How to Calculate Tax, Title, and License in Texas

Purchasing a motor vehicle in Texas involves costs beyond the advertised price, known as “TTL” – Tax, Title, and License. Understanding these costs, especially the motor vehicle sales tax, is important for vehicle ownership in the state. This tax applies to most vehicle acquisitions.

Understanding Texas Motor Vehicle Sales Tax

Texas imposes a motor vehicle sales tax at a standard rate of 6.25 percent on purchases of cars, trucks, and motorcycles. Licensed dealers typically collect this tax. For private party sales, the buyer remits the tax directly to the county tax assessor-collector.

Tax calculation varies for new and used vehicles. For new vehicles from a dealer, tax is based on the sales price. For used vehicles, especially from private sellers, a “Standard Presumptive Value” (SPV) may be used for tax calculation.

Calculating Taxable Value for Various Transactions

For new and used vehicles from licensed dealers, sales tax is calculated on the gross sales price. Any trade-in allowance reduces this taxable amount. Trade-in allowances reduce the taxable value in both dealer and private party transactions. For example, if a vehicle costs $20,000 and a trade-in is $5,000, tax applies to $15,000.

Private party sales of used vehicles use the Standard Presumptive Value (SPV) method. Tax is calculated on the greater of the actual sales price or 80 percent of the vehicle’s SPV. The Texas Department of Motor Vehicles (TxDMV) determines SPV based on regional sales data. You can find a vehicle’s SPV using the TxDMV website calculator with the Vehicle Identification Number (VIN) and mileage.

For instance, if a used car is bought for $5,000 with an SPV of $7,000, 80 percent of the SPV is $5,600. Since $5,600 is greater than $5,000, tax is calculated on $5,600. If the actual sales price was $6,000, tax would be based on $6,000.

A flat $10 gift tax applies when a vehicle is transferred as a bona fide gift between specific family members: spouse, parent, child, grandparent, or grandchild. The recipient pays this tax when titling and registering the vehicle.

For vehicles purchased out-of-state and brought into Texas, a 6.25 percent use tax applies. A credit may be allowed for sales or use taxes already paid to another state. New residents bringing a vehicle previously registered in their name in another state may pay a $90 new resident tax instead of the use tax.

Exemptions and Reductions

Exemptions or reductions in Texas motor vehicle sales tax are available in certain situations. Bona fide gifts between eligible family members (spouse, parent, child, grandparent, or grandchild) qualify for a reduced $10 gift tax, provided no money or debt is exchanged.

Vehicles acquired through inheritance may also be subject to the $10 gift tax if no consideration is given. If an heir provides consideration, the standard motor vehicle tax may apply.

Vehicles used by certain nonprofit organizations or government agencies may be exempt from sales tax. This includes charitable and religious organizations, public school districts, and government entities. Vehicles purchased in Texas but intended for exclusive use outside the state are also exempt, provided they are not registered or used in Texas beyond transport.

Paying the Tax and Required Forms

The motor vehicle sales tax in Texas is paid at the county tax assessor-collector’s office when titling and registering the vehicle. Purchasers must pay the tax within 30 days from the purchase date or when an out-of-state vehicle is brought into Texas for use.

Form 130-U, the Application for Texas Title and/or Registration, is essential. It documents transaction details like sales price and trade-in allowances for tax calculation. Other required documents include:
Proof of insurance
Valid photo identification
Odometer disclosure statement
Vehicle inspection report
Vehicle’s previous title or Manufacturer’s Certificate of Origin (MCO)

Accepted payment methods at county tax assessor-collector offices include cash, checks, money orders, and credit or debit cards. Confirm accepted payment types with the specific county office. Failing to pay the motor vehicle tax within 30 days results in penalties: 5 percent for 1-30 days late, increasing to 10 percent if over 30 days late.