Car Flipping Laws in Texas 2025: Complete Legal Guide

Understanding Texas Car Flipping Laws

Texas takes unlicensed vehicle sales seriously. The Texas Department of Motor Vehicles (TxDMV) actively enforces dealer licensing requirements, and penalties for violations are significant. Understanding the rules protects your flipping business from legal trouble.

The good news: Texas allows 4 vehicle sales per year without a dealer license—one of the more generous limits among major states. If you stay within that limit, you're operating legally as a private seller. Exceed it, and you're curbstoning.

The 4-Vehicle Limit

What Counts Toward the Limit?

• All vehicles sold within a 12-month rolling period
• Vehicles sold to private parties
• Vehicles sold through consignment
• Vehicles titled in your name that you transfer

What Doesn't Count?

• Selling your personal vehicle (reasonable use)
• Vehicles inherited through estate
• Transfers between family members (in some cases)

The 12-month period is rolling—it's not a calendar year. If you sold 3 cars in November and 1 in January, that's 4 sales in a 3-month span. You must wait until those sales are more than 12 months old before they "drop off" your count.

What is Curbstoning?

Curbstoning is selling vehicles without proper licensing, typically by:

• Exceeding the 4-vehicle annual limit
• Advertising vehicles as "private seller" when operating as a dealer
• Using multiple people's names to circumvent limits
• Operating without required dealer infrastructure

Why Texas Cares

Curbstoning harms consumers because unlicensed sellers:

• Avoid disclosure requirements (salvage titles, flood damage, odometer issues)
• Provide no recourse for buyers with problems
• Don't carry required dealer insurance
• Often hide vehicle history issues
• Evade sales tax collection obligations

Penalties for Curbstoning in Texas

Criminal Penalties

• First offense: Class B misdemeanor
• Fine: Up to $4,000 per violation
• Jail time: Up to 180 days possible
• Repeat offenses: Enhanced penalties

Administrative Consequences

• Cease and desist orders from TxDMV
• Barriers to obtaining dealer license later
• Civil liability to defrauded buyers
• Tax penalties for uncollected/unpaid sales tax

Title Jumping: A Separate Offense

Title jumping means selling a vehicle without first registering it in your name. In Texas, this is illegal regardless of whether you exceed the 4-vehicle limit.

How It Works

You buy a car, get the title signed to you, then sell to another buyer and sign the title directly to them—skipping your registration. This evades:

• Registration fees
• Sales tax on your purchase
• Title transfer documentation

Title Jumping Penalties

Title jumping is a separate offense from curbstoning. You can be charged with both if you exceed the limit while also skipping title transfers. Always register vehicles in your name before reselling.

Comparison with Other States

Texas sits in the middle of state limits. Some states (Ohio) allow more sales; others (Florida) allow fewer. If you're flipping seriously, licensing eventually becomes necessary regardless of state.

Getting a Texas Dealer License

If you want to flip more than 4 vehicles per year legally, you need a dealer license. Here's what's required:

Surety Bond ($25,000)

The bond protects consumers if you violate dealer obligations. You don't pay $25,000—you pay a premium ($250-$500/year typically) to a bonding company. If claims are made against your bond, you're responsible for reimbursing the bonding company.

Business Location

This is often the biggest hurdle. Texas requires:

• Commercial or properly zoned property
• Space to display vehicles
• Permanent structure (not residential garage)
• Proper signage with business name
• Office space for records

Some flippers lease small commercial lots or partner with existing businesses. Virtual offices don't meet requirements.

Garage Liability Insurance

Dealer-specific insurance covering:

• Customer test drives
• Premises liability
• Inventory damage

Cost varies based on location, inventory value, and volume. Budget $1,500-$3,000 annually for basic coverage.

Application Process

1. Complete pre-licensing requirements (bond, location, insurance)
2. Submit application to TxDMV
3. Pay application fee ($700-$900)
4. Pass background check
5. Schedule inspection of business location
6. Receive license upon approval

Timeline: 30-60 days typical, longer if issues arise.

Wholesale vs. Retail Dealer License

Retail Dealer (GDN)

General Distinguishing Number (GDN) allows selling to public. Requires full location requirements, signage, and consumer protection compliance.

Wholesale Dealer

Allows selling only to other licensed dealers. Some location requirements are more flexible. Useful if you source vehicles for dealer clients. Cannot sell to retail consumers.

Staying Compliant Without a License

If you want to stay under the radar and flip legally without licensing:

Track Your Sales

• Maintain records of every vehicle sold
• Track rolling 12-month totals
• Stop at 4 sales—no exceptions

Always Title Vehicles

• Register every vehicle in your name before selling
• Pay applicable taxes and fees
• Maintain proper documentation

Be a Legitimate Private Seller

• Don't advertise as a dealer or business
• Don't use business phone numbers
• Don't operate from commercial location
• Make honest disclosures about vehicle condition

Reporting and Enforcement

How Curbstoners Get Caught

• Buyer complaints to TxDMV
• Pattern detection in online listings
• DMV database flagging multiple sales from same address
• Neighbor complaints about commercial activity
• Tips from competing licensed dealers

TxDMV Enforcement Unit

TxDMV has dedicated investigators for dealer compliance. They monitor online marketplaces, respond to complaints, and conduct undercover operations. Enforcement is real—don't assume you won't get caught.