Special Inventory FAQ's
The Senate Bill 878, effective January 1st, 1994, was enacted by the 73rd Texas Legislature changing how a county appraisal district (CAD) appraises motor vehicle inventory for property tax purposes and how dealers pay their property taxes on this inventory. Below are listed the most frequently asked questions and answers:
Q: Is special inventory taxable in the county where the vehicle is purchased or registered?:
A: The special inventory is taxable in the county where purchased. Dealers who sell vehicles that are later registered in another county must still report the sales on their special inventory monthly tax statement.
Q: If a dealer both leases and sells motor vehicles, how does the dealer report the leased vehicles?
A: If the dealer leases a car, it is not special vehicle inventory. If during the year, the dealer sells a lease car (for example, the lease expired and an individual purchased the car), the car is special vehicle inventory. If a dealer sells a car to a company (being it finance, another dealer) that does not have a GDN or fleet identification number, the car is special inventory and needs to be reported on the monthly tax statement.
Q: Are all trailers or semi-trailers considered special inventory?
A: State law requires that trailers or semi-trailers weighing 4,000 pounds or less must be registered but not titled. Trailers or semi-trailers of any weight used for farm or ranch purposes must be registered, but are not required to be titled. Because these trailers are not titled, they are not special vehicle inventory.
Q: Can a dealer protest the value or inclusion of special vehicle inventory on the appraisal roll to the appraisal review board?
A: Yes. The dealer would follow the normal protest procedures - by May 31st or within 30 days of the delivery of the notice of the appraised value. The dealer has the right to protest any action of the appraisal district that applies to and adversely affects the dealer.
Q: Are the special inventory Declaration or monthly Tax Statement confidential?
A: Yes. The filed forms are confidential.
Q: What is the special inventory Declaration based on?
A: The special inventory Declaration is based on the previous year retail sales. You have to report all types of sales during that year, but only the amount of retail sales is divided by 12 to get the Market Value for the current year. If your dealership is new, you divide it by the number of months that you were in business that year.
Q: When must the dealer file the Declaration? If the dealer files the declaration after the deadline, is the dealer automatically penalized?
A: The dealer must file the declaration before or on February 1st of the current tax year. Failure to file a declaration is a misdemeanor punishable by a fine not to exceed $500 per day. Only the county collector, to defray the cost of enforcement, may use a fine collected. The county attorney enforces this section.
Q: When must the dealer file the monthly Tax Statement? If the dealer files the monthly Tax Statement after the deadline, is the dealer automatically penalized?
A: The dealer must file the monthly Tax Statement by the 10th day of the following month. Failure to file a monthly Tax Statement incurs a penalty of five percent of the amount due. If the amount is not paid within 10 days after the due date, the penalty increases for an additional penalty of five percent of the amount due. Failing to file the statement is a misdemeanor punishable by a fine not to exceed $100.00. Each day that the dealer fails to file is a separate offense. Only the county collector, to defray the cost of enforcement, may use a fine collected. The county attorney enforces this section.
Q: What does the county collector do with fines collected by the county attorney?
A: The collector must use all fines collected to defray the cost of collecting the special inventory taxes. The collector also uses the earned interest from the special inventory escrow account to offset county administrative costs.
Q: Is the dealer required to use the special inventory forms adopted by the Comptroller?
A: Yes. Dealers must use the forms adopted by the Comptroller. A dealer may submit a computer generated form that is the exact format and wording used in the Comptroller forms, without the instructions.
Q: Must a dealer file a monthly Tax Statement if there were no sales in the prior month?
A: Yes. The dealer will file the monthly Tax Statement stating "no sales" when no sale occurred.
Q: When does the county collector pay the dealer's property tax bills on special inventory from the dealer's escrow account?
A: After receipt of the dealer's last monthly payment for the year's taxes (due no later than January 10th), the collector pays the tax bills.
Q: On January 10th, the dealer files the December tax statement with the last prepayment for the year. What does the county collector do if the escrow account is not enough to cover the total taxes due?
A: The county collector must proportionally apply the amount in the escrow account to the taxes levied by each taxing unit. The county collector then sends the dealer a bill for the unpaid amount, along with a temporary receipt for the money already paid. When the dealer pays the amount due, the collector must remit the proper amounts to each taxing unit.
Q: If the dealer escrow account does not cover the full tax bill, when does the tax still due become delinquent?
A: If the county collector does not receive the final payment from the dealer and remit it to the taxing units on or before January 31st, the taxes become delinquent February 1st. The delinquent taxes incur the normal penalty and interest charges as other delinquent taxes.
Q: What happens if the dealer has more prepayment money in the escrow account for the special inventory than the tax bill for that year? Does the dealer receive a refund or a credit to next year's taxes?
A: If the dealer has any money left in the escrow account after the collector pays the tax bills for the year, the county collector proportionally distributes the surplus to the appropriate taxing units and may increase the liability of the dealer for the current year.
Q: What happens if there is an even trade between the dealer and a company or individual without a GDN?
A: If a dealer does an even trade on vehicles with a company or individual without a GDN the vehicle is subject to the special vehicle inventory tax and the sale price of such vehicle should be that of wholesale.