                         ~July29, 1971


Honorable Robert S. Calvert           Opinion No. M-913
Comptroller of Public Accounts
State of Texas                        Re:   Questions concerning
Austin, Texas                               Article 6.01, et seq.,
                                            Title 122A, V.C.S.,
                                            and .amendments thereto
                                            contained in H.B. 730,
                                            Acts 1971, 62nd Leg.,
Dear Mr. Calvert,:                          R.S.
     ~You have requested an oplnlon on the following questions
concerning the Motor Vehicle Retail Sales and Use Tax Act,
as amended.1
        "1. A purchaser who buys a motor vehicle for' "leas-
        ing" as that term is defined In Article 6.03(f)
        (added by H.B. 730) must pay motor vehicle tax
        upon the purchase price of the vehicle at the time,
        of registration thereof. If such person there-
        after "leases" this motor vehicle to another person
        for two (2) months, then.elects to "rent" (as that
        term is defined in Article 6.03(E), added by H.B.
        730) the same vehicle to others for a series of
        dally or weekly rentals is the owner entitled to
        any credit or reimbursement due to the fact that
        he has paid motor vehicle tax upon the original
        purchase price?
        "2. Does Article 6.04, as amended by H.B. 730, make
        applicable to motor vehicle tax reports the penalty
        and interest provisions, the one per cent (1%) re-
        tailer reimbursement provisions, direct pay provision,
        and the prepayment discount provisions contained in
        Article 20.05, Limited Sales, Excise and Use Tax Act?


     1 All articles herein referred to are comprehended within
Chapter 6, Title 122A, Taxation-General, Vernon's Civil Statutes,
unless otherwise stated.

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Honorable Robert S. Calvert, page 2        (M-913)


        "3. In many Instances, a deposit is required of a
        person desiring to rent a car. When the car is
        returned, the deposit is credited toward the amount
        of rental due. Is this office correct In assuming
        that the motor rental tax is to be collected at
        the time the vehicle Is returned and at the tine
        any deposit is credited toward the rental due?
        "4. If a car rental agency has no office or
        operation at the place at which the car is to be
        left at the conclusion of a rental, it is common
        for such agency to levy a "drop-charge' to recompense
        i;~ ;;ycy for its expense involved In picking up
               . Is such drop-charge, or similar charge,
        subject to tax under Article 6.01(l), as amended
        by H.B. 730, or other provisions of that Chapter
        as so amended?
     The amendments to Chapter 6, Title 122A, Taxation-
General, Vernon's Civil Statutes, became effective on July
1, 1971. Prior to these amendments, the Motor Vehicle
Retail Sales and Use Tax Act did not tax rentals of motor
vehicles. The above mentioned amendments impose a tax
under Chapter 6 on the receipts from such rentals and on
the total consideration paid or to be paid on a lease of a
motor vehicle. Pertinent provisions of the Motor Vehicle
Act as related to this opinion are hereafter quoted:
     Relevant sections'of Article 6.01 read as follows:
        "(1) There Is hereby levied a tax upon every
        retail sale of every motor vehicle sold in this
        State, such tax to be equal to four per cent (4%)
        of the total consideration paid or to be paid for
        said motor vehicle. In the case of a motor vehicle
        purchased to be rented or held for rental, the tax
        is levied on the gross rental receipts of the renting
        of such motor vehicle at the same rataas that tax
        levied In Article 20.02 of this title. Provided,
        however, that where the period for rental is intended
        to be for more than 31 days, such rental is deemed
        to be a lease as defined In this Article and the
        purchaser-lessor must pay the tax on total con-
        sideration paid or to be paid for said motor vehicle.
        The tax on rental receipts shall be collected by the
        owner from the renter who has exclusive use of the

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Honorable Robert S. Calvert, page 3        (M-913)


       motor vehicle for a period of time and has the
       right ,to direct the manner of use of the vehicle,
       whether exercised or not, for that period. ...'
        II
         ...
       “(6) In the renting of motor vehicles, .... the
       purchaser shall furnish the County Assessor and
       Collector of Taxes with a resale certificate in
       accordance with the provisions of Article 6.04 of
       this Chapter, whereupon the Tax Collector shall
       accept the motor vehicle for registration or
       transfer.
       “(7) Motor vehicles purchased to be rented or to
       be held for renting must be purchased by an owner
       for use In a business where the renting of motor
       vehicles Is an established business. Every motor
       vehicle used In a business which either rents or
       leases motor vehicles to others, as those terms
       are defined insthis Article; and for consideration,
       must have paid the tax on total consideration at the
       time of purchase of those motor vehicles,intended
       for leasing or must be collecting and paying the
       gross rentals receipts tax on renting those motor
       vehicles. Any motor vehicle leased in this State
       and owned by the original manufacturer must be
       registered in this State and taxed in accordance
       with the provisions of this Article. If a person
       engages in both renting and leasing of motor vehicles,
       he shall keep complete and adequate records,
       segregating or enabling the segregration of both
       types of transactions.
        “(8) When the owner of a motor vehicle changes the
        status of the motor vehicle from a rental unit to
        a lease unit, the owner shall so inform the State
        Comptroller of Public Accounts of such change on a
        form to be supplied by the Comptroller, and the
        owner shall then pay the tax on such motor vehicle
        based on the owner's book value and at the rate
        provided in this Article."
     The relevant portions of Article 6.03 read as follows:
        "The following words shall have the following
        meaning unless a different meaning clearly appears
        from the context.
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Honorable Robert S. Calvert, page 4         (M-913)


        11
             .   .   .



       "(B) Retail Sale. The term 'retail sale' as herein
       used shall include all sales of motor vehicles except
       those whereby the purchaser acquires a motor vehicle
       for the exclusive purpose of resale and not for use
       and shall not include those operated under and in
       accordance with the terms of Article 6686, Revised
       Civil Statutes of Texas, 1925, as amended. The
       term 'retail sale' also shall include rentals the
       gross receipts from which are subject to the tax
       imposed by this Chapter, and purchases used or to
       be held for in such rentals shall be considered
       purchases for resale."
        11
         ...
        "(D)(3) Any person purchasing motor vehicles for
        resale at retail who has obtained a certificate of
        title to a motor vehicle which he uses for personal
        or business purposes may deduct the fair market
        value of such vehicle from the 'total consideration'
        when such person purchases another motor vehicle
        upon which he obtains a certificate of title as
        a substitute vehicle for personal or business use
        and the original vehicle is offered for sale at
        retail."
        "(E) Rental or Renting. Those terms as herein
        used shall mean the agreeing by the owner to give
        exclusive use of a motor vehicle to another for a
        consideration and for a period of time not to
        exceed 31 days under any one agreement.
        "(F) Lease or Leasing. Those terms as herein used
        shall mean the agreeing by the other to give
        exclusive use of,a motor vehicle to another for a
        consideration and for a period of time exceeding
        31 days under such agreement."
        "Article 6.04.   Collection of Taxes.
        "The taxes on total consideration paid or to be paid
        levied In this Chapter shall be collected by the
        Assessor and Collector of Taxes of the county in
        which any such motor vehicle Is first registered
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Honorable Robert S. Calvert, page 5        (M-913)


       or first transferred after such a sale; the Tax
       Collector shall refuse to accept for registration or
       for transfer ,anymotor vehicle until the tax
       thereon is paid or he is furnished with a resale
       c,ertlflcatein accordance with Article 6.01(6) of
       this Chapter.
        "The taxes on gross rental receiwts levied In this
        Chapter shall be reported and paid to the State
       Comptroller of Public Accounts in the same manner
        that the Limited Sales, Excise and Use Taxes of this
        State are reported and paid by retailers under
        Chapter 20, Article 20.05. Motor vehicle owners
       required to collect, report and pay the taxes on
       gross rental receipts Imposed by this Chapter
        shall register as sellers with the State Comptroller
        of Public Accounts and obtain from him a Motor
       Vehicle Retail Seller's Permit in the same manner
        as required under the Limited Sales, Excise and Use
        Tax laws of this State, Article 20.031 of this title.
        ...The tax shall .be paid at the time application is
       made for registration of said motor vehlole, and
       the Tax Collector shall refuse to issue the registration
       license until the tax Is paid or he is furnished with
       a resale certificate in accordance with Article 6.01(6)
       of this Chapter."
     Under these amendments, the tax imposed on every retail
sale of a motorvehicle in Texas was raised from three per
cent (3%) of the total consideration paid or to be paid for
such motor vehicle to four per cent (4%). In case of a motor
vehicle purchased to be rented or hela for rental for
periods not exceeding 31 days in any one agreement, the tax
is levied on the gross rental receipts. When a motor vehicle
is purchased for rental for more than 31 days, the rental
Is considered a lease and not a rental. The tax due on the
motor vehicle by the purchaser-lessor Is the total consideration
paid or to be paid for it.
     If a motor vehicle owner changes the status of his motor
vehicle from a rental unit to a lease unit, the act provides
that the owner will be taxed on such vehicle according to its
book value Instead of the receipts from the rental of such
vehicle. Question number one poses a question with regard
to the reverse factual situation, that is, whether any credit

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Honorable Robert S. Calvert, Page 6        (M-913)


or reimbursement nay be allowed when a person leases a
motor vehicle and then later desires to rent the same
vehicle, having paid the motor vehicle tax upon the
original purchase price. The law In question is silent
as to any credit or reimbursement that may be granted
or Is due to an owner in a situation where there is a
lease and then a rental of the same motor vehicle. The
owner has the option at the time of purchase to choose the
rental unit use for his vehicle and be accorded the change
in tax mus    authorized by Article 6.01(8). If he selects
the lease unit use, he must pay the tax as.provided In
Chap-     without a change. Therefore, it is the opinion
of this office that the question of any relief that may
be given to the owner in such instances by way of credit on
or reimbursement from hls taxes paid was within the purview
of the Legislature, and we must assume from the absence of
any language in the statute that nay reasonably be interpreted
to grant such relief, that the Legislature did not authorize
the giving of such credit or reimbursement. Therefore your
Question Number 1 is answered in the negative.
     Your Question Number 2 concerns the applicability of
the penalty and interest provisions, the one per cent
retailer reimbursement provisions, direct pay provisions
and the prepayment discount provisions of Article 20.05 of
the Limited Sales, Excise and Use Tax Act, Chapter 20,
Title 122A, Taxation-General, Vernon's Civil Statutes, to
the reports and payments required under the Motor Vehicle
Retail Sales and Use Tax Act here under discussion. In
view of the provisions of Article 6.04 requiring the taxes
levied on gross rental receipts to be reported and paid in
the same manner as the general sales and use taxes are so
reported and paid, we deem such provisions of Article 20.05
of the Limited Sales, Excise and Use Tax Act, which are
designed to facilitate the collection of such taxes, to be
equally applicable to the Motor Vehicle Sales and Use Taxes.
     Therefore your Question Number 2 is answered in the
affirmative.
     We are of the opinion that the motor vehicle tax on
rentals is due at the time of payment of the rental charges.
This answers your Question Number 3 in the affirmative.



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Honorable Robert S. Calvert, page 7        (M-913)

     Article 6.03(D)(l) defines "total consideration" as:
        "the amount paid or to be paid for said motor
        vehicle ... at the time of sale ...'
Under Article 6.03(B) a "Retail Sale" Is defined to include
rentals "the gross receipts from which are subject to the
tax imposed by this Chapter ...' Therefore, since a rental
is a retail sale, the definition of total consideration for
a sale in Article 6.03(D)(l) now would cover a rental. In
your Question Number 4, you ask whether a "drop-charge" as
stated In that question Is taxable under Article 6.01(l).
Apparently the charge is paid by the person renting the
vehicle at the time that he rents it or at some time
thereafter.
     Under Article 6.03(D)(l), the total rental consideration
includes all amounts paid or to be paid for the rental at the
time 'of rental, unless otherwise excluded. Article 6.03(D)
(2) lists items not included within the meaning of total
consideration. Among these items and the only one seen to
be possibly applicable herein Is:
        "(f) charges for transportation of motor vehicles
        after sale."
     There are no facts to indicate that a "drop-ch-rPe' is
in effect a transportation charge within Subsectior (f). Article
10, Vernon's Civil Statutes, provides that the provisions of
statutes shall be liberally construed with a view to effect
their objects. Calvert v. Rritlsh American 011 Producing
co.2 397 S.W.2d 839, (Tex.Sup., 1966)   The purpose of H.B.
730 as stated in the enacting clause is to raise revenue
to support the government of Texas. It would appear that a
"drop-charge" is just an amount imposed by the rental agency
as part of the total charge for renting the vehicle.
Therefore, the opinion of this office is that such charges
are taxable under Article 6.01(l) as part of the tctal
charge paid for the rental.
                        SUMMARY
             In the absence of any language in the statute that
        might reasonably be interpreted to grant such relief,
        it is assumed that the Legislature did not authorize
        the giving of credit or reimbursement for motor
        vehicle tax paid upon theoriginal purchase price,


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Honorable Robert S. Calvert, page 8        (M-913)



        when the status of the vehicle is changed from a
        lease unit to a rental unit. Chapter 6, Title 122A,
        Taxation-General, V.C.S.
             Since Article 6.04, Title 122A, Taxatlon-
        General, V.C.S., requires the taxes levied on gross
        rental receipts to be reported and paid in the sane
        manner as the general sales and use taxes are so
        reported and paid, the provisions of Article 20.05,
        Limited Sales, Excise and Use Tax Act, which are
        designed to faoilitate the collection of such taxes,
        are deemed to be equally applicable to the Motor
        Vehicle Sales and Use Tax Act.
             The motor vehicle tax on rentals is due at the
        time of payment of the rental charges.
             A drop-charge or similar charge is subject to
        tax under Chapter 6, Title 122A, V.C.S., as part
        of the total charge paid for the rental of the
        motor vehicle.                   ,7




Prepared by R. L. Lattimore
and Harriet D. Burke
Assistant Attorneys General
APPROVED:
OPINION COMMITTEE
Kerns Taylor, Chairman
W. E. Allen, Co-Chairman
Marietta Payne
Harold Kennedy
James Quick
Jim Swearingen




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Honorable Robert S. Calved,   page 9   (M-913)


MEADE F. GRIFFIN
Staff Legal Assistant
ALFRED WALKER
Executive Assistant
NOLA WHITE
First Assistant




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