That’s great the tax authorities are taking that position and I hope that gets applied more broadly. Good on you for pushing this forward as it obviously is a better result for us taxpayers. I still think the statute, though poorly drafted, supports a double tax on leased cars so I would not be surprised if other taxing authorities in Texas take that position.
Practically speaking, this matter is not going to get resolved by a judge - there just isn’t enough money at stake in any one transaction to warrant the legal fees needed to take it to court.
To your point on equity, it is the leasing company that technically buys the car from the dealer and pays the tax in the first instance, they just pass that cost along to us because we agree to pay it. When you decide to purchase the car at the end of the lease from the leasing company, Texas law treats it as a second transaction. Similar concept if you bought a car new, paid full tax on it, then sell it to a friend, who will then have to pay tax again. Seems like the state is double dipping but it’s just the nature of sales tax that the same item can get taxed multiple times as it changes hands.
This is why tax credits from leasing companies are so helpful to get a good deal in Texas because the leasing company eats the cost of the initial tax (or offsets it with some tax credit they have on their return) instead of passing that cost along to us.