Yes, when the dealer takes your car as a trade on the car you're buying. The Texas Comptroller says the motor vehicle sales tax is 6.25 percent of the sales price, minus any trade-in allowance. So you pay tax only on the difference.
This is a made-up example, not a quote. Say you buy a $30,000 car and the dealer gives you $10,000 for your trade.
In this example, the trade lowers the tax by $625. Put another way, the tax credit is worth 6.25% of whatever the trade allowance is.
Look at the title application, Form 130-U. It has a line for "Less Trade-in Amount" right under the sales price. Check that your trade number is on it.
The tax savings only count if the trade number is fair. A low trade offer can wipe out $625 fast. That's why it helps to know what your car is worth on its own before you sign. Our post on trading in vs. selling outright walks through that choice, and negotiating your trade separately shows how to keep the numbers clear.
With PriceForMyTrade, you send your vehicle details in about 30 seconds. Participating local dealerships contact you directly, and first responses typically come the same day (not guaranteed). Offers are confirmed after a physical appraisal. It's free to you. See how competing offers work.
This is general information, not tax advice.
Want to know what your trade is really worth? Get competing offers.