How to Start a Used Car Dealership in Texas: TxDMV General Distinguishing Number

If you want to sell used vehicles to the public in Texas, the license you need is the General Distinguishing Number, or GDN, issued by the Texas Department of Motor Vehicles (TxDMV). The GDN is the texas dealer license for this activity, and it is the same license most people mean when they search for a texas used car dealer license or a texas motor vehicle dealer license. You apply for it through eLICENSING, the TxDMV online system. This guide walks through the steps, costs, and mistakes to avoid so you can file once and file correctly.

Texas does not issue a general state business license, so the GDN is not a general permit. It is the specific license that covers vehicle sales, and it sits on top of the business formation filings every Texas company makes. Keep those two layers separate in your planning.

Disclaimer: This article is informational content, not legal or tax advice. Fees, forms, and rules change, so confirm current requirements with TxDMV, the Texas Secretary of State, and the Texas Comptroller of Public Accounts before you file. A dealership involves a lease, a surety bond, tax obligations, and consumer rules, so consult a qualified attorney and a CPA before you commit money.

What You Need Before You Start

Gather these items before you open eLICENSING. A missing item usually stalls the whole application.

• A formed Texas entity, usually an LLC or corporation, or a clear plan to operate as a sole proprietor
• A registered agent with a physical street address in Texas
• A legal right to use a business location that meets TxDMV premises rules, with a display area for at least five vehicles and the required signage
• A $50,000 surety bond, required for independent dealers
• Proof that you completed the required dealer education course
• A federal employer identification number (EIN) from the IRS
• A budget for filing fees, expedite fees if you want faster processing, and the bond premium

Known costs and fees

Item	Amount	Where it is filed or paid
LLC Certificate of Formation (Form 205)	$300	Texas Secretary of State
Corporation Certificate of Formation (Form 201)	$300	Texas Secretary of State
Name reservation (good for 120 days)	$40	Texas Secretary of State
Standard Expedite	$50 per document, in addition to the filing fee	Texas Secretary of State
Next Day Expedite	$500 per document, in addition to the filing fee	Texas Secretary of State
Same Day Expedite	$750 per document, in addition to the filing fee	Texas Secretary of State
Assumed name certificate (DBA) for an LLC or corporation	$25	Texas Secretary of State (Form 503)
Change of registered agent or office	$15	Texas Secretary of State
Surety bond	$50,000 bond amount; the premium is separate and varies, so get quotes from a surety agent	Surety company, submitted with your TxDMV application (confirm the method with TxDMV)
GDN application and license fees	Confirm on the TxDMV fee schedule	TxDMV through eLICENSING
Sales and use tax permit	No charge	Texas Comptroller of Public Accounts

Step-by-Step: Getting Your Texas Used Car Dealer License

Step 1: Form your business entity

Many dealers form an LLC because it separates business obligations from personal ones. Ask your attorney whether an LLC or a corporation fits your plans. File the Certificate of Formation with the Texas Secretary of State for $300. Online filing through SOSDirect is the fastest route. The Secretary of State does not publish a guaranteed standard turnaround, so if you have a lease or inventory deadline, use an expedite tier. Standard Expedite at $50 is typically processed within two to three business days. Next Day Expedite at $500 is processed by close of business the next business day for filings received by 12:00 p.m. Same Day Expedite at $750 is processed by close of business the same day for filings received by 12:00 p.m. Expedite fees are added to the filing fee.

The entity name must be distinguishable from existing names in Secretary of State records. It must include an organizational designation such as Limited Liability Company, Limited Company, LLC, L.L.C., LC, or L.C. It cannot imply a purpose the company is not authorized to pursue, and it cannot falsely suggest a connection to a government entity. Search the Secretary of State business records before you pick a name, and call (512) 463-5555 for preliminary availability. If you need time to finish paperwork, you can reserve a name for 120 days for $40.

Every domestic filing entity must keep a registered agent and a registered office in Texas. The agent must be a Texas resident individual, a domestic entity, or a qualified foreign entity, and it must have consented in writing or electronically. The entity cannot serve as its own agent. The registered office must be a physical street address where the agent can be personally served during business hours. A post office box, mail forwarding service, or answering service alone does not meet this rule.

If you operate as a sole proprietor, there is no Secretary of State filing for the business itself. If you sell under a name other than your own legal name, you file an assumed name certificate with the county clerk in each county where you maintain a business office or conduct business. County clerk fees vary by county, so confirm the amount with the clerk. Texas counties do not license car dealers. Their only role in this process is the assumed name filing.

Step 2: Get your federal EIN

Apply for a federal employer identification number from the IRS for your entity before you start the state filings that ask for one. You will use the EIN for tax registrations and possibly on the GDN application, so keep the confirmation letter with your formation documents.

Step 3: Choose the right GDN category

TxDMV issues several GDN categories: independent motor vehicle, motorcycle, travel trailer, trailer or semitrailer, wholesale, and mobility dealer. A used car lot that sells to the public usually applies in the independent motor vehicle category. A wholesale dealer generally sells only to other licensed dealers, but confirm the definition with TxDMV before you apply. Choosing the wrong category can mean starting over, so describe your planned sales accurately and ask TxDMV if you plan to sell more than one type of vehicle.

The category also affects your requirements. Independent and wholesale GDNs require a surety bond. Travel trailer and trailer GDNs are exempt from the bond. Wholesale dealers are exempt from the display area requirement described below.

Step 4: Secure a qualifying business location

Retail dealers need an established place of business that meets TxDMV premises rules. TxDMV publishes a premises checklist as Form MVD-LF628. For a retail dealer, the key requirements include a display area for at least five vehicles and signage that identifies the business. Review the checklist before you sign a lease, because a location that fails the checklist can delay or block your application.

Confirm the rules with TxDMV before you rely on a home address or a shared space. The checklist sets what the premises must include, and the agency decides whether your site meets it. You will also need documentation that you have the legal right to use the site, such as a lease or deed. Ask TxDMV what proof it accepts.

Counties do not license car dealers, but a city or county may regulate auto sales through zoning or local permits. Check with the local planning office before you sign anything. Zoning rules can rule out a site even when it meets the TxDMV checklist.

Step 5: Obtain the $50,000 surety bond

Texas Transportation Code 503.033 requires a $50,000 surety bond for independent and wholesale dealer GDNs. Travel trailer and trailer GDNs are exempt. The bond amount is not your cost. The premium is what you pay the surety company, and it depends on your credit, business history, and the surety's underwriting. Get quotes from a surety agent rather than assuming a rate.

The bond is a guarantee that can respond to certain claims against the dealer. Ask the surety how claims are made, what the bond covers, and what happens if the bond is canceled or not renewed. Keep the bond active for as long as you hold the license, because a lapse can jeopardize your license.

Step 6: Complete dealer education

Applicants must complete dealer education before they receive a GDN. TxDMV's 2026 dealer manual and proposed rule changes may affect which courses qualify and how they are approved, so check the current course rules with TxDMV before you enroll. Keep your completion certificate. You will need proof of completion for the application.

Step 7: Submit the GDN application in eLICENSING

Create an eLICENSING account and start the GDN application from the TxDMV site. Enter your legal entity name exactly as it appears on the Certificate of Formation. Mismatched names are one of the most common causes of application problems. Enter your registered agent, your premises details, and the GDN category you chose. Provide the surety bond, the dealer education proof, and the premises and signage documentation TxDMV requires.

Fingerprinting is required at renewal and when ownership changes. Confirm with TxDMV whether fingerprints are also required with the initial application, and plan for that step if they are. Confirm the GDN application and license fees on the TxDMV fee schedule, because this guide does not list a verified figure for them. TxDMV processing time is also not a figure this guide can state. Check the status in eLICENSING after you submit, and plan your lease start and inventory purchases around a possible review period.

Step 8: Set up your tax and filing obligations

Texas has no state personal income tax and no corporate income tax. Entities pay the Texas franchise tax, a privilege tax administered by the Texas Comptroller. For the 2026 and 2027 report years, the no tax due threshold is $2,650,000 in total revenue. Entities at or below that amount owe no franchise tax, but they must still file a Public Information Report with the Comptroller by May 15 each year. Entities above the threshold owe tax at rates of 0.375 percent for retail and wholesale, 0.75 percent for all other entities, and 0.331 percent under the EZ Computation rate for entities with less than $20 million in total revenue. Confirm which rate fits your business type with the Comptroller or a CPA. The Secretary of State does not require an annual report for an LLC or corporation.

Most businesses that sell taxable goods or services need a Texas sales and use tax permit from the Comptroller. The permit is issued at no charge and typically takes two to three weeks to process. The state sales tax rate is 6.25 percent. Vehicle sales tax is typically collected through the title and registration process rather than a regular sales tax return, so confirm with the Comptroller and TxDMV which permits and filings apply to your vehicle sales and any accessories or services you sell.

Once licensed, GDN holders may use dealer temporary tags and metal dealer plates. Confirm the ordering process and the rules for using them with TxDMV before your first sale.

Step 9: Check whether you need a separate salvage license

Salvage dealing is handled through a separate TxDMV license. A GDN does not automatically cover salvage activity. If you plan to buy or sell salvage vehicles, check TxDMV's requirements before you start.

Common Mistakes to Avoid

• Mismatched names. The entity name on the Secretary of State filing, the bond, and the eLICENSING application should match exactly.
• Using a post office box as the registered office. Texas requires a physical street address where the agent can be personally served.
• Assuming a home address qualifies. Confirm premises rules with TxDMV before you sign a lease or list a site on your application.
• Missing the display area or signage. Retail dealers who fail the premises checklist can delay their application.
• Choosing the wrong GDN category. Wholesale and independent dealers have different rules, so describe your planned sales accurately.
• Letting the bond lapse. Keep the $50,000 bond active, and calendar the renewal date.
• Forgetting the May 15 Public Information Report. Entities under the franchise tax threshold still must file it.
• Skipping the county filing for a sole proprietor DBA. Sole proprietors file assumed name certificates with the county clerk, and the fee varies by county.
• Ignoring the fingerprinting trigger. A change of ownership requires fingerprinting, so plan for it before you sell or transfer any interest.
• Advertising or selling before you are licensed. Confirm with TxDMV what you may do before the license is issued.

What to Expect Once You Are Licensed

A complete, accurate application may help you avoid repeated requests for documents, which are a common source of delay. Processing times and approval decisions depend on TxDMV's review and your local rules, so no specific outcome or timeline is guaranteed. Once your GDN is issued, you may be able to open a retail lot at an approved location, use dealer temporary tags and metal dealer plates, and buy and sell vehicles under your license, subject to TxDMV rules.

Licensing is the start of your ongoing obligations, not the end. You will need to renew the GDN, complete fingerprinting at renewal, keep the bond and premises in compliance, file the Public Information Report each May 15, and update the Secretary of State and TxDMV when your registered agent or ownership changes.

Official Resources

• Texas Secretary of State: https://www.sos.state.tx.us/corp/index.shtml
• SOSDirect online filing: https://direct.sos.state.tx.us/acct/acct-login.asp
• Texas Secretary of State business search: https://www.sos.state.tx.us/corp/searches.shtml
• Assumed name (DBA) filing FAQs: https://www.sos.state.tx.us/corp/namefilingsfaqs.shtml
• Texas Comptroller of Public Accounts: https://comptroller.texas.gov/taxes/
• Texas sales and use tax permit: https://comptroller.texas.gov/taxes/permit/
• Texas Department of Motor Vehicles: https://www.txdmv.gov (access eLICENSING and the premises checklist from this site)
• Texas Small Business Development Center Network: https://www.sbdctexas.org/

Final Notes

Starting a used car dealership in Texas involves several agencies, a surety bond, a qualifying location, and ongoing tax filings. Work through the steps in order, confirm every fee and timeline with the agency that controls it, and treat this article as a planning guide rather than a substitute for professional advice. Because your lease, bond, entity structure, and tax position all interact, consult a qualified attorney and a CPA before you file.