Lessors Subject to Texas Dealers Heavy Equipment Tax

ELFA is reaching out to members and coordinating with allied state associations in response to implementation of Texas House Bill 2476 that amended the Texas Dealers Heavy Equipment Inventory Tax (TRS Tax Code §26.1241) in a manner that now defines lease finance companies as dealers for the purpose of personal property tax (PPT). This would require lessors to file and report according to regulations designed by short-term equipment rental companies. A systematic approach is being employed to inform all parties of ELFA Concerns. Industry members interested in joining advocacy in Austin should send contact information to ELFA Vice President, State Government Relations Dennis Brown at dbrown@elfaonline.org.

Stakeholders have shared ELFA concerns with the Texas Comptroller's Office, which does not have authority to resolve these issues arising for equipment finance sources. An amendment to the statute must be enacted. The Texas Legislature does not meet in regular session this year as they convene once every two years and return again in January, 2013. It is expected ELFA will meet at the Comptroller's office in the coming months to share suggested text of a technical amendment that industry will seek from the Legislature.

Conversations with the sponsors of House Bill 2476 indicate they are sympathetic to ELFA concerns agreeing long-term equipment lessors that do not maintain an open stock of heavy equipment inventory were not intended to be covered.

In 2011 the Legislature passed House Bill 2476, amendments to the Texas Dealer's Heavy Equipment Inventory appraisal that resulted in lease finance companies falling under the definition of dealers. This designation will require finance sources to file and report according to the Texas Dealer's Heavy Equipment Inventory Tax, a very burdensome procedure.

"Heavy equipment" means self-propelled, self-powered, or pull-type equipment, including farm equipment or a diesel engine, that weighs at least 1,500 pounds and is intended to be used for agricultural, construction, industrial, maritime, mining, or forestry uses. The term does not include a motor vehicle required by Chapter 501, Transportation Code, to be titled, or Chapter 502 to be registered. Vehicles such as water trucks are listed among vehicles that may be covered by the new statute. No reports have reached ELFA indicating any lease finance sources have filed.

ELFA analysis finds leasing companies, including entities that finance a dealer's heavy equipment inventory through flooring finance contracts, are swept into the definition of a dealer. The ELFA Concerns document identifies many issues such as added complexities to collecting advance escrow based on gross receipts and reconciling that to the tax based on cost as leasing companies will now file and report according to the Texas Dealer's Heavy Equipment Inventory Tax. Also see the Heavy Equipment Dealers' Special Inventory Manual distributed by the Texas Comptroller of Public Accounts. For instance, the definition of a Dealer, Dealer Financed Sale and Fleet Transaction on page 3 as numbered on the bottom right of each page. Also see Q&A #11 found on page 6 and on page 37 examples of equipment that may qualify as 'heavy equipment' such as backhoes, skid steers, boom lifts, rock saws, artic dump trucks, water trucks, portable power generators, and pumps. Heavy equipment inventory must be identified locally according to the definition in Tax Code SecÂtion 23.1241(a)(6). Other statutory definitions such as "portable drilling rigs" found in Tax Code Section 21.02(e), must be considered.