Texas Dealer Fined 10 x More Than Tax Owed

For anyone who is a regular reader of the TIADA Blog, you will already know we are talking about Special Inventory Tax (SIT).

For anyone who is a regular reader of the TIADA Blog, you will already know we are talking about Special Inventory Tax (SIT). If you are new to the blog, print this one out and post on the dealership bulletin board.
In the past few years, a number of local county tax assessor-collectors have taken an aggressive stance when it comes to enforcing special inventory tax penalty collections. This has led to numerous calls with dealers asking: “Was this the intent of the law?”  Let's say you owe a little over $500 in SIT in January and you fail to file a piece of paper that month with the your local tax office--a pandemic hits two months later and then in August you realize you have been penalized over $5,000. You might ask the same question. Really, 10 times what I owe in taxes? That is the exact predicament a central Texas dealer found himself in earlier this month.
Remember, monthly reports for special inventory tax payments are due EVERY month—even if a dealer doesn't sell any vehicles. And yes, many times the penalty is more than the tax.
A quick reminder about SIT a/k/a vehicle inventory tax. Texas law provides for the special appraisal of dealers' motor vehicle inventory. Special inventory appraisal is generally based on sales. Your local tax assessor collector will provide you with the local tax rate each calendar year. Dealers must file inventory declaration forms with the county tax appraisal district each year listing the total sales, leases or rentals, as applicable, in the preceding year and an inventory tax statement with the tax office must be filed each month.

Penalties and interest can add up. A dealer who does not file the monthly tax statement by the 10th day of the following month commits a misdemeanor offense punishable by a fine up to $100 per day until filed. In addition to any other penalty provided by law, a dealer forfeits a penalty of $500 for each month or portion of month that it is not filed. A tax lien can be attached to the dealer's business personal property to secure payment of the penalty. A dealer who fails to remit the taxes due pays a 5 percent late penalty, with another 5 percent due if not paid within 10 days. And that is how you get to a $5,000 penalty on a $500 tax. So, what can you do?
  1. File your SIT on or before the 10th of each month - even if you don't sell any cars that month and even if we are in the middle of a pandemic.
  2. Help TIADA change this law. You can write a check to INDEPAC and become more involved in the association by joining a committee or attending the conference.
  3. You can also share your concerns with your local state representative or senator.
The Comptroller's office publishes the Motor Vehicle Dealer's Special Inventory Manual (PDF) to assist dealers in filing Form 50-244, Dealer's Motor Vehicle Inventory Declaration (PDF), and Form 50-246, Dealer's Motor Vehicle Inventory Tax Statement (PDF), and prepaying property taxes each month.


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