34 TAC §3.74
The Comptroller of Public Accounts proposes an amendment
to §3.74, concerning seller responsibility. The proposed amendment to
subsection (d)(2) incorporates the legislative change made by SB1125, 77th
Legislative Session, 2001, requiring sellers of certain motor vehicles to
remit tax within 20 days from the date that the sold vehicle becomes eligible
for registration. The proposed amendment to subsection (e) reflects codification
in SB1125 of the comptroller's policy in that no "bad debt" deduction may
be claimed in seller-financed sales. Other subsections of the proposed rule
are amended for the purposes of clarity.
James LeBas, 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 local government.
Mr. LeBas 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 in providing new information regarding tax responsibilities.
This rule is adopted under the 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 Bryant K. Lomax, Manager,
Tax Policy Division, P.O. Box 13528, Austin, Texas 78711.
This amendment is proposed under Tax Code, §111.002, 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.
§3.74.Seller Responsibility.
(a)
Definitions. The following words and terms, when used in
this section, shall have the following meanings, unless the context clearly
indicates otherwise.
(1)
Date of sale--The day the motor vehicle is delivered to
the purchaser unless otherwise specified by written agreement.
(2)
Dealer--A person who holds a
license
[
general
distinguishing number
] issued pursuant to the Transportation Code, Chapter
503. The term includes a dealer authorized by law and by franchise agreement
to offer for sale a new motor vehicle. The term also includes an independent
dealer authorized by law to offer for sale a motor vehicle other than a new
motor vehicle.
(3)
New motor vehicle--A motor vehicle that, without regard
to mileage, has not been the subject of a retail sale.
(4)
Retail sale--A sale of a motor vehicle other than:
(A)
a
[
the
] sale of a new motor vehicle
in which the purchaser is a franchised dealer who is authorized by law and
by franchise agreement to offer the vehicle for sale as a new motor vehicle
and who acquires the vehicle
to sell
[
either for the exclusive
purpose of sale
] in
a
[
the
] manner provided by
law or for purposes allowed under the Transportation Code, Chapter 503;
(B)
a
[
the
] sale of a vehicle other than
a new motor vehicle in which the purchaser is a dealer who holds a dealer's
license
[
general distinguishing number
] issued under the Transportation
Code, Chapter 503, and who acquires the vehicle either for the exclusive purpose
of resale in the manner provided by law or for purposes allowed under the
Transportation Code, Chapter 503; or
(C)
a
[
the
] sale to a franchised dealer
of a new motor vehicle removed from the franchised dealer's inventory for
the purpose of entering into a contract to lease the vehicle to another person
if, immediately after executing the lease contract, the franchised dealer
transfers title of the vehicle and assigns the lease contract to the lessor
of the vehicle.
(5)
Seller-financed sale--A retail sale of a motor vehicle
by a dealer in which the selling dealer 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. The term does not include a:
(A)
retail sale of a motor vehicle in which a person other
than the seller provides the consideration for the sale and retains a lien
on the motor vehicle as collateral;
(B)
lease; or
(C)
rental.
(6)
Total consideration--The amount paid or to be paid for
a motor vehicle and its accessories attached on or before the sale. The term
does not include separately stated finance or interest charges on credit extended
under a conditional sale or other deferred payment contract, or the value
of a motor vehicle taken by a seller as all or a part of the consideration
for sale of another motor vehicle.
(b)
Tax permit. Every dealer making seller-financed sales must
apply to the comptroller for a tax permit. Each entity (corporation, partnership,
sole proprietor, etc.) must apply for its own permit. The permit application
will be furnished by the comptroller. The permit cannot be transferred from
one owner to another.
(c)
Collection of the tax.
(1)
Seller-financed sales. The selling dealer must collect
tax on the total consideration paid as the payments are received.
The
tax is a debt of the purchaser to the seller until paid.
The total downpayment
is subject to tax unless the payment is itemized to indicate nontaxable charges.
If the finance agreement bears interest, it is conclusively presumed that
interest accrues and is paid by the purchaser on a straight line basis. [
The tax is a debt of the purchaser to the seller until paid.
]
(2)
Retail sales other than seller-financed sales. Unless the
sale is exempt, the selling dealer must collect the tax on the total consideration
paid for the motor vehicle. The tax is a debt of the purchaser to the seller
until paid. This section does not apply to the sale of a motor vehicle with
a gross weight in excess of 11,000 pounds; however, the seller must provide
the purchaser with a completed tax statement and all other documents necessary
to title and register the motor vehicle.
(d)
Remittance of the tax.
(1)
Seller-financed sales.
(A)
Each selling dealer must remit the tax due to the comptroller
as the
payments
[
receipts
] are received. On or before
the 20th day of the month following each reporting period, each selling dealer
shall file a consolidated return with the comptroller, together with the tax
payment for all locations operated by the entity.
(B)
The returns must be signed by the person required to file
the report or by the person's duly authorized agent.
(C)
The returns will be filed on forms prescribed by the comptroller.
The fact that the dealer does not receive the form or does not receive the
correct forms from the comptroller for the filing of the return does not relieve
the selling dealer of the responsibility of filing a return and payment.
(D)
The return should be completed attributing the receipts
to the county in which the
dealer applied for a
motor vehicle certificate
of title [
is applied for
].
(E)
Selling dealers owing tax of less than $1,500 per quarter
may file returns quarterly. The quarterly reporting periods end on March 31st,
June 30th, September 30th, and December 31st.
(F)
Selling dealers owing $1,500 or more in tax per quarter
must file monthly returns unless a seller prepays the tax.
(G)
Discounts and prepaying the tax.
(i)
Each dealer may retain 0.5% of the amount of tax due as
reimbursement for the expense of collecting the tax.
(ii)
A dealer who makes a prepayment based upon an estimate
of tax liability may retain an additional 1.25% of the amount due. The prepayment
must be made on or before the 15th day of the second month of the quarter
for which the tax is due. Monthly prepayments are due on or before the 15th
day of the month and are also entitled to the additional 1.25% deduction.
(iii)
On or before the 20th day of the month following the
quarter or month for which a prepayment was made, the dealer must file a return
showing the actual liability and remit any amount due in excess of the prepayment.
If there is an additional amount due, the dealer may retain the 0.5% reimbursement
provided that both the return and the additional amount due are timely filed.
If the prepayment exceeded the actual liability, the selling dealer will be
mailed an overpayment notice or refund warrant.
(iv)
If a dealer does not file a quarterly or monthly return
together with payment on or before the due date, the dealer forfeits all discounts
and incurs a mandatory 5.0% penalty. After the first 30 days delinquency,
an additional mandatory penalty of 5.0% is assessed against the selling dealer.
After the first 60 days delinquency, interest begins to accrue at the
prime rate plus 1.0% as published in the
Wall Street
Journal
on the first business day of each calendar year. For taxes
due on or before December 31, 1999, interest is assessed at the
rate
of 12% annually.
(2)
Retail sales other than seller-financed sales.
(A)
Except for sales of motor vehicles with a gross weight
in excess of 11,000 pounds
and for sales of motor vehicles that fall within
subparagraph (B) of this paragraph
, the selling dealer must remit the
tax, along with the properly completed tax statement, to the county tax assessor-collector
by the 20th working day following the date of sale.
(B)
If a dealer sells a commercial
motor vehicle that is required to be equipped with a body or other necessary
equipment before the motor vehicle can be registered under the Transportation
Code, then the selling dealer must remit the tax, along with the properly
completed tax statement, to the county tax assessor-collector by the 20th
working day following the date on which the motor vehicle becomes eligible
for registration.
(C)
[
(B)
] Documentation must be retained
to indicate that the proper amount of tax was submitted to the county tax
assessor-collector. A copy of the receipt for taxes issued by the county tax
assessor-collector will satisfy this requirement.
(e)
General principles of seller-financed sales.
(1)
A transaction is considered paid in full when the purchaser
of the motor vehicle provides that motor vehicle to the seller as consideration
for the purchase of another motor vehicle from the same seller. The remainder
of any tax owed on the initial sale must be reported in the report period
in which the motor vehicle is traded in.
(2)
Tax remitted to the county tax assessor-collector at the
time of registration and title transfer will be considered to be intended
to satisfy the tax liability for that transaction and no refund will be available
if the purchaser fails to satisfy his total liability to the dealer.
(3)
If the selling dealer fails to apply for certificate of
title and registration within 60 days of the date of sale, the seller becomes
liable for all unremitted tax on the total consideration and must remit that
amount on the first return due after the expiration of the 60 days.
(4)
If the selling dealer transfers the right to receive payments
on a sale, the dealer is liable for the unpaid tax due on the total consideration
and must
report and
remit that amount in the report
for the
period in which the transfer of the right to receive payments is made.
The dealer may not take a deduction in the amount of tax due
even
if
the dealer sells the right to receive payments
[
a transfer
] at a discount [
is made
]. The right to receive payments
is transferred and the tax remittance accelerated regardless of recourse to
the seller or any other condition.
(5)
If the selling dealer remits
the unpaid tax due in accordance with paragraph (4) of this subsection, and
the motor vehicle purchaser fails to make payments to the dealer's transferee
or assignee, then no bad debt deduction for any amount that the transferee
or assignee determines to be uncollectible on the purchaser's account may
be taken against any motor vehicle sales tax that the transferee or assignee
may owe.
(f)
Resale certificates and exemption documentation.
(1)
A seller may accept a motor vehicle resale certificate
only from a dealer as defined in this section. A resale certificate for the
sale of a new motor vehicle purchased for resale may only be accepted from
a franchised dealer who is authorized by law and by franchise agreement to
offer the vehicle for sale as a new motor vehicle. To be valid, the motor
vehicle resale certificate must show the
dealer license
[
general distinguishing number
] issued pursuant to the Transportation
Code, Chapter 503. See §3.95 of this title (relating to Motor Vehicle
Sales Tax Resale Certificate; Sales for Resale).
(2)
A seller may accept a properly completed Texas Motor Vehicle
Sales Tax Exemption Certificate--For Vehicles Taken Out of State, in lieu
of collecting tax on motor vehicles that will be removed from this state without
being operated other than to remove the motor vehicle from this state. See §3.90
of this title (relating to Motor Vehicles Purchased for Use Outside of Texas).
(3)
Exemptions provided for in the Tax Code, Chapter 152, Subchapter
E, other than those discussed in paragraphs (1) and (2) of this subsection,
shall be indicated on the tax statement provided to the county tax assessor-collector
at the time of [
tax remittance and
] title application.
(g)
Unremitted tax paid to seller, transfer of certificate
of title.
(1)
A county tax assessor-collector may accept an application
for certificate of title without the payment of tax from a purchaser who paid
the tax as described in subsection (c) of this section to a seller who failed
to remit the tax as described in subsection (d) of this section.
(2)
The purchaser must present acceptable evidence of tax payment
at the time of title application. Acceptable evidence includes, but is not
limited to, a sales contract or bill of sale that identifies the amount of
tax paid.
(3)
The application for certificate of title and receipt should
indicate "tax paid to seller," a zero in the space labeled amount of tax due,
and the seller's motor vehicle seller-finance tax permit number (if appropriate
and available
).
(4)
The county tax assessor-collector shall notify the comptroller
of the seller's failure to remit the tax through the automated Registration-Title
System (RTS) and include the document indicating tax paid to the selling dealer
in the title application material.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of the
Secretary of State, on January 7, 2002.
TRD-200200070
Martin Cherry
Deputy General Counsel for Taxation
Comptroller of Public Accounts
Earliest possible date of adoption: February 24, 2002
For further information, please call: (512) 475-0387