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Total loss settlements and sales tax: Recouping expenses after your car is totaled

Having a car insurance company declare your vehicle a total loss after a crash might cause you to lose sleep because of the hassle. But you shouldn't lose your shirt.

Car insurance companies are responsible for paying the actual cash value or market value of your vehicle so you can replace it with a similar one. Now, that likely isn't enough to pay for a brand new version of the vehicle you just lost. Instead, it's what your car is worth at the time of the crash.

Also, insurers may be responsible for other costs associated with purchasing a new vehicle, such as sales tax, title and vehicle registration.

Thirty-four states require car insurance companies pay the sales tax after you replace your crashed vehicle with a new or used one (see list). However, that doesn't necessarily mean insurers in those states are going to offer to pay sales tax upfront. Nor does it mean insurers in states that don't require those reimbursements will refuse to pay. That's why it's important to ask your insurance company to reimburse you -- even if the state in which you live does not require it.

There is often a 30-day time limit for requirement reimbursement for these costs from the time you purchase your replacement vehicle. So, it's important to make your request quickly if you live in a state that requires auto insurance companies to reimburse you for these costs.

Your auto insurance company vs. theirs

Don't fret if your state doesn't require auto insurance companies to reimburse you for sales tax. Public policy is generally on your side anyways.

For instance, if another motorist is at fault in the crash, public policy dictates that you can collect from that person's insurer all costs you incurred directly because of the crash. That includes the costs associated with purchasing a new car after your old one is totaled. Also, your car insurance rates should not increase if the accident was not your fault.

The situation is similar if you make a claim under your own insurance policy and your state doesn't require insurers to reimburse you for those extra costs. Most collision and comprehensive car insurance policies limit your insurer's liability to the car's actual cash value or the cost to repair or replace it.

In states that reimburse you for sales tax, insurers will reimburse you for those costs on the total loss settlement for your original vehicle, not your newer vehicle. For example, let's say you total an old Saturn and receive $5,000 from your insurer for it. If you use that money to purchase a Honda Accord for $20,000, your insurance company would pay you sales tax on the $5,000, not the $20,000.

Are you first party or third party?

Drivers unfamiliar with the auto insurance claims process may not know the difference between first party and third party. Here's the difference.

What's considered first or third party in an insurance claim depends on who's filing the claim and who's at fault. If you're filing a claim with your own insurance company, that's a first-party claim. You should file a first-party insurance claim if you're at fault.

If you're filing a claim with another insurer, such as the other driver's insurance, then it's a third-party claim.

States that have laws requiring insurance companies to pay for sales tax may or may not have regulations about third-party insurers. You can see which states with sales tax reimbursement laws also have third-party regulations on the list on this page.

State laws vary on whether sales tax is required for total loss settlements

State laws vary on the topic of recouping expenses after your car is totaled. There are states that require car insurance companies for both first party and third party. Others only pertain to the first party. Some don't have any provisions at all.

Then there are the differences between the processes. For instance, states like Missouri and Ohio don't require car insurance companies to pay sales tax, title, and registration costs in total-loss settlements upfront. In Ohio, you have to submit your sales tax, title, and registration costs to the insurer within 30 days after you purchase your new car. In Missouri, the insurer will give you an affidavit to fill out and file with the state's revenue department so you can forego paying the sales tax on your newly purchased vehicle.

Other states, such as Arizona, Kansas, and Minnesota, require insurers to include future sales tax as part of the total-loss settlement check. Under this circumstance, the insurer will calculate the sales tax as a percentage of the total settlement.

Then, there are states, for instance Wisconsin is one example, where there is no official law requiring that sales tax be paid as part of a loss settlement, and yet insurers have been cited by state insurance commissions for doing so.

See the table below for details on how states govern sales tax for total loss settlements.

Shop around for car insurance

If you're not totally satisfied with your auto insurer, it's probably time to review Insure.com's annual ranking of the best auto insurance companies and see if there's a better match for you. When looking to change insurers, make sure to get quotes from multiple companies for the same policy. Compare possible discounts and see which company would give you the best rate while also providing you the most protection.

State laws on requiring sales tax to be paid as part of total-loss settlement

Here are the laws pertaining to recovering sales tax as part of a total loss settlements in each state. This research was compiled in January 2020 by the law offices of Matthiesen, Wickert & Lehrer, S.C., which operates out of Hartford, New Orleans, Austin and Los Angeles.

Enter a state in the search field to see the laws for that state.

StateRequired to pay sales tax as part of loss settlement?First-party claimsThird-party claims
ALABAMAYesWhen the insurance policy provides for the adjustment and settlement of first-party auto total losses based on ACV or replacement with another of like kind and quality, the insurer must pay all applicable taxes, license fees, and other fees. Ala. Admin. Code § 482-1-125-.08.No applicable statute, case law, or regulation governing recovery of sales tax.
Where policy provides that “If we pay for loss in money, our payment will include the applicable sales tax”, sales tax is owed. Lary v. Valiant Ins. Co., 864 So.2d 1105 (Ala. Civ. App. 2002), overruled by Ex parte S & M, LLC, 120 So.3d 509 (Ala. 2012).
ALASKAYesNo state sales tax in Alaska. When the insurance policy provides for the adjustment and settlement of first-party auto total loss based on ACV or replacement with another of like kind and quality, the insurer must offer a comparable replacement vehicle with all applicable taxes, license fees, and other fees paid. Alaska. Admin. Code § 26.080.No applicable statute, case law, or regulation governing recovery of sales tax.
If insured wants to retain the salvage following a total loss and seeks to settle on an ACV basis, the correct calculation for the total loss is based on the actual cost to purchase a comparable vehicle, including all applicable taxes, license fees, destination or delivery charges, and other fees incident to transfer of ownership. This calculation is not contingent on salvage, nor does calculation of ACV change if the insured seeks to keep the salvage rather than have the salvage turned over to the insurer for disposition. Bulletin 93-8, 1993 WL 13563685 (AK INS BUL), 2.
ARIZONAYesAll insurance policies must make prompt, fair, and equitable settlements applicable to both first and third-party total loss claims. This includes either (1) offering a replacement auto with all applicable “taxes, license fees, and other fees” paid, or (2) making cash settlement which includes all applicable taxes, license fees, and other fees. Ariz. Admin. Code § R20-6-801(H)(1).Third-party insurers must follow the same rules as first-party insurers. Any deviation from those rules must be supported by documentation giving particulars of the vehicle’s condition, and all deviations must be “measurable, discernible, itemized, and specified as to dollar amount.” Ariz. Admin. Code § R20-6-801(H)(1)(C).
ARKANSASYesWhen the insurance policy provides for the adjustment and settlement of a first-party auto total loss, the insurer must either (1) offer a replacement auto with all applicable “taxes, license fees, and other fees” paid, or (2) make a cash settlement which includes all applicable taxes, license fees, and other fees. If the insurer deviates from the methods above, they must include an itemized list stating the amount of the claim attributable to the value of the auto and the amount attributable to the sales tax. Ark. Admin. Code § 054.00.43-10(A).Third-party insurers must follow the same rules as first-party insurers. Any deviation from those rules must be supported by documentation giving particulars of the vehicle’s condition, and all deviations must be “measurable, discernible, and itemized as to dollar amount.” Ark. Admin. Code § 054.00.43-10(A)(3).
CALIFORNIAYesInsurer must (1) offer a cash settlement based upon the actual cost of a “comparable auto” including all applicable taxes and other fees, or (2) offer a replacement comparable auto including all applicable taxes, license fees, and other fees. Cal. Code of Regs. Tit. 10 § 2695.8(B).Third-party total loss claims are evaluated in the same way as first-party claims. Cal. Code of Regs. Tit. 10 § 2695.8(B)(5).
Pro-rata refund of Vehicle License Fee (VLF) portion of the registration fees (in lieu of property tax) is required when one (1) vehicle is stolen and not recovered within 60 days after police report, Cal. Rev. and Tax. Code § 10902; (2) total loss, Cal. Veh. Code § 11515 & Cal. Rev. and Tax. Code § 10902, or (3) vehicle completely stripped or burned.
When a carrier elects to repair the car to its pre-accident condition, it’s not required to pay for any loss of value to the vehicle, which can occur after a seriously damaged vehicle is fully repaired. Carson v. Mercury Ins. Co., 148 Cal. Rptr. 3d 518 (Cal. App. 2012).
COLORADOYesInsurer shall pay title fees, sales tax, and any other transfer or registration fee associated with the total loss of a motor vehicle. C.R.S. § 10-4-639.Third-party total loss claims are evaluated in the same way as first-party total loss claims. C.R.S. § 10-4-639.
CONNECTICUTYesInsurer must pay an amount equal to (A) the settlement amount on such vehicle plus, (B) whenever the insurer takes title, an amount determined by multiplying the settlement amount by the current tax rate percentage. C.G.S.A. § 38a-816.No authority requiring payments of sales tax to third-party total loss claims. Insurers have no duty of good faith to third parties since their relationship is adversarial and not fiduciary in character. Asmus Elc., Inc. v. G.M.K. Contractors, LLC, WL 758126 (2005); Sherrick v. Belanger, 43 Conn. L. Rptr. 878 (2007).
DELAWARENo state sales tax in Delaware. No applicable statute, case law, or regulation governing recovery of sales tax. 21 Del. C. § 2118 (A)(4) describes only the following benefits: “Compensation for damage to the insured motor vehicle, including loss of use of the motor vehicle, not to exceed the actual cash value of the vehicle at the time of the loss and $10 per day, with the maximum payment of $300, for loss of use of such vehicle.” 21 Del. C. § 2118 (A) (4). Look at policy language.No applicable statute, case law, or regulation governing recovery of sales tax.
DISTRICT OFNo applicable statute, case law, or regulation governing recovery of sales tax. However, an insured can recover damages suffered as a result of being without a vehicle for a reasonable amount of time necessary to replace or repair the damaged vehicle. Gamble v. Smith, 386 A.2d 692, 694 (1978). Look at policy language.No applicable statute, case law, or regulation governing recovery of sales tax.
COLUMBIA
FLORIDAYesWhen the insurance policy provides for the adjustment and settlement of first-party auto total losses based on ACV or replacement with another of like kind and quality, the insurer must pay sales tax. Any deviation from this method must be supported by documentation. The insurer must include an itemized list stating the amount of the claim attributable to the value of the auto and the amount attributable to the sales tax. F.S.A. § 626.9743.Third-party insurers must follow the same rules as first-party insurers. Any deviation from those rules must be supported by documentation giving particulars of the auto condition, and all deviations must be “measurable, discernible, itemized and specified as to dollar amount.” F.S.A. § 626.9743(5)(C).
GEORGIAYesInsurer must (1) offer a cash equivalent settlement based upon the ACV of a “comparable auto” including all applicable taxes and other fees, or (2) offer a replacement auto including all applicable taxes, license fees and other fees. Ga. Comp. R. & Regs. § 120-2-52-.06.No applicable statute, case law, or regulation governing recovery of sales tax.
HAWAIIYesInsurer must (1) offer a cash settlement based upon the ACV of a “comparable auto”, if within 30 days the insured purchases a new car, the insurer must reimburse for excise tax and ownership fees, or (2) offer a replacement comparable auto including all excise taxes and ownership fees. Haw. Rev. Stat. § 431:10C-312.No applicable statute, case law, or regulation governing recovery of sales tax. However, courts have applied various measures of damages to personal property. All these measures are merely guides to common sense aimed to ultimately fully compensate the injured party. The assessment of property damage must rest on its own facts and circumstances. Richards v. Kailua Auto Mach. Serv., 10 Haw. App. 613, 623, 880 P.2d 1233, 1238 (1994).
IDAHONo applicable statute, case law, or regulation governing recovery of sales tax. However, Idaho Department of Insurance’s website states that an insured can recover sales tax, title fees, and release of liability fees. http://www.doi.idaho.gov/consumer/claim_faq.aspxNo applicable statute, case law, or regulation governing recovery of sales tax. A claim against an insurer for breach of duty of good faith is only available to first-party insured parties. Idaho State Ins. Fund v. Van Tine, 132 Idaho 902, 908, 980 P.2d 566, 572 (1999).
ILLINOISYesInsurer must (1) offer a cash settlement based upon the ACV of a “comparable auto”, If within 30 days the insured buys or leases a new vehicle, the carrier must pay the applicable sales tax, transfer, and title fees in an amount equivalent to the value of the total loss vehicle, or (2) offer a replacement comparable auto including all applicable taxes, license fees, and other fees, if the insured purchases a vehicle with a market value less than the amount previously settled upon, the company must pay only the amount of sales tax actually incurred and include transfer and title fees. Ill. Admin. Code tit. 50, § 919.80(C).No applicable statute, case law, or regulation governing recovery of sales tax. In a third-party claim, you do not have a direct contract with the party you are seeking to recover from and their primary obligation is to their own policyholder.
Exhibit A to § 919 states: “If within 30 days of a cash settlement, you can prove that you have purchased another vehicle, the company must pay the applicable sales tax, transfer and title fees in an amount equivalent to the value of the total loss vehicle. If you purchase a vehicle with a market value less than the amount previously settled upon, the company must pay you only the amount of sales tax that you actually incurred and include transfer and title fees.”http://insurance.illinois.gov/autoinsurance/auto_own_claim.pdf; Cramer v. Ins. Exch. Agency, 174 Ill.2d 513, 531, 675 N.E.2d 897, 906 (1996).
INDIANAYesInsurer must pay sales tax in addition to the fair market value of the totaled vehicle. This is necessary for the insured to be “made whole” for the loss. Sales tax must be paid at the time of compensating the insured for the loss of the vehicle. Indiana Insurance Bulletin 82, 2/25/94. In 2014, Indiana Dept. of Ins. General Counsel Tina Korty explained that, “The Department views payment of sales tax to be a necessary component of a fair and equitable settlement.” 1/9/15 e-mail to Gary Wickert.The Indiana Dept. of Ins. General Counsel says the position of the Department is that of Indiana Insurance Bulletin 82. Indiana law requires insurers to effectuate prompt, fair, and equitable settlement of claims. I.C. § 27-4-1-4.5. The Department views payment of sales tax to be a necessary component of a fair and equitable settlement. No case law to support, however.
IOWAYesInsurer may (1) offer a replacement auto that is at least comparable including all applicable taxes, license fees, or other fees, or (2) offer a cash settlement based on the ACV of a comparable vehicle including all applicable taxes, license fees, or other fees. Iowa A.D.C. § 191-15.43(507B).No applicable statute, case law, or regulation governing recovery of sales tax.
KANSASYesInsurer may (1) offer owner a comparable replacement vehicle, “with all applicable taxes, license fees, and other fees incident to transfer of evidence of ownership ...” or (2) pay owner a cash settlement equal to the actual cost required to purchase a comparable vehicle “including all applicable taxes, license fees and other fees incident to transfer of evidence of ownership ...” Sales tax is calculated by multiplying the ACV of the comparable vehicle by state and local income tax. Kan. Admin. Regs. § 40-1-34.Kansas Insurance Department Bulletin 2013-01 states that insurers have an obligation to pay sales tax and fees for all total loss claims.
http://www.ksinsurance.org/department/LegalIssues/bulletins/2013-1.pdfhttp://www.ksinsurance.org/department/LegalIssues/bulletins/2013-1.pdf
KENTUCKYYesIf the policy provides for the settlement of first-party auto total loss, the insurer may elect to either (1) offer a replacement auto that is at least comparable including all applicable taxes, license fees, or other fees, or (2) offer a cash settlement based on the actual cost of a comparable vehicle including all applicable taxes, license fees, or other fees. 806 Ky. Admin. Regs. § 12:095.806 Ky. Admin. Regs. § 12:095 defines “claimant” as a first-party claimant, a third-party claimant, or both. Bulletin 81-DM-007, 1981 states “it is necessary for sales tax to be included in establishing the value of damage when such tax is obviously an obligation of the claimant upon replacement of total losses.” However, no other applicable statute or case law.
LOUISIANAInsured truck owner was not entitled to recover sales tax on vehicle under terms of the policy as result of his truck being stolen and/or damaged, where policy provided for “actual cash value” of the damaged property; fact that insured paid sales tax on the truck did not increase its value. Clark v. Clarendon Ins. Co., 841 So.2d 1039 (La. App. 2003).State Farm’s insured suffered total loss to vehicle. State Farm paid insured sales tax and sought to subrogate the damages from the tortfeasor. The third party refused to reimburse State Farm for the sales tax. The Supreme Court denied State Farm’s claim, holding that, despite § 2315, below, State Farm was subrogated only to those rights its insured had, and only to the extent of first-party coverage it provided. Section 1830 says the subrogee cannot recover more than the extent of its performance under the policy. The State Farm policy did not obligate it to pay sales tax, so it could not recover sales tax from the tortfeasor. State Farm Mut. Auto. Ins. Co. v. Berthelot, 732 So.2d 1230 (La. 1999).
Vehicle owner can recover sales tax. If the first-party policy requires payment of sales tax, such tax may be recovered in third-party action by subrogated insurer.
Section 2315 (“Liability For Acts Causing Damages”) is known as the “fountainhead” of tort law in Louisiana, and provides in part, “Damages shall include any sales taxes paid by the owner on the repair or replacement of the property damaged.”
MAINEYes“All contracts of motor vehicle casualty insurance ... shall provide coverage for the value of the sales tax credit that would have been available upon trade thereof at the highest book value at the time of loss or destruction of the insured vehicle.” 24-A M.R.S.A. § 2907.No applicable statute, case law, or regulation governing recovery of sales tax.
MARYLANDYesInsurer may (1) offer a replacement auto that is substantially similar (does not address if sales tax and fees are included). Md. Code Regs. § 31.15.12.07, or (2) offer a cash settlement based on the actual cost of a substantially similar vehicle including all applicable taxes and transfer fees. Md. Code Regs. § 31.15.12.04. Insurers have been cited for refusing to reimburse sales tax on a total loss claim under Md. Code Ann., Ins. § 27-303 and § 27-304.Insurer may only offer a cash settlement based on the actual cost of a substantially similar vehicle including all applicable taxes and transfer fees. Md. Code Regs. §§ 31.15.12.03 and 31.15.12.04. MD Ins. Order 11-25-80.
MASSACHUSETTSInsurer is only required to pay for the ACV of a vehicle as of the day of the loss, not the cost to replace it. 211 Mass. Code Regs. § 133.05. http://www.mass.gov/ocabr/insurance/vehicle/auto-insurance/faq.html#q2.No applicable statute, case law, or regulation governing recovery of sales tax.
MICHIGANNo applicable statute, case law, or regulation governing recovery of sales tax.No third-party collision litigation allowed due to no fault.
MINNESOTAYesIf the policy provides for the settlement of first-party auto total loss, the insurer may (1) offer a comparable and available replacement vehicle including all applicable taxes, license fees, or other fees, or (2) offer a cash settlement based on the actual cost of a comparable vehicle including all applicable taxes, license fees, or other fees. M.S.A. § 72A.201.No applicable statute, case law, or regulation governing recovery of sales tax.
MISSISSIPPIYesThe insurer must pay sales taxes, title fees, or license fees unless the policy unambiguously excludes this recovery for total loss claims. MS Bulletin 2007-4.Jay Evey (Mississippi Department of Insurance) states that MS Bulletin 2007-4 does extend to third parties based on public policy of making the injured party whole.
No applicable statute, case law, or regulation governing recovery of sales tax.
MISSOURIUnless stated in the policy language, an insurer is not required to reimburse for sales tax. The insured must file a request with the state to have their sales tax refunded. https://insurance.mo.gov/Contribute%20Documents/autoclaimbrochure_002.pdfNo applicable statute, case law, or regulation governing recovery of sales tax.
MONTANANo state sales tax. No applicable statute, case law, or regulation governing recovery of sales tax. Mont. Code Ann. § 27-1-306 states that the insured can only recover the cash value of the vehicle immediately prior to the accident.No applicable statute, case law, or regulation governing recovery of sales tax.
NEBRASKAYesInsurer must pay sales tax to put the injured party back into the position they were in before the injury. NE Bulletin CB-49.Third-party total loss claims are evaluated in the same way as first-party total loss claims. NE Bulletin CB-49.
NEVADAYesInsurer must (1) offer a cash settlement based upon the actual cost of a “comparable auto” including all applicable taxes and other fees, or (2) offer a replacement comparable auto including all applicable taxes, license fees, and other fees. Nev. Admin. Code § 686A.680.No applicable statute, case law, or regulation governing recovery of sales tax.
NEW HAMPSHIRENo state sales tax. No applicable statute, case law, or regulation governing recovery of sales tax. N.H. A.D.C. Ins. § 1002.15 describes how to determine reimbursement for total loss claims but does not speak on the topic of sales tax.No applicable statute, case law, or regulation governing recovery of sales tax.
NEW JERSEYYesInsurer must (1) offer a cash settlement based upon the actual cost of a “substantially similar auto” including all applicable taxes and other fees, or (2) offer a replacement auto including all applicable taxes, license fees, and other fees. N.J. Admin. Code § 11:3-10.4.No applicable statute, case law, or regulation governing recovery of sales tax.
NEW MEXICONo applicable statute, case law, or regulation governing recovery of sales tax. However, New Mexico Public Regulation Commission states that after a cash settlement, the insurer must reimburse the state’s excise tax, any title fees, and any registration charges. http://www.nmprc.state.nm.us/consumer-relations/docs/settlement-total-loss.pdf.No applicable statute, case law, or regulation governing recovery of sales tax.
NEW YORKYesInsurer is required to reimburse the insured with the ACV. This means either repairing the damaged item or replacing it with an item substantially identical including sales tax (sales tax added to the value of the auto prior to the accident before salvage value is taken). N.Y. Comp. Codes R. & Regs. tit. 11, § 216.6. An insurer is not required to include transfer or title fees. http://www.dfs.ny.gov/insurance/ogco2008/rg081013.html.Third-party insurers must follow the same rules as first-party insurers. N.Y. Comp. Codes R. & Regs. tit. 11, § 216.0 (Standards for Prompt, Fair and Equitable Settlement of Motor Vehicle Physical Damage Claims) states that these claim practice rules apply to both first and third-party claims.
On 5/1/02, the N.Y. Office of General Counsel issued a formal opinion which says that in adjusting a third-party claim for a total loss of a vehicle, the third-party insurer must comply with the requirements in N.Y. Comp. Codes R. & Regs. tit. 11, § 216.7(c)(1), (3), (4) (1999), which specifies how the insurer’s minimum offer, subject to applicable deductions, should be computed.
NORTH CAROLINANo applicable statute, case law, or regulation governing recovery of sales tax.No applicable statute, case law, or regulation governing recovery of sales tax.
NORTH DAKOTANo applicable statute, case law, or regulation governing recovery of sales tax. The payment on a total loss would be the ACV less the deductible. ACV is defined as an amount equivalent to the replacement cost of lost or damaged property at the time of the loss, less depreciation. http://www.nd.gov/ndins/consumers/auto/ http://www.nd.gov/ndins/consumers/auto/glossary/.No applicable statute, case law, or regulation governing recovery of sales tax.
OHIOYesInsurer may (1) offer a replacement of like kind and quality including all applicable taxes, license fees, or other fees if the insured provides documentation of the purchase of a replacement auto within 30 days, or (2) offer a cash settlement based on the ACV of a comparable vehicle including all applicable taxes, license fees, or other fees. Insurers must only reimburse sales tax for claim amount, not the replacement vehicle cost. Ohio Admin. Code 3901-1-54.Ohio Admin. Code 3901-1-54 (C)(3) defines “Claimant” as a first-party claimant or a third-party claimant. Third-party insurers must follow the same rules as first-party insurers.
OKLAHOMAYesIf the policy provides for the settlement of first-party auto total loss, insurer may (1) offer a replacement of like kind and quality including all applicable taxes, license fees, or other fees, or (2) offer a cash settlement based on the ACV of a comparable vehicle including all applicable taxes, license fees, or other fees. Okla. Stat. Ann. tit. 36, § 1250.8.No applicable statute, case law, or regulation governing recovery of sales tax.
OREGONYesNo state sales tax in Oregon. If the policy provides for the settlement of first-party auto total loss, insurer may (1) offer a replacement comparable vehicle including all applicable taxes, license fees, or other fees, or (2) offer a cash settlement based on the ACV of a comparable vehicle including all applicable taxes, license fees, or other fees. Or. Admin. R. § 836-080-0240.Insurer is only required to offer a cash settlement to third-parties including all applicable taxes, license fees, or other fees. Or. Admin. R. § 836-080-0240 (14).
PENNSYLVANIAYesA total loss is settled based upon the pre-loss fair market value of the damaged vehicle plus the state sales tax on the cost of a replacement vehicle. 27 Pennsylvania Bulletin 306131; Pa. Code § 62.3 (E)(4).31 Pa. Code § 146.2 defines “claimant” as a first-party claimant, a third-party claimant, or both. However, no other applicable statute, or case law governing recovery of sales tax.
RHODE ISLANDYesWhen the policy provides for the adjustment and settlement of first-party total losses, the Insurer may (1) offer a replacement of like kind and quality including all applicable taxes, license fees, or other fees, or (2) offer a cash settlement based on the ACV of a comparable vehicle including all applicable taxes, license fees, or other fees. R.I. Code R. § 11-5-73:8.R.I. Code R. § 11-5-73:3 defines “claimant” as a first-party claimant, a third-party claimant, or both. “In order to fully compensate for the loss to the consumer, the insurer must include applicable sales tax in its calculation of settlement value in any total loss claim.” http://www.dbr.ri.gov/documents/rules/insurance/InsuranceRegulation73.pdf.
http://www.dbr.state.ri.us/documents/rules/proposed/2013-propd73.pdf.
SOUTH CAROLINAInsurers are not required to reimburse for the sales tax unless the policy specifically states otherwise. Schulmeyer v. State Farm Fire & Cas. Co., 353 S.C. 491, 498, 579 S.E.2d 132, 135 (2003). No applicable statute, case law, or regulation governing recovery of sales tax.No applicable statute, case law, or regulation governing recovery of sales tax.
SOUTH DAKOTA“First-party claims are controlled by the relationship provided by the insurance contract, so the results depend on the policy language.” E-mail from Frank Marnell – South Dakota Department of Labor and Regulations. However, no applicable statute, case law, or regulation governing recovery of sales tax.“Third-party claims are controlled by tort law and sales tax is generally payable on third-party total loss claims”. Email from Frank Marnell – South Dakota Department of Labor and Regulations. However, no applicable statute, case law, or regulation governing recovery of sales tax
TENNESSEEYesSales tax is payable on the value of the damaged auto at the time the loss is owed on all losses. TN Bulletin 9-1-89 (#3).Third-party insurers must follow the same rules as first-party insurers. TN Bulletin 9-1-89 (#3).
TEXASMotor vehicle sale and use tax is not due when insurer takes title to vehicle because of a total loss. However, motor vehicle sale and use tax is due when the insurer purchases a replacement vehicle for the insured on a total loss claim. 34 Tex. Admin. Code § 3.62.No applicable statute, case law, or regulation directly governing recovery of sales tax. However, in Adams v. ABC Ins. Co., 264 S.W.3d 424 (Tex. App.–Dallas 2008), the court held that the total loss settlement (which included tax and fees) was some evidence of the pre-accident fair market value of the car. Thus, a subrogated carrier has essentially two arguments. Either the taxes and fees should be considered actual damages (separate and apart from FMV of the vehicle) or they should be considered some evidence as to what the true fair market value is of the vehicle. There is no law indicating that they cannot be recovered.
UTAHYesInsurer may (1) offer a replacement of like kind and quality including all applicable taxes, license fees, or other fees, or (2) offer a cash settlement based on the actual cost of a comparable vehicle including all applicable taxes, license fees, or other fees. Utah Admin. Code r. § R590-190.Third-party insurers must follow the same rules as first-party insurers. Utah Admin. Code r. R590-190
VERMONTYesInsurer may (1) offer a comparable motor vehicle including all applicable taxes, license fees, or other fees, or (2) offer a cash settlement based on the ACV of a comparable vehicle including all applicable taxes, license fees, or other fees. 4-3 Vt. Code R. § 7:8.Third-party insurers must follow the same rules as first-party insurers. 4-3 Vt. Code R. § 7:9; VT Bulletin 58, 1982.
VIRGINIAYesInsurer may (1) offer a replacement vehicle including all applicable taxes, license fees, or other fees, or (2) offer a cash settlement based on the actual cost of a comparable vehicle including all applicable taxes, license fees, or other fees. Insurance Order No. 11607. Insurers have been cited for not promptly reimbursing sales tax, license fees, and title fees under Va. Code Ann. § 38.2-510.  https://www.scc.virginia.gov/boi/adminords/11607.pdf.“Insurers are only required to reimburse for sales tax, title fees, and transfer fees in third-party claims if the policy so requires.” E-mail from Virginia Bureau of Insurance. However, no other applicable statute, case law, or regulation governing recovery of sales tax besides Insurance Order No. 11607. Insurers have been cited for not reimbursing sales tax to a third-party total loss claim under Va. Code Ann. § 38.2-510. https://www.scc.virginia.gov/boi/adminords/11607.pdf
WASHINGTONYesInsurer may (1) offer a comparable vehicle, including all applicable taxes, license fees, or other fees, or (2) offer cash settlement including all applicable taxes, license fees, or other fees. Wash. Admin. Code § 284-30-391. License fees, weight-based fees, and other regional fees (urban areas of King, Pierce, or Snohomish counties, an insured may be required to pay Regional Transit Authority (RTA) tax to pay for their local transit-related projects) are calculated on a pro-rata basis so that the insured is compensated for the “unused” portion of the annual taxes and fees. After the ACV, sales tax and applicable pro-rated taxes and fees are added together, the insurer deducts the salvage value from the total amount.As part of settlement amount, include all applicable government taxes and fees that would have been incurred by the claimant if the claimant had purchased the loss vehicle immediately prior to the loss. These taxes and fees must be included in the settlement amount whether the claimant retains or subsequently transfers ownership of the loss vehicle. Wash. Admin. Code 284-30-391(4)(e).
First-party coverage under clear ACV provision does not include sales tax because replacement cost considerations apply only when the property is replaced. Holden v. Farmers Ins. Co. of Wash., 175 P.3d 601 (Wash. App. 2008). However, if ACV provision is ambiguous, policy must be read to include sales tax in calculating the FMV of damaged property, regardless of whether insured replaced the damaged property. Holden v. Farmers Ins. Co. of Wash., 239 P.3d 344 (Wash. 2010).Sales tax must be dealt with by insurers “in good faith.” Wash. Office of Ins. Comm., Bulletin No. 89-3 (Apr. 5, 1989). The bulletin notes that in ACV claims, “the cost of repairing and restoring a building or other object to the condition it was in before the loss is not only material, but is the most persuasive evidence of the amount of loss for which the insurer is liable. Obviously, such costs will include sales tax.” WA Bulletin 89-3, 1989; see Holden, supra.
WEST VIRGINIAYesInsurer may (1) offer a substantially similar vehicle to claimant which does not include the reimbursement of sales tax, or (2) offer cash settlement to claimant based on the minimum cash value of the vehicle including an extra 5% of the cash value as reimbursement for any excise tax imposed. W. Va. Code Ann. § 33-6-33; W. Va. Code R. § 114-14-7.Claimant is defined as a first-party, a third-party, or both. W. Va. Code R. § 114-14-2. Third-party insurers must follow the same rules as first-party insurers.
WISCONSINNo applicable statute, case law, or regulation governing recovery of sales tax. Insurers have been cited for not reimbursing sales tax in a total loss claim under Wis. ADC § Ins. 6.11. http://oci.wi.gov/pub_list/pi-057.pdf; http://oci.wi.gov/consumer/autohome-faqauto.htm#claims.No applicable statute, case law, or regulation governing recovery of sales tax.
WYOMINGNo applicable statute, case law, or regulation governing recovery of sales tax.No applicable statute, case law, or regulation governing recovery of sales tax. It is the WY Dept. of Insurance’s position that sales tax is included and is based on the appraised value of the car prior to the accident/loss, but there is no specific case law, statute, rule, or formal opinion or statement that expressly supports that position.

These materials and other materials promulgated by Matthiesen, Wickert & Lehrer, S.C. may become outdated or superseded as time goes by. If you should have questions regarding the current applicability of any topics contained in this publication or any publications distributed by Matthiesen, Wickert & Lehrer, S.C., please contact Gary Wickert at gwickert@mwl-law.com. This publication is intended for the clients and friends of Matthiesen, Wickert & Lehrer, S.C. This information should not be construed as legal advice concerning any factual situation and representation of insurance companies and\or individuals by Matthiesen, Wickert & Lehrer, S.C. on specific facts disclosed within the attorney\client relationship. These materials should not be used in lieu thereof in anyway.

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1 Responses to "Total loss settlements and sales tax: Recouping expenses after your car is totaled"
  1. Juli

    I'm frustrated with the haggling with 3rd party reimbursement and how they value my vehicle. I've looked up NADA, Edmunds, Kelly Blue Book and they all give higher value for replacing through a dealer and also a private party. The insurance company only wants to pay actual cash value and not greater than private party. My other frustration is my brand new 45 day old Michelin tires which cost $653. They only want to give me half. First they offered $135, which is not enough for one tire! My vehicle is limited on comparable due to extremely low mileage and extras. If their client is at fault, shouldn't they pay replacement value especially for tires?!

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