If you purchased a vehicle and are wondering why the tax office required you to pay taxes on an amount that was significantly more than what you paid for the vehicle…wonder no longer. The answer is SPV.
According to the State, the majority of sales tax on used car sales is used to fund and support the Texas education system. To address a shortfall in education funding and to insurance that everyone pays their fair share of taxes, Texas adopted the Standard Presumptive Value (SPV) taxing method in October of 2006.
The SPV is a state determined calculation of a vehicle’s worth based on similar sales in the Texas region. This amount is used by the tax assessor-collector’s office to determine tax due on a private-party sale of a used motor vehicle, the taxable amount being the greater of the sales price or 80% of the SPV.
While the SPV method better insures that proper taxes are paid on used vehicle sales, it does not account for vehicles that happen to be sold for an amount that is lower than 80% of SPV. In other words, if you purchase a vehicle in rough condition for an amount that is less than 80% of SPV, you are still required to pay taxes on 80% of SPV. Doesn’t sound fair does it? Well there is a solution to this problem.
If you paid less than the standard presumptive value for your vehicle, the state allows you to pay sales taxes on an appraisal amount provided it is certified by a licensed insurance adjuster or a licensed motor vehicle dealer. However, the appraisal must be obtained within 20 working days of the date of purchase. This allows you to pay taxes on an amount that is closer to what you actually paid for the vehicle, but there is a catch. You are required to pay at least $100.00 for the appraisal; meaning the vehicle would have to be appraised for $1600.00 less than the SPV amount for you to realize a savings.
In defense of education, SPV is a justified implementation. However, it routinely forces purchasers to pay more taxes than necessary for private-party used vehicle purchases. While it does allow for vehicles to be appraised to determine a new taxable amount, the cost of an appraisal significantly dilutes the tax savings. If the state is going to mandate the amount for which taxes should be paid, maybe they should consider offering appraisals at their cost by making it a subsidized program for motor vehicle dealers and insurance adjusters.
For more information on SPV visit: https://www.txdmv.gov/standard-presumptive-calculator