Business Personal Property – Dealer’s Motor Vehicle Inventory Frequently Asked Questions

When are the Monthly VIT Statement and Declaration due?

Dealer Motor Vehicle Inventory Tax Statements are due on or before the 10th of each month.

A declaration must be filed not later than February 1 of each year or, in the case of a dealer who was not in business on January 1, not later than 30 days after commencement of the business, except as provided by Texas Property Tax Code Section 23.122(l). A dealer is presumed to have commenced business on the date of issuance of their general distinguishing number as provided by Transportation Code Chapter 503. Notwithstanding this presumption, a chief appraiser may, at their sole discretion, designate another date on which a dealer commenced business.

Where do I send the Dealer’s Motor Vehicle Inventory Tax Statement, form 50-246?

You may submit your tax statement by mail to PO BOX 830248, SAN ANTONIO, TX 78283, by fax to (210)242-2452, or using the Help Center at help.bcad.org.

What is considered heavy equipment?

Texas Property Tax Code Section 23.1241(a)(6) defines heavy equipment as any item of equipment that is:

• self-propelled, self-powered, or pull-type equipment, including farm equipment or a diesel engine
• weighs at least 500 pounds, and is intended to be used for agricultural, construction, industrial, maritime, mining, or forestry uses
• is not a motor vehicle that is required to be titled or registered.

If you are a heavy equipment dealer, do you still have to render under Chapter 22 of the Texas Property Tax Code?

Yes, a heavy equipment dealer is required to render all tangible personal property used to produce income, as required by Texas Property Tax Code Section 22.01. Additionally, Texas Property Tax Code Section 23.1241(d) addresses personal property held by a dealer and a dealer who sells predominately to other dealers. Some chief appraisers may not require those dealers to render their inventory but instead consider the declaration they are required to file as meeting the rendition requirement; however, there is nothing specific in the Texas Property Tax Code which exempts inventory owners from the rendition requirements.

Is sales tax included in the sales price of heavy equipment or in the monthly lease or rental payment, as applicable?

Yes, the sales price is part of the total price paid for the equipment and is included in the sales tax.

The sales price of heavy equipment is defined in Texas Property Tax Code Section 23.1241(a)(7) as the total amount of money paid or to be paid to a dealer for the purchase of an item of heavy equipment (or for a lease or rental with an option to purchase), the total amount of the lease or rental payments, plus any final consideration, excluding interest. The sales price includes the sales tax since it is part of the money paid or to be paid to a dealer for the purchase of the heavy equipment.

Can previous lease and rental payments be deducted from the cost of a piece of heavy equipment being sold?

Yes, interest payment can be deducted.

Texas Property Tax Code Section 23.1241(a)(7) states that the sales price is the total amount of the lease or rental payments plus any final consideration, excluding interest. For the purpose of the annual declaration used to determine the property tax on the market value of a dealer’s inventory, Texas Property Tax Code Section 23.1241(b-1) states that the sales price of an item of heavy equipment that is sold during the preceding year is considered to be the sum of the sales price for the item plus the total lease and rental payments received for the item in the preceding tax year.

Should the cost of warranties in the sales price of heavy equipment be included before applying the unit property tax?

This depends on the specifics of the transaction.

If the cost of the warranties is set up as a separate transaction, then it is not part of the sales price of the heavy equipment. If, however, the cost of the warranty is part of the single transaction in the purchase of the heavy equipment, it is part of the money paid or to be paid to a dealer for the purchase of the heavy equipment and is included as part of the sales price.

Is anyone who sells, leases or rents heavy equipment a dealer? Or must the person be engaged in the business in this state of selling, leasing or renting heavy equipment?

Texas Property Tax Code Section 23.1241(a)(1) defines a dealer as a person engaged in this state in the business of selling, leasing, or renting heavy equipment.  A dealer engaged in business in Texas that sells or leases heavy equipment must be permitted to collect state and local sales tax since these are taxable transactions for sales tax purposes. An appraisal district can verify if the person has a Texas sales tax permit.

Are excess funds in the escrow account after all property taxes have been paid to the appropriate taxing units carried over to the next tax year?

No, excess funds are not carried over to the next tax year. Texas Property Tax Code Section 23.1242(j) states hat no later than February 15, the tax collector shall distribute all funds collected under authority of this section and held in escrow to each appropriate taxing unit.

In other words, funds deposited during the calendar year are used to pay the heavy equipment dealer’s tax bill on the dealer’s inventory. The tax collector distributes the deposited funds to the taxing units on or before January 31 of the following year and then any remaining in the account by February 15. No funds are carried forward to pay the next year’s tax bill.

Current law does allow a heavy equipment dealer to apply for a refund of prepaid taxes on a sale that is a fleet transaction (sale of five or more items of heavy equipment in one calendar year); however, this is the only provision for returning money in an escrow account.

Do the exclusions for fleet transactions, sales to dealers, and subsequent sales apply to leases and rentals?

No, these exclusions deal with sales of heavy equipment; therefore, they do not apply to leases and rentals. Please note that a subsequent sale does not include a lease or rental that lacks a purchase option or has an unexercised purchase option. Leased or rented equipment in which the lessee/renter has exercised a purchase option change that leased/rented equipment to a sale.

Is a dealer who does not owe property tax because the dealer was not in business on January 1 prohibited from assigning a unit property tax apply only to sales or to sales, leases, and rentals?

A dealer must file monthly statements each month that they are in business; however, Texas Property Tax Code Section 23.1242(g)(2) states that the dealer may not assign a unit property tax to an item of heavy equipment sold by the dealer or remit money with the statement.  An exception to this is Texas Property Tax Code Section 23.1242(k) which states a person who acquires another dealer’s business and has a contract to pay the selling dealer’s inventory taxes.

If the same auction house is used by a company to sell all of its used equipment, is this considered a fleet sale?

If the dealer sells the used equipment to the auction company and sells five or more items in one calendar year, the dealer should report those sales as fleet transactions.

While the auction company reports its sales as a dealer selling heavy equipment, in some cases, they are not taking ownership of the heavy equipment but instead handling the sales transaction for the dealer. The final determination will depend on the arrangements made between the dealer and the auction company.

Does the requirement that the owner of the equipment shall state the amount of the unit property tax assigned as a separate line item on an invoice apply to sales?

Recent changes to Texas Property Tax Code Section 23.1241(b) addresses both sales and lease/rental transactions. As such, this line item should appear on all invoices.