicle has been previously used by either the lessor or rental company or other entity.

Notes

34 Tex. Admin. Code § 3.73

The provisions of this §3.73 adopted to be effective December 6, 1996, 21 TexReg 11488; amended to be effective July 10, 2002, 27 TexReg 6040