60-Day Rule Subject of Increasing Comptroller Audits

By Michael Dunagan
TIADA General Counsel

One of the greatest legislative achievements of TIADA was the passage of deferred sales tax. It allows buy-here-pay-here dealers to pay sales tax from the income stream received from buyers (as opposed to fronting the entire sales tax amount at the time of transfer).  Additionally, it eliminates the payment of tax on any portion of the sales price not paid by the buyer.


In my all-day educational seminar, BHPH Compliance: A Comprehensive Workshop, I discuss the ways that the benefits of deferred sales tax can be lost. Here is a summary of two of the issues regarding deferred sales tax that are covered in the seminar.

The Sixty-Day Rule 

As part of the negotiations with the office of the Comptroller when deferred sales tax reform was being sought, it was agreed that a dealer would have to transfer title to a vehicle in order to take advantage of sales tax deferral and avoid having to front the total sales tax.  Agreement was reached that the right to defer sales tax on a vehicle would be waived if the title wasn't transferred within 60 days of the date of sale (this time limit only applies to taxation and doesn't affect other areas of the law that address when titles must be transferred).  Transfer is required even if a vehicle is repossessed within the 60-day period.  Auditors compare the date of sale to the date of transfer for determining if any 60-day transfer violations have occurred.  Where violations are found, sales tax is accelerated as of the 60th day and the dealer is assessed for the full sales tax minus what was actually paid.  Then, penalties and interest are added. 

Sales or Assignment of Contracts 

In order that deferred sales tax would benefit only buy-here-pay-here dealers, and not banks and financial institutions, the comptroller insisted on inclusion of a “due on sale” provision when deferred sales tax was approved.  If dealer paper is sold or assigned to a third party (other than a related finance company), all sales tax is accelerated and can no longer be deferred.  Auditors are looking for evidence that a contract upon which a dealer is continuing to defer sales tax has been assigned.

Mike Dunagan will be presenting the TIADA seminar BHPH Compliance: A Comprehensive Workshop on May 8, 2017 in Austin. Register today!


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