If You Buy A Car (Okay, Truck) In Texas, Make Sure You Don't Pay The Inventory Tax

Texas levies an inventory tax of .02% on the retail value of all products in a company’s inventory each year, but lots of car dealerships try to sneak the fee over to the consumer. Even worse, they do it year-round. A reader writes in to explain how you can argue your way out of it at the dealership.

I have a complaint about hidden fees that some car dealerships try to get away with.

The state of Texas charges any business an inventory tax in January of each year for products in warehouse at the end of the year. It’s not much, @0.02% of the retail value of the item. Some large national companies ship inventory out of state to other warehouses to avoid paying the Texas inventory taxes.

Several New and Used car dealerships go one step further and try to charge the consumer the Vehicle Inventory Tax on every car sales receipt during the year.

Although the Texas department of transportation office says by definition the “Vehicle Inventory Tax (VIT) – A property tax that dealers pay on their business inventory. This is NOT a tax that is required to be paid by the consumer.” referenced at www.txdot.gov/publications/motor_vehicle/section01.pdf

The finance person at the dealership doesn’t like it but persistence has prevailed. Though they claim to not be able to remove the fee, I have successfully negotiated out of paying this hidden fee at the dealerships by quoting this manual. They usually adjust the sales price down to cover this line item on the retail purchase contract.

We checked the document and it’s there at the end of page 3, fourth item from the bottom. If you’re in Texas, you might want to print this out the next time you go buy a car. We mean truck.

(Thanks to Mike!)

“Motor Vehicle Dealer Manual – Section 1” [Texas Department of Transportation]
(Photo: A contradiction of terms)