34 TAC §3.74
The Comptroller of Public Accounts proposes an amendment
to §3.74, concerning seller responsibility. This amendment implements
House Bill 2424, 78th Legislature, 2003. This legislation added Tax Code §152.106
providing for the prohibition of certain advertising and penalties. A new
subsection (h) is added to address the change.
John Heleman, 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 units of local government.
Mr. Heleman also has determined that for each year of the first five years
the rule is in effect, the rule would benefit the public by prohibiting dealers
from making certain advertising claims that might confuse the public with
regard to their tax responsibilities on the purchase of a motor vehicle .
This rule is adopted under 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 section 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.
This amended section implements Tax Code, §152.106.
§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 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 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 in a manner provided by law or for purposes allowed under [
the
]Transportation Code, Chapter 503;
(B)
a sale of a vehicle other than a new motor vehicle in which
the purchaser is a dealer who holds a dealer's license 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 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.
(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 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.
(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)
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 at a discount. 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 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 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.
(h)
Prohibited advertising. A dealer may not
directly or indirectly advertise, hold out or state to a customer or the public
that he will assume, absorb or refund a part of the tax imposed on the sale
of a motor vehicle, or will not add tax to the sales price.
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 26, 2005.
TRD-200500353
Martin Cherry
Chief Deputy General Counsel
Comptroller of Public Accounts
Earliest possible date of adoption: March 13, 2005
For further information, please call: (512) 475-0387