Written by Q: Is an insurance company required to pay sales tax on my car when they pay a claim for a totaled vehicle?
AIS Answer: 28 states in the U.S. require auto insurance companies to pay for sales tax reimbursement on the replacement vehicle when the prior insured vehicle has been totaled.
Each of the 28 states will vary in how you recoup sales tax. Some states like AZ, KS, and MN require auto insurers to include sales tax as part of the total-loss settlement check, where sales tax would be added as a percentage of the total settlement. Since each state has different regulations it’s important you check with your insurance company or Department of Insurance to determine if/how you will be reimbursed for sales tax.
States with Sales Tax Reimbursement Rules For Auto Insurers
Alaska, Arizona, Arkansas, California, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Maryland, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New York, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Vermont, Washington, West Virginia and Wisconsin.
If your state is not listed, that does not mean you can’t be reimbursed for sales tax. Contact your automobile insurer and request a sales tax reimbursement, clearly state to them that the policy requires they make you ‘whole’ and often, this includes sales tax if applicable in your state.
What? Oregon has no sales tax, why would they require reimbursement for a tax they do’t have?
I would have never thought to calculate sales tax into my totaled loss payout. Should I contact my insurance company and ask if they include sales tax in the payout? how is the payout made?
all auto insurers should have to pay out sales tax on a vehicle. It’s stupid to think that an insurance company wouldn’t have to fully compensate you for a total loss on the vehicle.
If I had a totaled vehicle and went in to a dealership and had to pay 7% sales tax on a new car, I would certainly notify the insurance company that I can’t buy a $30,000 vehicle and pay $2,000 in sales tax with a $30,000 check…so give me $2,000!