Glenn Hegar

Texas Comptroller of Public Accounts

Dealer’s
Heavy Equipment
Special Inventory
Instructions for Filing Forms
and Paying Property Taxes

May 2018
By publishing this manual, the Texas Comptroller of Public Accounts is providing general information. The information is
provided as a public service and is intended to be used solely for informational purposes. This publication does not address
all aspects of law applicable to heavy equipment dealers’ special inventory, and the Comptroller’s office is not offering legal
advice. The information contained in this manual neither constitutes nor serves as a substitute for legal advice. Questions re-
garding the meaning or interpretation of statutes, legal requirements and other matters should, as appropriate or necessary, be
directed to an attorney or other appropriate counsel.

Dealers’ heavy equipment inventory laws are found primarily in Tax Code Sections 23.1241, 23.1242 and 23.1243. Protest and
judicial review provisions related to refunds on fleet transactions can be found in Tax Code Sections 41.44(a)(4), 41.47(c-1) and
42.01(a)(1)(D).

B — Dealer’s Heavy Equipment Special Inventory

Texas Property Tax

Table of Contents
Dealer’s Heavy Equipment Special Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DHEI Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Documentation Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Filing Forms and Paying Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Step 1 – Dealer Files DHEI Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Step 2 – Dealer Files DHEI Tax Statement(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Step 3 – Dealer Prepays Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Unit property tax factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Calculate the unit property tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Assign a unit property tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Step 4 – Tax Collector Pays Inventory Taxes from Dealer’s Escrow Account . . . . . . . . . . . . . . 5
Fleet Transaction Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Frequently Asked Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Statutory Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Additional Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Dealer’s Heavy Equipment Special Inventory — i

ii — Dealer’s Heavy Equipment Special Inventory
Texas Property Tax

Dealer’s Heavy Equipment

Special Inventory
Texas law provides for the appraisal of dealer’s heavy equip- DHEI Appraisal
ment inventory (DHEI) for the purpose of property tax com-
The market value of a dealer’s heavy equipment inventory
putation based on the sales, leases and rentals of heavy equip-
on Jan. 1 is the total annual sales (less sales to dealers, fleet
ment in the prior year.
transactions and subsequent sales) for the 12-month period
A heavy equipment dealer does not require a special li- corresponding to the preceding tax year, divided by 12.5 For
cense for purposes of Tax Code Sections 23.1241, 23.1242 or an item of heavy equipment that is sold during the preceding
23.1243. A heavy equipment dealer is a person engaged in the tax year after being leased or rented for a portion of that same
business of selling, leasing or renting heavy equipment. The tax year, the sales price is the sum of the sales price plus the
term does not include a bank, savings bank, savings and loan total lease and rental payments received for the item in the
association, credit union or other finance company. Nor does preceding tax year.6
it include a person who renders heavy equipment inventory in
The Texas Supreme Court held that Tax Code Section 21.02
a tax year by filing a rendition statement or property report in
does not control the taxable situs of heavy equipment cov-
accordance with Tax Code Chapter 22.1
ered by Tax Code 23.1242. The decision concluded that Tax
DHEI is all items of heavy equipment that a dealer holds for Code Sections 23.1241 and 23.1242, read together, reflect the
sale, lease, or rent in this state during a 12-month period.2 The Legislature’s intent to fix the situs of dealer-held heavy equip-
definition of heavy equipment is self-propelled, self-powered ment at the location where the dealer maintains its invento-
or pull-type equipment, including farm equipment or a diesel ry, rather than at the various locations where the equipment
engine, that weighs at least 1,500 pounds and is intended to might otherwise be physically located. The court determined
be used for agricultural, construction, industrial, maritime, that the business location and storage yard to which the in-
mining or forestry uses.3 ventory was assigned was deemed to be the taxable situs for
the compressors at issue.7
A motor vehicle that is required to be titled according to
Transportation Code Chapter 501 or registered according to If an owner of a dealer’s heavy equipment inventory was not
Transportation Code Chapter 502 is not considered heavy a dealer on Jan. 1 of the preceding tax year, the chief ap-
equipment for the purposes of a special inventory tax.4 Ques- praiser estimates the market value of the inventory.8 These
tions regarding what motor vehicles must be titled or regis- estimates are created using sales data, if any, generated by
tered should be directed to the Texas Department of Motor sales from the dealer’s heavy equipment inventory in the pre-
Vehicles. ceding tax year.9

5
Tex. Tax Code §23.1241(b)
6
Tex. Tax Code §23.1241(b-1)
1
Tex. Tax Code §23.1241(a)(1) 7
EXLP Leasing, LLC v. Galveston Cent. Appraisal Dist., No. 15-0683,
2
Tex. Tax Code §23.1241(a)(2) 2018 Tex. LEXIS 185 (Mar. 2, 2018).
3
Tex. Tax Code §23.1241(a)(6) 8
Tex. Tax Code §23.1241(c)
4
Tex. Tax Code §23.1241(a)(6) 9
Tex. Tax Code §23.1241(c)

Dealer’s Heavy Equipment Special Inventory — 1

Except for dealer’s heavy equipment inventory, personal A chief appraiser or collector may also examine documents
property held by a heavy equipment dealer is appraised as related to the monthly tax statement.17
provided by other sections of the Tax Code.10 If a dealer’s
sales from the dealer’s heavy equipment inventory are made Confidential Information
predominately to other dealers, the chief appraiser must ap-
praise the heavy equipment inventory as provided by Tax Declarations and tax statements are confidential under Tax
Code Section 23.12.11 Code Section 23.123.18 A declaration or statement filed with
a chief appraiser or collector is confidential and not open to
A dealer is presumed to be an owner of a dealer’s heavy public inspection.19 A declaration or statement and the con-
equipment inventory on Jan. 1 if the dealer sold, leased or tained information may not be disclosed to anyone except an
rented an item of heavy equipment to a person other than a employee of the appraisal office who appraises the property
dealer in the 12-month period ending on Dec. 31 of the pre- or to an employee of the county tax assessor-collector in-
ceding year.12 The presumption is not rebutted by the fact that volved in the maintenance of the owner’s escrow account.20
a dealer has no item of heavy equipment physically on hand This confidential information may be disclosed in the follow-
for sale on Jan. 1.13 ing ways:

When a person acquires a business or assets of a heavy equip- • in a judicial or administrative proceeding pursuant to a
ment inventory owner that person may, by contract, agree to lawful subpoena;
pay that owner’s current year heavy equipment inventory tax- • to the person who filed the declaration or statement or to
es. Both parties must jointly notify the chief appraiser and the that person’s representative authorized by the person in
collector of the agreement, including the terms of the agree- writing to receive the information;
ment. This provision does not relieve the selling owner of the • to the Comptroller or a Comptroller employee authorized
tax liability.14 by the Comptroller to receive the information;
• to a collector or chief appraiser;
• to a district attorney, criminal district attorney or county
Documentation Inspection attorney involved in the enforcement of a penalty imposed
A chief appraiser may examine a dealer’s books and records, pursuant to Tax Code Sections 23.121 or 23.122;
including documentation to ascertain the applicability of Tax • for statistical purposes if in a form that does not identify
Code Sections 23.1241 and 23.1242 and sales records to sub- specific property or a specific property owner;
stantiate information in declarations filed by the dealer.15 A • if and to the extent that the information is required for
request must: inclusion in a public document or record that the appraisal
or collection office is required by law to prepare or main-
• be made in writing; tain; or
• be delivered personally to the custodian of the records at a • to the Texas Department of Motor Vehicles for use by that
location at which the dealer conducts business; department in auditing compliance of its licensees with
• provide a period of not less than 15 days for the person to appropriate provisions of applicable law.21
respond; and
• state that the person to whom the request is addressed has It is a Class B misdemeanor offense to knowingly permit in-
the right to seek judicial relief from compliance with the spection of a declaration or statement or to disclose confiden-
request.16 tial information to an unauthorized person.22

10
Tex. Tax Code §23.1241(d)
11
Tex. Tax Code §23.1241(d) 17
Tex. Tax Code §23.1242(f)
12
Tex. Tax Code §23.1241(e) 18
Tex. Tax Code §23.1242(p)
13
Tex. Tax Code §23.1241(e) 19
Tex. Tax Code §23.123(b)
14
Tex. Tax Code §23.1242(k) 20
Tex. Tax Code §23.123(b)
15
Tex. Tax Code §23.1241(g) and 23.1242(f) 21
Tex. Tax Code §23.123(c)
16
Tex. Tax Code §§23.1241(g) and 23.1242(f) 22
Tex. Tax Code §23.123(d)

2 — Dealer’s Heavy Equipment Special Inventory

Texas Property Tax

Filing Forms and Paying Property Taxes

Generally, dealers must annually file with the county apprais- the acquisition. This provision does not relieve the selling
al district Comptroller Form 50-265, Dealer’s Heavy Equip- owner of the tax liability.30
ment Inventory Declaration, listing the total market value of
the inventory sold, leased or rented in the prior year .23 A dealer’s declaration must include the following:

Dealers must also file monthly with the assessor-collector • name and business address of each location at which the
Comptroller Form 50-266, Dealer’s Heavy Equipment In- declarant conducts business;
ventory Tax Statement, listing heavy equipment sold, leased • a statement that the declarant is the owner of a dealer’s
or rented, from the inventory.24 heavy equipment inventory; and
• the market value of the declarant’s heavy equipment in-
ventory for the tax year as computed by Tax Code Section
Step 1 –
23.1241(b).31
Dealer Files DHEI Declaration
Dealers must file Comptroller Form 50-265, Dealer’s Heavy Penalties
Equipment Inventory Declaration, listing the total value of In addition to other penalties provided by law, a dealer be-
the inventory sold, leased or rented in the prior year for the comes liable for a penalty of $1,000 for each month or por-
inventory in the following manner:25 tion of a month in which a declaration is not filed.32 A tax lien
attaches to the dealer’s business personal property to secure
• file a declaration each year not later than Feb. 1;26 payment of the penalty.33
• file the declaration with the county appraisal district in
which the business location of the inventory is situated;27 If there is a disaster that made it effectively impossible for a
• send a copy of the declaration to the assessor-collector; dealer to comply with filing requirements or an event beyond
and28 the control of the dealer that destroys property or records
• if not in business on Jan. 1, file a declaration not later than and the declaration is not timely filed, then the dealer may
30 days of opening the business.29 file a written application for the chief appraiser to waive the
penalty within 30 days after the date the declaration must be
A person acquiring the business or assets of a heavy equip- filed.34 The dealer must otherwise be in compliance Tax Code
ment inventory owner who agreed, by contract, to pay the Chapter 23 for the chief appraiser to waive the penalty.35
selling owner’s current year heavy equipment inventory taxes
is not required to file a declaration until the year following Step 2 –
Dealer Files DHEI Tax Statement(s)
23
Tex. Tax Code §23.1241 Each month, a dealer must file with the assessor-collector
24
Tex. Tax Code §23.1242 the original completed monthly tax statement listing heavy
25
Tex. Tax Code §23.1241(f)
26
Tex. Tax Code §23.1241(f) 30
Tex. Tax Code §23.1242(k)
27
EXLP Leasing, LLC v. Galveston Cent. Appraisal Dist., No. 15-0683, 31
Tex. Tax Code §23.1241(f)
2018 Tex. LEXIS 185 (Mar. 2, 2018) and Tex. Tax Code §§23.1241 and 32
Tex. Tax Code §23.1241(j)
23.1242 33
Tex. Tax Code §23.1241(j)
28
Tex. Tax Code §23.1241(f) 34
Tex. Tax Code §23.129
29
Tex. Tax Code §23.1241(f) 35
Tex. Tax Code §23.129

Dealer’s Heavy Equipment Special Inventory — 3

equipment sold, leased or rented and also generally must file • the unit property tax of the item of heavy equipment, if
a monthly tax payment.36 A dealer must file a statement for any; and
the business location of the inventory.37 • the reason no unit property tax is assigned if no unit prop-
erty tax is assigned.46
Dealers must file statements meeting the following schedule
and criteria: Dealers should retain any documentation relating to the dis-
position of each item of heavy equipment sold.47
• file 12 statements per year;38
• file by the 20th of each month following the reporting Penalties
month (for example, file January inventory tax statement In addition to other penalties provided by law, a dealer who
by Feb. 20);39 fails to file or timely file a statement must forfeit a penalty of
• file the originals with the assessor-collector and copies $500 for each month or part of a month in which a statement
with the chief appraiser.40 is not filed or timely filed after it is due.48 A tax lien attaches
• file a statement indicating no sales, leases or rentals if the to the dealer’s business personal property to secure payment
dealer does not sell, lease or rent heavy equipment during of the penalty.49
the month;41
• if not in business on Jan. 1, file for each month in If there is a disaster that made it effectively impossible for a
business;42 and dealer to comply with filing requirements or an event beyond
• if not in business on Jan. 1, do not assign a unit property the control of the dealer that destroys property or records and
tax to sold items or remit money with the statement.43 the monthly statement is not timely filed, then the dealer may
file a written application for the collector to waive the penalty
The prohibition on assigning a unit property tax or remitting within 30 days after the date the statement must be filed.50
money with the statement if the dealer was not in business on The dealer must otherwise be in compliance Tax Code Chap-
Jan. 1 does not apply to person who acquired a business and ter 23 for the collector to waive the penalty.51
is complying with a contract to pay a selling owner’s current
year heavy equipment inventory taxes.44 This provision does
Step 3 –
not relieve the selling owner of the tax liability.45
Dealer Prepays Taxes
A dealer must use Comptroller Form 50-266, Dealer Heavy Along with the inventory tax statement filed with the collec-
Equipment Inventory Tax Statement, and include: tor’s office, owners must deposit the total unit property tax
assigned to all items of heavy equipment sold, leased or rent-
• a description of each item of heavy equipment sold, leased ed in the preceding month.52 This money is deposited into an
or rented including any unique identification or serial escrow account for the prepayment of property taxes.53 The
number affixed by the manufacturer; owner may not withdraw funds in an escrow account, except
• the sales price of or lease or rental payment received for as provided by Tax Code Section 23.1243.54
the item of heavy equipment, as applicable;
Unit property tax factor
36
Tex. Tax Code §23.1242(b), (e) and (f)
Call the assessor-collector or appraisal district for the unit
37
EXLP Leasing, LLC v. Galveston Cent. Appraisal Dist., No. 15-0683, property tax factor. This factor is one-twelfth of the prior
2018 Tex. LEXIS 185 (Mar. 2, 2018) and Tex. Tax Code §§23.1241 and
23.1242 46
Tex. Tax Code §23.1242(e)
38
Tex. Tax Code §23.1242(f) 47
Tex. Tax Code §23.1242(f)
39
Tex. Tax Code §23.1242(f) 48
Tex. Tax Code §23.1242(m)
40
Tex. Tax Code §23.1242(f) 49
Tex. Tax Code §23.1242(m)
41
Tex. Tax Code §23.1242(f) 50
Tex. Tax Code §23.129
42
Tex. Tax Code §23.1242(g) 51
Tex. Tax Code §23.129
43
Tex. Tax Code §23.1242(g) 52
Tex. Tax Code §23.1242(b)
44
Tex. Tax Code §23.1242(b), (g) and (k) 53
Tex. Tax Code §23.1242(b)
45
Tex. Tax Code §23.1242(k) 54
Tex. Tax Code §23.1242(d)

4 — Dealer’s Heavy Equipment Special Inventory

year’s aggregate property tax rate at the location where the Step 4 –
dealer’s heavy equipment inventory is located on Jan. 1 of
the current year.55 Each property is taxed by a county and by Tax Collector Pays Inventory Taxes
a school district, but may also be taxed by a city and special from Dealer’s Escrow Account
districts (such as a junior college and/or hospital district, de-
The current year’s tax bills received in October will be based
pending on location).
on the market value of the inventory and the current year’s
tax rates. The inventory’s market value is an average of the
Calculate the unit property tax monthly inventory sales, leases and rentals from the preced-
The unit property tax is the product of multiplying the unit
ing year.64
property tax factor by the sales price of the item or the
monthly lease or rental payment received for the item.56 The owner will receive annual property tax bills and taxing
unit assessor(s) send a copy of the owner’s heavy equipment
Assign a unit property tax inventory tax bill to the collector.65 On behalf of the owner,
Except for dealer sales, fleet transactions and subsequent
the assessor-collector pays the annual inventory taxes from
sales, an owner must assign a unit property tax to each item
the dealer’s escrow account and bills the owner for any ad-
of heavy equipment sold from a dealer’s heavy equipment
ditional amount due.66 Collector pays the inventory tax bill
inventory. An owner must also assign a unit property tax to
from the escrow account to the taxing units.67
each item of heavy equipment leased or rented.57 On a lease
or rental, the owner collects the unit property tax from the The owner will receive a tax receipt for payment and any ad-
lessee or renter at the time the lessee or renter makes a pay- ditional tax bill from the assessor-collector for any deficiency
ment.58 The owner must state the amount of the assigned unit in escrow account.68 Taxes that are due but not received by
property tax as a separate line item on an invoice.59 the collector on or before Jan. 30 are delinquent.69

If a dealer is not in business on Jan. 1, the dealer may not Collectors must distribute to taxing units all funds collected
assign a unit property tax to sold items or remit money with and held in the escrow account by Feb. 15.70 An owner may
the statement unless to comply with contract to pay a selling not withdraw funds from the escrow account.71 A dealer may
owner’s current year heavy equipment inventory taxes.60 write to the chief appraiser to apply for a refund of taxes paid
on a sale that is a fleet transaction.72
Penalties
In addition to other penalties provided by law, an owner who
fails to remit unit property tax due must pay a penalty of 5 Fleet Transaction Refunds
percent of the amount due.61 If the amount due is not paid A dealer may apply to the chief appraiser for a refund of
within 10 days after the due date, the owner must pay an addi- the unit property tax paid on a fleet transaction sale.73 The
tional 5 percent of the amount due.62 Unit property taxes paid chief appraiser must determine whether to approve or deny,
on or before Jan. 31 of the year following the date on which
they are due are not delinquent.63
64
Tex. Tax Code §23.1242(b)
65
Tex. Tax Code §23.1242(h)
66
Tex. Tax Code §23.1242(h) and (i)
67
Tex. Tax Code §23.1242(h)
68
Tex. Tax Code §23.1242(i)
55
Tex. Tax Code §23.1242(a)(4) 69
Tex. Tax Code §23.1242(j)
56
Tex. Tax Code §23.1242(b) 70
Tex. Tax Code §23.1242(j)
57
Tex. Tax Code §23.1242(b) 71
Tex. Tax Code §23.1242(d). See also Tex. Att’y Gen. Op. JC-0286 (2000)
58
Tex. Tax Code §23.1242(b) which provides that a heavy equipment dealer who mistakenly prepays
59
Tex. Tax Code §23.1242(b) inventory taxes is not entitled to a refund unless entitled under Tax Code
60
Tex. Tax Code §23.1242(b), (g) and (k) §31.11 or can show the payment was the result of fraud, mutual mistake
61
Tex. Tax Code §23.1242(n) of fact or under duress.
62
Tex. Tax Code §23.1242(n) 72
Tex. Tax Code §§23.1242(d) and 23.1243
63
Tex. Tax Code §23.1242(n) 73
Tex. Tax Code §23.1243(b)

Dealer’s Heavy Equipment Special Inventory — 5

wholly or partly, the requested refund.74 A written notice of Additional Information
the chief appraiser’s determination must be delivered to both
• For specific questions regarding the declaration form, call
to the collector maintaining the escrow account and to the
the applicable local county appraisal district.
applicant.75 The notice must state the amount, if any, to be
• For specific questions regarding the monthly tax statement
refunded.76 An owner may protest the determination if they
form, call the applicable local assessor-collector office.
file a protest not later than 30 days after the date that the de-
• For specific questions regarding what motor vehicles are
termination notice is delivered to the owner.77
excluded from the definition of heavy equipment inven-
If a collector receives a notice stating a refund amount, the tory because the vehicle must be titled or registered under
collector must pay the amount to the dealer not later than the Transportation Code Chapter 501 and 502, respectively,
45th day after the collector receives the notice.78 The dealer call the Texas Department of Motor Vehicles; and
must use the dealer’s best efforts to pay the refund to the cus- • For general questions on the declaration or monthly tax
tomer who paid the tax for which the refund was requested statement, contact the Comptroller’s Property Tax Assis-
not later than the 30th after the date the dealer receives the tance Division at 800-252-9121 (press 3) or ptad.cpa@
refund.79 cpa.texas.gov.

74
Tex. Tax Code §23.1243(c)
75
Tex. Tax Code §23.1243(c)
76
Tex. Tax Code §23.1243(c)
77
Tex. Tax Code §41.44(a)(4)
78
Tex. Tax Code §23.1243(d)
79
Tex. Tax Code §23.1243(d)

6 — Dealer’s Heavy Equipment Special Inventory

Texas Property Tax

Frequently Asked Questions

1. Is sales tax included in the sales price of heavy equip- renders heavy equipment inventory in that tax year by
ment or in the monthly lease or rental payment, as filing a rendition statement or property report in accor-
applicable? dance with Tax Code Chapter 22.82

This question involves a very fact-based inquiry. As an 4. Last year, I rented out several pieces of heavy equip-
initial matter, any given piece of equipment may or may ment, but closed my business in December. Am I con-
not be subject to sales tax. If sales tax is collected, one sidered a dealer of heavy equipment for the next tax
may question whether such tax is included in the vari- year?
ous provisions of Tax Code Sections 23.1241 and 23.1242
including, but not limited to, the definition of sales price A dealer means a person engaged in the business in this
and provisions for the calculation of unit property tax. state of selling, leasing or renting heavy equipment. The
These are questions involving interpretation of law that term does not include a person who renders heavy equip-
should be directed to an attorney. ment inventory in that tax year by filing a rendition state-
ment or property report in accordance with Tax Code
2. Is every sale, lease and rental of heavy equipment sub- Chapter 22.83
ject to the special inventory tax?
A dealer is presumed to be an owner of heavy equipment
The special inventory law excludes three types of trans- inventory on Jan. 1 if the dealer sold, leased or rented an
actions made from a dealer’s heavy equipment inventory item of heavy equipment to a person other than a dealer
from the definition of market value and the requirements in the 12-month period ending on Dec. 31 of the preced-
to assign a unit property tax: ing year.84 This presumption is not rebutted by the fact the
dealer does not physically have an item of heavy equip-
1. sales to dealers; ment on hand for sale from the dealer’s heavy equipment
2. fleet transactions; and inventory on Jan. 1.85
3. subsequent sale(s).80
5. I opened my heavy equipment dealership in the mid-
Sales to dealers, fleet transactions and subsequent sales, dle of this year, do I have to file monthly tax state-
however, must be reported on the monthly tax statement.81 ments for the current year?

3. If I only lease or rent heavy equipment, am I consid- Yes. A dealer who owes no heavy equipment inventory
ered a dealer of heavy equipment inventory? tax for the current year because the dealer was not in
business on Jan. 1 must file a statement for each month
Yes. The definition of dealer is a person engaged in the that the dealer is in business.86 The dealer also must file
business in this state of selling, leasing or renting heavy a declaration within 30 days after the business opens.87
equipment. A dealer does not include a bank, savings
bank, savings and loan association, credit union or oth- 82
Tex. Tax Code §23.1241(a)(1)
er finance company; nor does it include a person who 83
Tex. Tax Code §23.1241(a)(1)
84
Tex. Tax Code §23.1241(e)
85
Tex. Tax Code §23.1241(e)
80
Tex. Tax Code §§23.1241(b) and 23.1242(b) 86
Tex. Tax Code §23.1242(g)(1)
81
Tex. Tax Code §23.1242(e)(1) 87
Tex. Tax Code §23.1241(f)

Dealer’s Heavy Equipment Special Inventory — 7

6. What can happen if I do not file or timely file a decla- Chapter 501 or be registered pursuant to Transportation
ration for my heavy equipment inventory? Code Chapter 502.96 A motor vehicle is not included in
the definition of heavy equipment inventory if it is re-
In addition to other penalties provided by law, a dealer quired to be titled according to Transportation Code
who fails to file or timely file a required declaration must Chapter 501 or registered according to Transportation
forfeit a penalty of $1,000 for each month or part of a Code Chapter 502.
month in which a declaration is not filed or timely filed
after it is due.88 A tax lien attaches to the dealer’s busi- Questions regarding what motor vehicles must be titled
ness personal property to secure payment of the penalty.89 or registered should be directed to the Texas Department
of Motor Vehicles.
7. What can happen if I do not file or timely file a monthly
statement for my heavy equipment inventory? What 10. When do I collect the inventory tax on a leased or
happens if I do not remit due unit property taxes? rented item of heavy equipment?

In addition to other penalties provided by law, a dealer If a transaction is a lease or rental, the owner must col-
who fails to file or timely file a statement must forfeit lect the unit property tax from the lessee or renter at the
a penalty of $500 for each month or part of a month in time the lessee or renter submits payment for the lease
which a statement is not filed or timely filed after it is or rental.97
due.90 A tax lien attaches to the dealer’s business personal
property to secure payment of the penalty.91 In addition 11. What if I sell, lease, or rent to an individual who is
to other penalties provided by law, an owner who fails out-of-state or to a governmental entity? Do I include
to remit unit property tax due must pay a penalty of 5 that transaction in the monthly statement?
percent of the amount due.92 If the amount due is not paid
within 10 days after the due date, the owner must pay an The Tax Code does not exclude sales, leases or rentals to
additional 5 percent of the amount due.93 Unit property out-of-state individuals or governmental entities for pur-
taxes paid on or before Jan. 31 of the year following the poses of declarations or monthly statements under Tax
date on which they are due are not delinquent.94 Code Sections 23.1241, 23.1242 and 23.1243.

8. How much does an item have to weigh before it quali- See question 2 for exclusions.
fies as heavy equipment?
12. If a renter or lessee fails to pay the lease or rental pay-
Dealers’ heavy equipment inventory must weigh at least ments, do I still have to prepay the inventory tax for
1,500 pounds.95 that lease or rental?

9. Are semitrailers considered heavy equipment for The owner must deposit with the assessor-collector the
purposes of special inventory? total amount of unit property tax assigned to all items
sold, leased or rented in the preceding month.98 The as-
A semitrailer would not be considered heavy equipment signed unit property tax is determined by multiplying
for purposes of special inventory if the semitrailer must the unit property tax factor by the sales price of the item
be titled as a motor vehicle under Transportation Code or the monthly lease or rental payment received for an
item.99 If a unit property tax has been assigned, then that
88
Tex. Tax Code §23.1241(j) amount must be remitted to the collector.100 Whether an
89
Tex. Tax Code §23.1241(j)
90
Tex. Tax Code §23.1242(m)
91
Tex. Tax Code §23.1242(m) 96
Tex. Tax Code §23.1241(a)(6)
92
Tex. Tax Code §23.1242(n) 97
Tex. Tax Code §23.1242(b)
93
Tex. Tax Code §23.1242(n) 98
Tex. Tax Code §23.1242(b)
94
Tex. Tax Code §23.1242(n) 99
Tex. Tax Code §23.1242(b)
95
Tex. Tax Code §23.1241(a)(6) 100
Tex. Tax Code §23.1242(b)

8 — Dealer’s Heavy Equipment Special Inventory

 owner is required to prepay unit property tax that is not 15. If I apply to the chief appraiser for a refund for pre-
remitted by a lessee or renter involves interpretation of payment of a fleet sale and I am denied, can I appeal
law that should be directed to an attorney. the determination?

13. When I sell a piece of heavy equipment that has been A property owner may protest a chief appraiser’s deter-
rented or leased, how is the market value calculated mination of eligibility for a refund under Tax Code Sec-
for tax purposes? tion 23.1243 to the appraisal review board not later than
the 30th day after the date the chief appraiser’s refund
For the purpose of the computation of property tax on the eligibility is delivered to the property owner.102 An ARB
market value of the dealer’s heavy equipment inventory, determination on the eligibility of a refund may be ap-
the sales price of an item of heavy equipment that is sold pealed in district court.103
during the preceding tax year after being leased or rented
for a portion of the same tax year is considered to be the 16. If a dealer has two or more locations in the same
sum of the sales price of the item plus the total lease and county but in different taxing units may the dealer
rental payments received for the item in the preceding count all transactions in that county for purposes of
tax year.101 calculating fleet transactions?

14. If I have excess funds in my escrow account after my No. Each business location of the inventory (therefore
tax bill is paid do I get a refund? each taxing unit) is treated separately for this purpose.104

The only provision in the Tax Code relating to refunds

pertains to fleet transactions in Tax Code Section 23.1243.

102
Tex. Tax Code §41.44(a)(4)
103
Tex. Tax Code §42.01
104
EXLP Leasing, LLC v. Galveston Cent. Appraisal Dist., No. 15-0683,
2018 Tex. LEXIS 185 (Mar. 2, 2018) and Tex. Tax Code §§6.01, 6.02,
101
Tex. Tax Code §23.1241(b-1) 21.02, 25.01(a), 23.1241, 23.1242 and 26.01(a).

Dealer’s Heavy Equipment Special Inventory — 9

10 — Dealer’s Heavy Equipment Special Inventory
Texas Property Tax

Definitions
The following are terms related to dealer’s heavy equipment. Fleet transaction – the sale of five or more items of heavy
equipment from a dealer’s heavy equipment inventory to the
Statutory Definitions same person in one calendar year.110

The terms below are defined in Tax Code Sections 23.1241(a) Heavy equipment – self-propelled, self-powered or pull-
and 23.1242(a) except as otherwise cited. type equipment, including farm equipment or a diesel engine,
that weighs at least 1,500 pounds and is intended to be used
Aggregate tax rate – the combined tax rates of all appro- for agricultural, construction, industrial, maritime, mining
priate taxing units authorized by law to levy property taxes or forestry uses. The term does not include a motor vehicle
against a dealer’s heavy equipment inventory.105 that is required to be titled according to Transportation Code
Chapter 501 or registered according to Transportation Code
Dealer – a person engaged in the business in this state of sell-
Chapter 502.111
ing, leasing or renting heavy equipment. The term does not
include a bank, savings bank, savings and loan association, Motor vehicle – Transportation Code Section 501.002(17)
credit union or other finance company. In addition, for pur- defines a motor vehicle is:
poses of taxation of a person’s inventory of heavy equipment
in a tax year, the term does not include a person who renders • any motor driven or propelled vehicle required to be reg-
the person’s inventory of heavy equipment for taxation in that istered under state law;
tax year by filing a rendition statement or property report in • a trailer or semitrailer (other than manufactured housing)
accordance with Tax Code Chapter 22.106 with a gross vehicle weight that exceeds 4,000 pounds;
• a travel trailer;
Dealer’s heavy equipment inventory – all items of heavy • an all-terrain vehicle or recreational off-highway vehicle
equipment that a dealer holds for sale, lease or rent in this designed by the manufacturer for off-highway use that is
state during a 12-month period.107 not required to be registered under state law; or
• a motorcycle, motor-driven cycle or moped that is not re-
Dealer-financed sale – the sale at retail of an item of heavy
quired to be registered under state law.
equipment in which the dealer finances the purchase of the
item, is the sole lender in the transaction and retains exclu- Transportation Code Section 502.002 provides that the defi-
sively the right to enforce the terms of the agreement that nition of motor vehicle is a vehicle that is self-propelled.
evidences the sale.108
Questions regarding what motor vehicles must be titled or
Declaration – a dealer’s heavy equipment inventory declara- registered should be directed to the Texas Department of Mo-
tion form adopted by the Comptroller’s office.109 tor Vehicles.

Statement – the dealer’s heavy equipment inventory tax state-

ment filed on a form adopted by the Comptroller’s office.112
105
Tex. Tax Code §23.1242(a)(1)
106
Tex. Tax Code §23.1241(a)(1)
107
Tex. Tax Code §23.1241(a)(2) 110
Tex. Tax Code §23.1241(a)(5)
108
Tex. Tax Code §23.1241(a)(3) 111
Tex. Tax Code §23.1241(a)(6)
109
Tex. Tax Code §23.1241(a)(4) 112
Tex. Tax Code §23.1242(a)(3)

Dealer’s Heavy Equipment Special Inventory — 11

Sales price – the total amount of money paid or to be paid Additional Definitions
to a dealer for the purchase of an item of heavy equipment;
Sale – Merriam-Webster’s Dictionary defines sale as “the act
or for a lease or rental, the total amount of the lease or rental
of selling; specifically: the transfer of ownership of and title
payments.113
to property from one person to another for a price.”117
Subsequent sale – a dealer-financed sale of an item of heavy
Sale – Black Law’s Dictionary defines sale as “a contract be-
equipment that, at the time of the sale, has been the subject
tween two parties, called, respectively, the seller (or vendor)
of a dealer-financed sale from the same dealer’s heavy equip-
and the buyer (or purchaser), by which the former, in consid-
ment inventory in the same calendar year. The term does not
eration of the payment or promise of payment of a certain
include a rental or lease with an unexercised purchase option
price in money, transfers to the latter the title and the posses-
or without a purchase option.114
sion of property. Transfer of property for consideration either
Total annual sales – the total of the sales price for each sale in money or its equivalent.”118
from a dealer’s heavy equipment inventory in a 12-month pe-
riod; and lease and rental payments received for each lease or
rental of heavy equipment inventory in a 12-month period.115

Unit property tax factor – a number equal to one-twelfth of

the preceding year’s aggregate ad valorem tax rate at the lo-
cation where a dealer’s heavy equipment inventory is located
on Jan. 1 of the current year.116

113
Tex. Tax Code §23.1241(a)(7)
114
Tex. Tax Code §23.1241(a)(8) 117
Merriam-Webster’s Dictionary Online. “Sale,” www.merriam-webster.
115
Tex. Tax Code §23.1241(a)(9) com/dictionary/sale (Last visited Oct. 16, 2017)
116
Tex. Tax Code §23.1242(a)(4) 118
Black’s Laws Dictionary 1200 (5th ed. 1979)

12 — Dealer’s Heavy Equipment Special Inventory

 For more information, visit our website:
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Texas Comptroller of Public Accounts

Publication #96-560
May 2023