Texas car rental law: a guide for rental companies

Texas asks two things of a rental company: tax and disclosure. The motor vehicle rental tax replaces sales tax on the rental and has its own permit. The damage waiver rules in Business and Commerce Code chapter 91 are about how you sell the waiver, not what it costs. Texas sets no cap on what a renter owes for damage and no cap on the waiver's price.

Do I collect the rental car tax?

Yes. Tax Code section 152.026 imposes a tax on the gross rental receipts of a rented motor vehicle: 10% for a rental of 30 days or less, and 6.25% for longer than 30 days. The Comptroller's guide puts the long-term band at 31 to 180 days. The rate follows the length of the contract, so a 35-day contract is taxed at 6.25% on all of it, not 10% on the first 30 days.

The Comptroller's rules for what you charge it on:

• Included: everything you charge to rent the car, including any reimbursement charge for property tax, title fee or registration fee.
• Left out, if separately stated: insurance, charges for damage during the rental, fuel, and discounts. Put them in one lump sum and you collect tax on the whole sum.
• On the invoice: state the tax separately, or state that it is included in the total. You may not pay the customer's tax for them or make it look as if none is charged.
• Local taxes: some cities and counties add their own tax on short-term rentals and administer it themselves, so ask each one you rent in.

The Comptroller does not say how a rental extended from 28 to 35 days is handled. Ask before you invoice one.

Which permit do I need?

A Texas Motor Vehicle Rental Tax Permit, form AP-143, if you rent vehicles in Texas on agreements of 180 days or less. The permit account is "qualified" if you hold title to at least five rental vehicles within a 12-month period (or are an authorized Texas automobile dealer). A qualified account can defer the minimum rental tax when it registers or titles a rental car. A non-qualified one pays motor vehicle sales tax when it registers the cars it buys to rent.

Section 152.026(d) explains why this matters. While a car is registered as a rental vehicle, the motor vehicle sales and use tax is not due on it. Over the car's rental life you must pay at least what that sales tax would have been, unless the car is destroyed or stolen and not recovered.

In Renviq the location's long-term rate applies to the whole rental once it reaches the day you set. City or county rental taxes are not added as separate automatic lines. Fold them into the location rate if your adviser confirms they fall on the same base, or check the invoice by hand. More states compared in car rental taxes by state.

What do I have to tell a renter about the damage waiver?

Chapter 91 covers any business renting private passenger vehicles, vans included, to the public for 180 days or less. Since 1 September 2025 that limit is 180 days, no longer 30. Its rules:

1. Written consent. You may sell a damage waiver only if the renter agrees to it in writing at or before signing (section 91.051).
2. The notice in the agreement. A renter who buys a waiver not included in the base rate gets this notice in at least 10-point type (section 91.052): "NOTICE: Your rental agreement offers, for an additional charge, an optional waiver to cover all or a part of your responsibility for damage to or loss of the vehicle. Before deciding whether to purchase the waiver, you may wish to determine whether your own automobile insurance or credit card agreement provides you coverage for rental vehicle damage or loss and determine the amount of the deductible under your own insurance coverage. The purchase of the waiver is not mandatory. The waiver is not insurance."
3. The posted notice. Section 91.053 prescribes a "Notice to Texas Residents Regarding Damage Waivers", posted conspicuously where the waiver is offered. It warns that a personal-policy claim may lead the insurer to non-renew, but only if the renter was at fault.
4. No pressure. Staff may not contradict the chapter or use coercion. Once the renter declines, any further mention of the waiver counts as coercive, other than noting the decline while reviewing the agreement (section 91.054).
5. Never mandatory. A waiver may not be imposed as a mandatory charge (section 91.055(b)).
6. Refund unused days. If the renter returns early, or cancels the waiver and you confirm the car was undamaged, refund the waiver charge for the days it was not in effect (section 91.057, from 1 September 2025).

You may void a waiver only for the reasons in section 91.056. These are intentional or wilful and wanton damage, an unauthorized or impaired driver, use in a crime, hire, towing, driver training or a speed contest, driving outside the continental US without permission, and fraud. A theft also voids it when the renter fails to return the key, report the theft within 24 hours, or cooperate. A violation costs $500 to $1,000 per act in civil penalties (section 91.101).

What can I charge for damage and other fees?

The chapter defines "damage" broadly: damage or loss regardless of fault, including theft, loss of use, and storage, impound, towing and administrative charges. Unlike California and New York, it sets no dollar cap on any of them. What the renter owes is what your agreement says, so write the calculation down. Evidence still decides disputes. Dated pickup and return photos are what an insurer or a card issuer will ask for.

Any mandatory charge, meaning an unavoidable charge on top of the base rate other than one imposed by law, must be shown separately on the face of the agreement. It must also appear in all your price ads, quotes, offers and displays, including online booking (section 91.055(a)).

Age. We found no Texas statute that sets a minimum renting age or limits a young-driver fee. Chapter 91 only refers to "any minimum age requirement established by the rental company". Renviq checks minimum age, years licensed and licence class per vehicle at booking and runs young-driver fees as fee rules.

What insurance and licence checks does Texas require?

• Insurance. Transportation Code section 601.072 sets the minimum liability cover for financial responsibility at $30,000 per person, $60,000 per collision for bodily injury and $25,000 for property damage. The federal Graves Amendment (49 U.S.C. 30106) shields a rental owner from liability merely for owning the car, when the owner was not negligent. It keeps state insurance requirements in force.
• Licence. Section 521.460 bars renting to anyone without a valid licence, or a home-state or Canadian-province licence for nonresidents. You must inspect the licence first. Keep a record of the plate, the renter's name and address, and the licence number, issue date and place, open to police inspection.

How do I transfer TxTag and toll-by-mail bills to the renter?

For TxDOT toll projects, Transportation Code section 228.055(d) relieves you as lessor if, within 30 days of the invoice being mailed, you send TxDOT a copy of the rental agreement with the renter's name and address. You can instead send agreed electronic data with the plate, the renter's name and address and the licence number. TxDOT may then invoice the renter. Other Texas toll authorities run their own rules, which we did not check. Export and matching steps are in charging rental customers for tolls. Renviq imports TxTag statements in one go and bills a rental's tolls on one invoice.

Texas checklist

1. Permit AP-143 before the first rental; qualified account if you hold five or more rental cars.
2. 10% on contracts of 30 days or less, 6.25% on 31 to 180; insurance, damage and fuel stated separately.
3. City and county short-term rental taxes checked where you operate.
4. Damage waiver sold only with written consent, the 91.052 notice in 10-point type and the 91.053 notice posted.
5. Unused waiver days refunded; mandatory charges shown in every quote and ad.
6. Liability cover of at least 30/60/25 on every car; licences inspected and recorded.
7. TxDOT toll invoices answered within 30 days with the agreement.