SALES TAX ON PARKING AND STORAGE OF MOTOR VEHICLES, BOAT TRAILERS OR BOATS
(Updated August 2024)
by TSSA Legal Counsel

While sales tax is not collected for the rents of self-storage units, sales tax must be collected on all rents and charges received for vehicle or trailer parking or storage. It is your responsibility to collect the sales tax from the customer and forward it to the state.

Subject to certain exceptions, all charges and fees incurred in connection with the storage of a motor vehicle are subject to sales tax under Texas law. Unless such items are considered clearly separate charges from rent, items considered incurred in connection with rent, and thus taxable, include overlock fees, lock cutting charges and foreclosure charges. However, administrative fees (i.e., charges for returned checks) are not taxable as long as the charges are clearly separate charges from the rent. Additionally, charges for towing are not taxable. Please note that it is critical that the non-parking charges must truly be separate, as members in the past have been penalized for charging an “administrative fee.”

It does not make any difference whether the vehicle parking is in an enclosed parking garage or in an open storage lot. It makes no difference whether there is an attendant. It makes no difference that vehicle parking or storage is done with or without the consent of the parking facility operator (the self-storage facility). Sales tax must be collected on the full amount of rent actually paid for the unit or space where the vehicle is stored, regardless of how many vehicles are stored or if they “come-and-go.” It does not matter if the vehicle is stored with items considered to be general household items and non-taxable, the entire rent for the space is taxable.

“Motor vehicles” are defined by Section 152.001 of the Tax Code to include: 1) self-propelled vehicles (cars, trucks, RVs, motor homes, motorcycles, mopeds, restored and un-restored antique cars, etc.) designed to transport persons or property on public streets and highways; 2) a trailer and semitrailer (including a van, flatbed, tank, dumpster, dolly, jeep, stinger, auxiliar axle or converter gear); and 3) a house trailer (a trailer designed for human habitation).

Not all items that have wheels are “vehicles.” Golf carts on a trailer, unlicensed off-road motorcycles on motorcycle trailers or boats on a trailer are not taxable. The item contained on the specialized trailer and not the trailer itself is considered to be the item stored in such situations. Trailers by themselves are taxable. Additionally, no tax is due on boat storage.

Mobile barbeque pits are either considered to be motor vehicles (and subject to storage tax) or not based on the following test: Barbeque pits that have been mounted on flatbed trailers are motor vehicles and the charge for storage is taxable. Barbeque pits that have wheels and axels mounted on them are movable specialized equipment and charges for storage are not taxable.

Sales tax must be paid on the dollar amount of all rents actually received by the parking/storage facility operator for the service of parking or storage. What if a tenant doesn’t pay? No tax is due if the customer does not pay the parking or storage fees that are due, as long as the owner uses a cash accounting method (for owners using an accrual accounting method, the tax still must be paid, and a refund may later be requested).

If you fail to, or choose not to, collect sales tax from the customer, you are still liable for reporting and remitting the payment of the taxes to the state. Your lease can state (you could insert into TSSA lease paragraph 6, special provisions, for example) that the “rental price includes sales tax.” And if your price includes sales tax, obviously you must remit the sales tax to the comptroller. For example, if your rent is $50 per month and your lease states that this includes sales tax, then you must back out the 8.25% tax. So, your rent income is actually $46.19, and you must remit $3.81 to the comptroller. If you are passing the sales tax through to your tenant, separate and apart from the rent, you are not required to include special language in your lease. If you provide an invoice or receipt to tenants, then you must separately state the sales tax amount on the invoice or receipt unless it contains a statement that the price includes sales tax. Advertisements and promotional information or agreements cannot state that the parking facility operator pays the sales tax. However, signs, advertising and other written materials can (a) be silent on the tax; (b) say the price includes tax; (c) say the price is “plus tax;” or (d) say the price is plus “x%” or “x$” tax.

Exemptions from the sales tax include: 1) parking or storage charges paid by governmental entities, and 2) parking or storage charges paid by religious, educational or charitable entities that sign an exemption certificate and give it to the parking facility operator. Such exemption certificates must be kept on file by the parking facility operator for comptroller audit purposes in case the sales tax reports are ever questioned.

If you knowingly allow vehicle parking or storage and charge rent or a fee for such service, you must obtain a comptroller’s sales tax permit and begin to make monthly, quarterly or yearly sales tax payments to the comptroller. (More than $500 total sales tax receipts per month requires monthly reporting. Less than $500 total sales tax receipts per calendar year permits yearly reporting. If less than $500 sales tax receipts are collected per month [or less than $1,500 per calendar quarter], the taxpayer must file quarterly.) Reports must be submitted as scheduled whether you have any taxes for that period or not. The comptroller has offices in all major cities, and the forms for obtaining a sales tax permit with instructions for remitting the tax can be obtained from the local comptroller’s office in your city.

Retail items sold from your facility (e.g., boxes, tape, snacks/foods and other products for sale) are also taxable. You must also collect and remit sales tax on all proceeds from your Ch. 59 auctions (with the exception of (i) sales of vehicles and boats, outboard motors;(ii) buyers who have delivered exemption certificates; or (iii) buyers who have delivered resale certificates).

Tenant protection plans, when sold to a tenant for vehicle parking or storage, are also taxable. Services, such as tenant protection plans, which include additional fees, either bundled or separately stated, become part of the sales price, which is taxable per Rule 3.315(b), Motor Vehicle Parking and Storage, of the Texas Administrative Code.

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