Dealer License Requirements (Part 1)

Logo of the Texas Department of Motor Vehicles

So, let’s get to the heart of the matter, and talk about the requirements for your dealer’s license.

You will need a physical location for the business that meets the premises requirements, which we will discuss in more detail momentarily.

Obviously, you’ll have to submit a completed application with all the attachments, which will include evidence of a $50,000 surety bond.

And a valid two-year lease or proof of ownership is required for your business location.

Background Check. All applicants will be reviewed for criminal history and previous disciplinary action. We will discuss this in more detail at the end of this section.

Premises Requirements

As promised, let’s get into the premises requirements for the state. 

Keep in mind that you may not sell – or offer to sell – vehicles from anywhere other than your licensed location. That is known as “curbstoning” (selling vehicles with no license at all is also referred to as curbstoning, by the way). 

The requirements we’re about to go into will apply to independent motor vehicle, independent motorcycle, travel trailer and utility trailer dealers.

If you have a consignment location and you are going to retail vehicles to the public, you must have a GDN unless the consignment location is a wholesale motor vehicle auction. 

Here’s a link that will provide you ALL of the information found in the Admin rules regarding premises requirements.

Failure to Meet Requirements

Keep in mind, all the premises requirements we are about to review must be met at the time the application is submitted.  At any point during the process TxDMV can request a site visit and failure to have all requirements in place could result in denial of the application.

One last note on curbstoning: You don’t want to do it.  If you do, you may have to pay civil penalty fees or, worse, you may have your license revoked.

Hours of Operation

A retail dealer must be open at least 4 days per week. And they must be open at least four consecutive hours on those days.

There are no further hours requirements other than the Blue Law, which we’ll get into a little bit later.

So, if it’s your business model to be open from 1 a.m. to 5 a.m. on Wednesday, Thursday, Friday and Saturday, the state does not object. The hours that you’re open must be posted at the main entrance to your building, accessible to the public. If you have a gate around the outside of your lot, then be sure to post the hours there so people will know your hours when they are trying to access your building after hours.

Now, you must have either an owner, or a bona fide employee, present during those business hours to buy, sell, or exchange vehicles. But the question comes up, “if it’s a one or two person show and no one is available because they have to go to the auction, or somewhere else, what do we do?”

If an owner or employee is not available during business hours, then a “Be-Back” sign must be posted indicating the time and date of the return.  

Blue Law

The Texas Blue Law is in effect.  That means you can be open on Saturday or Sunday, but NOT on both consecutively.  The Blue Law only applies to “self-propelled vehicles.” Towable travel-trailers, utility and semi-trailer sales are excepted.

Phone and Office Equipment

Regardless of your business hours, your business phone must be answered by an employee, answering service, or voicemail from 8am to 5pm on weekdays. You can use a mobile phone, but the requirements are the same.

Your office is required to be equipped with a desk, two chairs, Internet access, and a phone. 

The phone can be a landline or mobile and needs to be listed in the dealership’s business name. 

Important note: If there is more than one dealer licensed at a location, then each dealer must meet the premise requirements.  In other words, two dealers cannot share the same desk, chairs or phone.

Signage

The state has some specific ideas when it comes to your business sign.  You must display a conspicuous, permanent sign with at least 6-inch-high letters.  It must be permanently mounted.

You may have a temporary sign – in order to open your store – if you’re able to prove a permanent sign is on order and will be there shortly.  A banner can function as a permanent sign if it is approved by the city, it’s permanently mounted, and it doesn’t violate any local ordinances of your area.

Structure

Your office structure must be in a building with connecting exterior walls on all sides and, like any business, must comply with local zoning and deed restrictions.

It also may not be a portable type office UNLESS it meets the requirements above and is NOT readily movable.

Business Address

The business address must be recognized by the U.S. Postal Service or capable of receiving U.S. mail.  Also, be aware that TxDMV will not mail metal dealer’s plates to an out of state address.  It should go without saying but your office must be located in Texas.  Like we mentioned before, all sales must be conducted from this licensed business location.

Local Zoning

Like any business, you must comply with local zoning, municipal codes, and deed restrictions and have the authority to open a dealership in the location you are looking to lease or buy.  Contact your city for a Certificate of Occupancy prior to getting your license.

If you are informed that your proposed business location is in an unincorporated area, then you will need to contact the county to ask what occupancy or permit requirements are required for your proposed location.

Premises Restrictions

You’re not allowed to locate your office structure within a residence, an apartment, hotel/motel or rooming house.  “What if I have a separate entrance for my business or I reside on a separate floor?” Don’t do it, that is still considered a residence.

Sharing Space

You may share a lot with other dealers, but you may not have more than four retail dealers located in the same business structure, and only eight wholesale dealers per structure. Wholesale and retail dealers MAY NOT share an office.  If the building shares a roofline, it’s considered a single structure.  Now, if you own a dealership and another business and they are operating under the same name, for example Joe’s Enterprises, then the same phone number may be used.  But, if the business is operated under DIFFERENT names, for example Joe’s Used Cars and Joe’s Antiques, then separate phone listings and separate signs are required.

Sharing Space with Non-Dealers

Regarding the sharing of space, you CAN share space with a non-dealer only if you own the property yourself or if you have a separate lease in the name of the dealer business signed by you and the owner.  The dealer has to have a separate business line, phone number, and office equipment, as we discussed earlier.  So, could you open the dealership out of your uncle’s bait and tackle shop?  In theory, yes you could, and many dealerships share space with other small businesses in Texas.  However, you would still have to meet the requirements described earlier.

Keep in mind, a retail dealer and lessor or lease facilitator may not operate out of the same business structure unless they share the same owner.

If you do share space with another business, including another dealer, then your inventory must be separated, and must also be separate from any parking areas.  Think of this as the reasonable person test.  If a reasonable person approached your premises, would he be able to clearly see what vehicles are for sale, and by whom?

There is a lot to cover here, and we will continue our discussion of the requirements for a dealer’s license in a couple of weeks.

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