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Motor Vehicle Tax Manual

Maintained by the Audit Division (Revised 04/2008)

 

CHAPTER 2 - EXEMPTIONS

Church and Religious Societies

Consular Officers and Employees

Driver Training Vehicles

Farm (Ranch)

Exemptions for Specially Modified Motor Vehicles Used on a Farm or Ranch

Non-Exempt Vehicles Used on a Farm or Ranch

Farm Trailers

Examples of Farm Use Vehicles

    Fertilizer Spreader

    Mobilized Fertilizer Spreader

    Modified Motor Vehicle

Trailers Used for Timber Operations

Interstate Motor Vehicle

Licensed Child Care Facilities

Nonprofit Organizations

Orthopedically Handicapped Person

Driver Exemption

Transporting Exemption

Who May Claim the Exemption

Disabled Veterans or Former Prisoners of War

Public Agency - Definition

Public Agency Exemption

Lease to a Public Agency

License Plates

Contractors

Other Organizations Exempt by Statute

Federal Organizations

State Organizations

Volunteer Fire Department - Definition

Volunteer Fire Department Exemption

Vehicles Transported Out of State

Hydrogen-Powered Vehicles

Citrus Pest and Disease Management Corporation (Chapter 80 of Agriculture Code)


Church and Religious Societies (§152.088 and Rule 3.82)

 

A church or religious society is an organized group of people regularly associating for the sole purpose of holding, conducting, and sponsoring religious worship according to the rites of the sect.

 

An organization simply supporting and encouraging religion as an incidental purpose, or furthering religious work, or instilling its membership with religious understanding, may not qualify as a church or religious society.

 

A church or religious society is exempt from paying motor vehicle tax if the vehicle is:

  • designed to carry more than six passengers (includes buses and vans), and
  • used primarily (at least 80% of the vehicle's operating time) to provide transportation to and from church or religious services or meetings.

 

This exemption does not apply to a passenger vehicle registered for the personal or official use of a minister.


Consular Officers and Employees - (Rule 3.63)

All diplomatic missions and their members, including dependents, are required by federal law (22 U.S.C. Section 4303) to register all motor vehicles that they own or lease, with the United States Department of State, Office of Foreign Missions, Diplomatic Vehicle Office.

 

The vendor of a motor vehicle sold in Texas must contact the Office of Foreign Missions in order to determine the tax exempt status of a purchaser. A statement will be provided by the Office of Foreign Missions to the vendor indicating the tax exempt status of the purchaser for motor vehicle sales tax imposed on the transaction. A copy of the statement must be kept by the vendor for four years from the date of purchase. If the exemption is denied, a selling dealer licensed under Transportation Code, Chapter 503, must collect and remit the motor vehicle sales tax due.

 

Note:

A U.S. citizen or a permanent resident of the U.S. working for a foreign consulate would not qualify for exemption from taxes.

 


Driver Training Vehicles (§152.081 and Rule 3.76)

A driver training vehicle is exempt from motor vehicle tax if all of the following requirements are met. A driver training vehicle must:

  • be titled in the name of the dealership,
  • be loaned free of charge to a public school,
  • be used exclusively in an approved standard driver training course, and
  • display exempt license plates (the use of standard license plates subjects the vehicle to tax).

 

 

A driver training vehicle is not exempt from motor vehicle tax when used for:

  • school transportation,
  • vocational programs,
  • faculty,
  • loan to a private or parochial school, or
  • anything other than driver training

 


Farm or Ranch (§152.091 and Rule 3.72)

A farm or ranch is one or more tracts of land used to produce crops, livestock or other agricultural products to be sold as a regular course of business. Included are dairy farms, commercial orchards, commercial greenhouses, feedlots and similar commercial agricultural operations that are the original producers of agricultural products.

 

A home garden is not considered a farm or ranch.

Exemptions for Specially Modified Motor Vehicles Used on a Farm or Ranch

Farm machines, trailers and semi-trailers used primarily for farming and ranching including the rearing of poultry and use in feedlots are exempt from motor vehicle tax. Tax liability or exemption is not determined by the type of registration and titling required by the State Department of Highways and Public Transportation.

 

Self-propelled motor vehicles that are specially adapted for primary use on a farm or ranch are exempt as farm machines. The vehicles must be adapted for use in:

  • the production of crops or rearing of livestock, including poultry, or
  • feedlots, or
  • applying plant food materials, agricultural chemicals, or feed for livestock

 

For example, a truck which has a fertilizer spreader attached to it would be exempt if primarily used in farming.

 

Non-Exempt Vehicles Used on a Farm or Ranch

Specially adapted self-propelled motor vehicles whose only purpose is the transportation of agricultural products or materials are subject to motor vehicle tax. They do not qualify as exempt farm machines as defined by motor vehicle tax law.

A pick-up truck is not exempt as a farm vehicle even though it may have farm registration.

 

Farm tractors are not included in the definition of a motor vehicle.

 

Farm Trailers

A farm trailer is a trailer or semi-trailer (including gooseneck trailers) that is used primarily as a farm or ranch vehicle. A farm trailer must be used in the production of:

  • food for human consumption,
  • grass,
  • feed for any form of animal life, or other livestock or agricultural products to be sold in the regular course of business.

 

A farm trailer used primarily by a farmer or rancher in processing, packing, or marketing of the farmer's own livestock or agricultural products is not subject to motor vehicle tax.

 

A farm trailer used exclusively in processing, packing, or marketing agricultural products by an agricultural cooperative or gin is subject to the tax, unless the cooperative can prove that the cooperative itself is the original producer of all agricultural products being processed, packed or marketed, and that those functions are being done at a location operated by the cooperative.

Examples of Farm Use Vehicles

Fertilizer Spreader

NOT A MOTOR VEHICLE     NO MOTOR VEHICLE TAX DUE

Fertilizer Spreader

 

Mobilized Fertilizer Spreader

NOT A MOTOR VEHICLE     NO MOTOR VEHICLE TAX DUE

Mobilized Fertilizer Spreader

 

Modified Motor Vehicle

AN EXEMPT MOTOR VEHICLE

Modified Motor Vehicle

 

Agricultural Tax Exemptions

Effective September 1, 2011, in order to qualify for motor vehicle sales or use tax exemption, farmers and ranchers must register with the Comptroller and obtain a registration number.

Registration numbers must be indicated on the Application for Certificate of Title (Form 130-U) in Section 21, the “Exemption claimed under the Motor Vehicle Sales and Use tax Law because…” This includes motor vehicles purchased to be leased to qualifying farmers and ranchers. Vendors and county tax assessor-collectors will able to verify registration numbers through an online system.


Trailers Used for Timber Operations (§152.091 and Rule 3.72)

A timber operation is the production of timber including land preparation, planting, maintenance, and gathering of trees commonly grown for commercial timber.

 

A timber machine is a self-propelled motor vehicle specially adapted to perform a specialized function for use primarily in timber operations. 

 

Timber trailer is a trailer or semi-trailer designed for and used primarily in a timber operation.

 

A retail sale, use, or rental of a timber machine or a timber trailer is not subject to motor vehicle sales and use tax or motor vehicle gross rental receipts tax if the timber machine or timber trailer is used in growing, harvesting, processing, packing, and marketing of timber by the original producer.

 

Timber Operators Tax Exemption

Effective September 1, 2011, in order to qualify for motor vehicle sales or use tax exemption, timber operators must register with the Comptroller and obtain a registration number.

Registration numbers must be indicated on the Application for Certificate of title (Form 130-U) in Section 21, the “Exemption claimed under the Motor Vehicle Sales and Use Tax Law because…” This includes motor vehicles purchased to be leased to qualifying timber operators. Vendors and county tax assessor-collectors will be able to verify registration numbers through an online system.


Interstate Motor Vehicles (§152.089)

Interstate motor vehicles, trailers, and semi-trailers are exempt.  An interstate motor vehicle, trailer, or semi-trailer is one which is operated in Texas and in at least one other state or country and for which the registration fees could be apportioned if the motor vehicle were registered in a state or province of a country that is a member of the International registration Plan.

 

See Chapter 11 for more information on interstate motor vehicles


Licensed Child Care Facilities (§152.093)

Certain qualified residential child care facilities may purchase, use, or rent motor vehicles tax-free. The motor vehicles must be used primarily for transporting the children residing in the facility under a state license.

 

The child care facility must meet all of the following requirements:

 

1.

Licensed under Chapter 42, Human Resources Code, to provide residential care 24 hours a day to both:

--

children who do not require specialized services or treatment, and

--

children who are emotionally disturbed, and

2.

The children are permitted by the license to live together in a single residential group.


Nonprofit Organizations

Nonprofit organizations are not exempt from paying motor vehicle tax.

 

An organization incorporated under the Texas Nonprofit Corporation Act is not exempt from paying motor vehicle tax.

 

Organizations funded by the state or federal government are not automatically exempt from motor vehicle tax. In order to qualify for an exemption, an organization must be either a public agency or exempted by a specific statute. For more information, see Public Agencies in this chapter.

 

A Limited Sales Tax Exemption Certificate may not be used by any organization to claim exemption from motor vehicle tax.


Orthopedically Handicapped Person - (§152.086 and Rule 3.84)

An orthopedically handicapped person is someone with limited movement of body extremities and/or loss of physical functions.

For the purpose of claiming an exemption from the motor vehicle tax, the person must be either unable to operate, or be transported in, a motor vehicle unless it has been specially modified.

 

Driver Exemption:
A vehicle purchased to be driven by an orthopedically handicapped person is exempt from motor vehicle tax if the vehicle is driven primarily by the orthopedically handicapped person, and if the vehicle is modified to:

 

(1)

facilitate operation by an orthopedically handicapped driver by altering conventional controls for the brakes, accelerator, or steering wheel, or

(2)

allow an orthopedically handicapped driver to enter the vehicle by installing a wheelchair lift, hoist, or ramp.


The driver must present to the county tax assessor-collector a restricted Texas driver's license which requires a modification restriction on the vehicle or an invoice or other document from an installer of special equipment which describes the modification and the vehicle being modified.

 

Transporting Exemption:
A vehicle purchased to transport an orthopedically handicapped person is exempt from motor vehicle tax if the vehicle:

  • has been modified for transporting an orthopedically handicapped person by installing a wheelchair lift, hoist or ramp, special seat restraints, or wheelchair hold-down clamps, and
  • is used primarily to transport the orthopedically handicapped person

 


The purchaser must present to the county tax assessor-collector an invoice or other document from an installer of special equipment which describes the modification and the vehicle being modified for transporting an orthopedically handicapped person.

 

Who May Claim the Exemption?:

The exemption for orthopedically handicapped persons applies to individuals, partnerships, corporations, or associations, as long as the requirements are met.

Beginning January 1, 2010, a dealer selling a motor vehicle may not collect the motor vehicle sales tax when a purchaser claims an exemption for an orthopedically handicapped person when the purchaser signs a properly completed Exemption for Orthopedically Handicapped Person (Form 14-318) at the time of the sale. The purchaser must provide a copy of the restricted Texas Driver License indicating the required modification to the motor vehicle or provide a statement from a practitioner of the healing arts (included on the exemption certificate) certifying that the person is orthopedically handicapped and that the motor vehicle must be modified in order for the person to drive the vehicle or be transported by the vehicle.

The dealer must retain the exemption certificate and provide a copy of the certificate to the County Tax Assessor-Collector at the time of title transfer. The dealer who accepts the exemption certificate in good faith does not have any responsibility to investigate the purchaser's claim, and the dealer will not incur any liability for any taxes later found to be due.

The exemption certificate is available at the Comptroller's Web site at:

      www.window.state.tx.us/taxinfo/taxforms/14-forms.html.


Disabled Veterans or Former Prisoners of War

A disabled veteran or former P.O.W. is not automatically exempt from the motor vehicle sales and use tax. A disabled veteran or former P.O.W. must be an orthopedically handicapped person as defined in this section to qualify for an exemption from motor vehicle tax.


Public Agency (§152.082)

A public agency is a department, commission, board, office, institution, or other agency of the State of Texas, or of a county, city, town, school district, hospital district, water district, or other special district, authority, or political subdivision created by or pursuant to the constitution or the statutes of this state. The term also includes the unincorporated agencies and instrumentalities of the United States.

 

An organization is not a public agency simply because it is funded by the state or federal government. An organization may be state or federally funded and still not be entitled to an exemption from motor vehicle tax.

 

A public agency is exempt from payment of motor vehicle tax if the vehicles are operated with exempt plates and are titled in the name of the agency.

A limited sales tax exemption certificate may not be used to claim exemption from motor vehicle tax.


Lease to a Public Agency (§152.083)

A leasing company acquiring a motor vehicle to be leased to a public agency is not required to pay motor vehicle tax as long as the vehicle is:

  • titled in the lessor's name,
  • leased to a public agency, and
  • operated with exempt license plates.

 

The leasing company is required to pay motor vehicle tax on the book value of the vehicle at the termination of the lease unless the vehicle is held exclusively for resale. For more information refer to Chapter 9.


License Plates

To qualify for the exemption, exempt license plates must be displayed. However, the exempt plate requirement cannot be enforced on federal vehicles. This requirement also is waived for undercover law enforcement vehicles. Exempt plates are issued for undercover vehicles, but are then traded for non-traceable regular plates.


Contractors

A contractor working on a public agency project is not exempt from motor vehicle tax. An exemption granted under the Texas Limited Sales and Use Tax Act is not valid for motor vehicle tax.


Other Organizations Exempt by Statute

In addition to public agencies, other organizations are exempt from motor vehicle tax by particular statutes. These organizations are not required to operate their vehicles with exempt license plates in order to qualify for the exemption. Listed below are some examples of such organizations.

 

Federal Organizations:

Federal Intermediate Credit Bank

Federal Land Bank

Federal Credit Unions

Federal Reserve Banks

Federal Home Loan Mortgage, Inc., and other Federal Home Loan Banks

American Red Cross

Boy Scouts and Girl Scouts. The Boy Scouts and Girl Scouts have been determined to be instrumentalities of the federal government and are exempt from motor vehicle tax.

 

State Organizations:

Rural Electric Cooperatives, organized under the Electric Cooperative Corporation Act, Tex. Rev. Civ. Stat. Ann. art. 1528(b), §30

 

Telephone Cooperatives, organized under the Telephone Cooperative Act, Tex. Rev. Civ. Stat. ANN. art. 1528(c), §29

______________________________________________________________

Volunteer Fire Department

A volunteer fire department is any company, department or association organized to answer fire alarms, extinguish fires and provide emergency medical services. The members of a volunteer fire department receive either no compensation or nominal compensation for their services.

 

A fire truck, ambulance, or other motor vehicle used exclusively for fire-fighting purposes or for emergency medical service is exempt from motor vehicle tax when purchased by a volunteer fire department. Private ambulance services are exempt. Other fire departments will probably be exempt as public agencies. For more information refer to the Transportation Code § 502.204 and the Health and Safety Code § 773.003


Vehicles Transported Out of State (§152.092)

Motor vehicle tax is not due on the retail sale of a motor vehicle that is transported out of Texas prior to any use in Texas other than the transportation of the vehicle out of the state.  The motor vehicle would have to be taken out of Texas, permanently, within 20 working days from the date of purchase to qualify for this exemption.

In order to qualify for this exemption, the purchaser of the motor vehicle must sign, at the time of the purchase, an exemption certificate that:

  • is on a form designated by the Comptroller;
  • contains all the information that the Comptroller considers reasonable;
  • is signed by the purchaser, and
  • provides that the purchaser, by signing the certificate, authorizes the Comptroller to provide a copy of the certificate to the state of intended use and registration.

 

If the vehicle ever re-enters Texas, use tax is due based on the total consideration. Credit would be allowed for a legally imposed sales or use tax paid to another state.

 

A vehicle that has been exempted under this provision, that later is brought back into this state by the purchaser who intends to establish residence in Texas, is not eligible for the new-resident tax. Use tax would be due on the vehicle with credit allowed for tax paid to the other state.

 

Form 14-312 — Exemption Certificate for Vehicles Taken Out of State

 

Texas Motor Vehicle Sales Tax Exemption


Hydrogen-Powered Vehicles

Effective September 1, 2007, an ultra low-emission motor vehicle that is hydrogen-power capable and has a fuel economy of at least 45 miles per gallon, or that is fully hydrogen-powered, is exempt from Texas motor vehicles and use tax.  A qualifying hydrogen-powered motor vehicle is a vehicle that meets Phase II standards established by the California Air Resources Board as of September 1, 2007, for an ultra low-emission vehicle II or stricter Phase II emission standards established by that board.


Citrus Pest and Disease Management Corporation (Chapter 80 of Agriculture Code)

Effective September 1, 2009, the Agricultural Code was amended, by adding Chapter 80, to provide an exemption from motor vehicle sales and use taxes for the Texas Citrus Pest and Disease Management Corporation. This Texas nonprofit corporation is a quasi-governmental entity formed to control and suppress the Asian citrus psyllid, a citrus pest. The corporation operates under the supervision of the Texas Department of Agriculture.

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