Repo Taxes in Texas – A Risk to Lenders and Agencies Alike

Texas Comptroller on the Hunt

Taxes on repossession activity in Texas are nothing new. While over 500+ of the known 800+ agencies and collectors here are in some level of compliance, the Texas Comptrollers Office is on the hunt for Accredited Companies instead of companies that are not accredited or registered with the State. Those found to be out of compliance put their agencies at risk and can have their assets seized by the state. This includes the stored collateral of their lenders and forwarders!

The Texas Comptroller is targeting accredited repossession agents, agents that are registered and paying sales tax. Repossession agents are considered debt collectors in Texas, every service they offer outside of transport is Taxable.

Many of the TexasARP members have been called for a sales tax audit, an undue burden on the repossessor that is actually complying with state law by collecting and paying sales tax. Although a pass-through fee from the clients to the state we as agents are accountable for charging, collecting and then surrendering to the state every month.

What about the non-accredited repossessor in the State of Texas or repossessors in another state that are operating in Texas?

Sales tax on debtor collections is to be charged in the state of Texas even if you’re operating outside the state. If a repossession company is not registered with the state for Sales Tax, Franchise Tax, Client beware!!!

All of this may sound like it’s a problem for the agencies to deal with, but if a lender of forwarder is using an agency deemed to be out of compliance by the state, all of the agencies assets can be seized by the state. That includes every vehicle stored on that agencies lot.

Getting the state to release seized collateral could be time consuming, costly and cause numerous consumer litigation issues including possible FDCPA, UCC and UDAAP violations should the seizure inhibit or prohibit the vehicle’s redemption or reinstatement.

This is not a matter to take lightly.

What is Taxable in Texas?

To put it plainly, EVERY charge from a repossessor is taxable to the lender or forwarder, and considered part of the debt collection process. Taxable Services:

Voluntary Repossession
Involuntary Repossession
Impound Repossession
Bail-Out/Fronted Fees – Even if funds are provided by the client and not borrowed from the agency
Close Fees
Key Fees
Flatbed/Dollie/Go-Jack Fees
Mileage Fees
Fuel Surcharge Fees
Skiptrace Fee
Stake-Out Fee
Oversize Fees
Storage Fees

From the State Comptrollers Office these are all of the taxable services in Texas: https://comptroller.texas.gov/taxes/publications/96-259.php

Typically, the Comptroller’s office will take the following collection actions to protect the state’s interests and collect past due taxes: Require the taxpayer to post a security bond. File a tax lien in applicable counties. Freeze and/or seize non-exempt assets.

What happens if you don’t pay sales tax in Texas?

Depending on the amount of unpaid sales tax, the offense could be up to a second-degree felony, which carries a prison sentence of 2 to 20 years and a criminal fine of up to $10,000. Additionally, a person convicted of failure to pay sales tax owes 5% of the total unpaid tax as a penalty.

Clients can check the status of a vendor-repossession agent by searching the agent through TexasARP’s website at TexasARP.org

TexasARP checks members status with the State every quarter. If they do not qualify to conduct business in the state they are removed from the website until they are active.

Or they can search their repossession agent by visiting both websites:

Texas Sales Tax- https://mycpa.cpa.state.tx.us/staxpayersearch/

Texas Franchise Tax- https://mycpa.cpa.state.tx.us/coa/

Texas repossession agents MUST be registered with both entities above and have an active TDLR- in order to conduct business.

Thank you,

Stephanie Findley

President, TexasARP