The Lone Star State has specific laws that regulate its popular Texas car auctions. Maintaining compliance during the application process will ensure you can obtain a car auction license without making costly errors. A completed application must be submitted by the Texas car dealer to obtain an independent dealer license.
What Type of License Do You Need to Buy & Sell Cars at Auctions?
The Texas Department of Licensing and Regulation issues licenses for auctioneers to perform on the lot of any licensed dealer. This includes passenger cars, travel trailers, utility trailers, ATVs, and trailer/semi trailers.
- Wholesale dealer licenses reduce the overhead costs of operating a car dealership with a physical lot. This license also reduces employee expenses, overhead, and associated costs.
- Transactions with sales tax include direct, indirect, and consignment sales; they all require a GDN for the Texas auto dealer license.
- In addition to the GDN, a franchised Texas auto dealer license must be obtained for those who wish to sell new vehicles.
Requirements for Obtaining a Car Auction License in Texas
Texas law requires that training must be approved by the Texas Department of Motor Vehicles, or DMV. It must be made available to the public online. Six hours of online training must be given for new applicants, but only three hours are needed for renewal applicants.
- Eligibility criteria: The training covers various laws and rules and consequences for violations.
- Register a business: Register your business entity with the Secretary of State's office. This requires you to select an organizational structure.
- Documents: Collect and submit all supporting documentation required by the application form. This will be submitted along with the application after paying any fees and mailing costs.
Requirement 1: Select a Qualified Training Provider
The educational requirements for pre-license applicants are detailed in the Texas Transportation Code §503.029. As of March 1, 2020, only certain course providers are qualified to offer training for auto auctions. This includes institutions of higher education and motor vehicle trade associations located in the state. Trade associations must charge the same price for courses covering licensing requirements. The fees cannot be higher than $150 per individual trainee. A certificate of completion must be provided.
Requirement 2: Register, Obtain a Business Address
When you register your business with the Secretary of State, you need to provide an official address. The permanent business address must meet the minimum requirements of the DMV to be submitted with the license application.
Requirement 3: Fill Out Application, Submit Forms and Documentation
Go to the website for the Texas DMV, or TXDMV. If you print out the form, complete it in the ink required by law. Read the instructions carefully.
Here is a list of the most common documents you will need to provide:
- Proof of the general distinguishing number, which is issued by the Texas DMV
- Proof of a franchised dealer license from the DMV for businesses that sell new vehicles
- Proof of a Texas auto dealer bond with a two-year term.
- Copies of the car dealer license, EIN, and fictitious name
- Background check, fingerprints, and photo identification
- A copy of the certification from the educational training course
Step-by-Step Guide to Get a Texas Car Auction License
Step 1: Select the Right License Application
You can select and submit more than one application if you plan to operate under multiple licenses at the same time. Only certain licenses require a surety bond to fulfill the application requirements.
Step 2: Register Your Business, Secretary of State
Decide whether to operate as a partnership, a limited liability corporation, a sole proprietorship, a corporation, or a workers' cooperative enterprise. You must register the business with the Secretary of State. Registration can be done on the website.
To meet the permanent business requirement of the DMV, you must obtain a business address that meets the following specifications:
- The building must have connecting exterior walls on every side.
- The building must be located within a commercial zone.
- You must provide a valid business mailing address and phone number.
- The building must comply with zoning laws, deed restrictions, and regulations.
- The business office must contain at least one desk, two chairs, a phone, and internet access.
- You must have a permanent business sign featuring the business name in legible letters. It must be at least 6 inches high.
- Display areas must be well-lit and accommodate at least five vehicles.
- Business hours must be displayed at the building's main entrance.
- A lease agreement or proof of ownership must be obtained in writing.
- Phone lines must be answered by a service or employee from the hours of 8:00 a.m. to 5:00 p.m. during weekdays.
- Wholesale dealers are exempt from the business location requirement.
Step 3: Obtain a Texas Auto Dealer Bond
A Texas auto dealer bond is required for operating in the state. The surety bond provides the public with the necessary assurance to conduct transitions with confidence. Only a small percentage of the surety bond cost amount must be paid up front.
How Much Does It Cost to Get an Auction License in Texas?
The total cost of obtaining an auction license depends on the amount you will pay for your business address, license, and surety bond. These are the major expenses, yet they depend on several variables.
- Required training costs no more than $150.
- To submit a complete application, you must provide a business address. The cost of this property will depend on the business owner's acumen in securing a good deal.
- The assumed name certificate shows up on your business license; this determines the fee applied.
- The surety bond price is determined by your credit score. The total bond amount must be at least $25,000; the credit score will determine the percentage. It is usually around 1 to 3% of the total. The online quotes for a surety bond will be higher if the credit score is low and can go as high as 15%. A good credit score results in a price range between $500 and $2,500.
How Long Does It Take to Obtain a Car Auction License in Texas?
The amount of time it takes to process the application depends on factors like the accuracy of the information provided, the number of applications submitted, financial issues, and any missing data.
Can I Operate a Car Auction Business Without a License in Texas?
No. All states require a license to operate a car auction business; however, Texas also requires independent dealers and wholesale dealers to obtain their GDN licenses via the general distinguishing number.
What Happens if My Car Auction License Application Is Denied?
The procedure for resubmitting the application is the same, but you should find out why the application was denied and correct the issue before reapplying.
How Often Do I Need to Renew My Car Auction License in Texas?
Each license displays an expiration date. The auctioneer must finish mandatory continuing education prior to renewing the license.