| (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.
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