Texas Comptroller Update Regarding Use Tax Return on Out-of-State Vehicle Purchases

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Beginning on March 1, 2020, a taxpayer who has purchased an off-highway vehicle (“OHV”) outside of Texas must provide proof that they paid Texas use tax on the vehicle when registering it with their local county tax assessor. The Texas Comptroller of Public Accounts (“Comptroller”) has stated that affected taxpayers should use Form 01-163 Texas Use Tax Return – For Off-Highway Vehicles Purchased for Out-of-State Retailers. Once the completed form and payment has been received and processed by the Comptroller, the taxpayer will receive a receipt for the payment. The taxpayer can then use that receipt when registering the OHV with their local county tax assessor; without proof of payment a taxpayer will be unable to register the out-of-state purchased OHV.

The Comptroller has stated that the following vehicles are considered OHVs:

  1. All-Terrain Vehicles (ATVs);
  2. Off-Highway Motorcycles;
  3. Off-Highway Recreational Vehicles;
  4. Sand Rails; and
  5. Utility Vehicles.

Tax is due on any OHV used for recreational riding, hunting, wildlife management, or any other purpose.  For more information on vehicles designated as off-road vehicles, please see Texas Comptroller Tax Publications 94-438 All-Terrain or Off-Road Vehicles and Texas Use Tax, and also 98-805 Motorcycles, Autocycles and Off-Road Vehicles – Which Tax is Due?

It should be noted that there is an exemption for any sales or use tax due if the OHV is used exclusively on a farm, ranch, or in a timber operation in the production of agricultural or timber products.  If a taxpayer holding a valid and current agriculture and timber exemption makes an out-of-state purchase of an OHV, then he/she only need provide the registration number of the exemption to the local county tax assessor in order to register it.

The Texas use tax rate is 6.25%.  The taxpayer will also need to determine applicable local tax based on where the OHV is used or stored. The Comptroller’s website has a tax rate locator which will provide the correct local tax percentage, which can be up to 2%.[1]  It is also important to remember that the Comptroller will provide a credit for any sales or use tax paid by the taxpayer to the out-of-state taxing authority for the purchase of the OHV.

Also beginning on March 1, 2020, Tex. Tax Code §151.482 will require manufacturers of OHVs licensed by the Texas Department of Motor Vehicles to file an annual report with the Comptroller listing each warranty issued by the manufacturer for a new OHV that was sold to a Texas resident by an out-of-state retailer for the previous calendar year.  The Comptroller will use the information in the report to investigate and collect any unpaid use taxes.  The report is due on March 1 of the year following the reporting period.  For 2019, the report date has been extended and is due on April 1, 2020.

Texas taxpayers who have made out-of-state purchases of OHVs are strongly encouraged to begin the process of filing Form 01-163 and paying the applicable use tax so as to avoid paying any potential penalties and interest.


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[1] The Comptroller’s tax rate locator.