Sales Tax Auto Total Loss Laws

When a vehicle is a total loss, insurers will pay the actual cash value to purchase another vehicle. Carriers may also indemnify first- and third-party claimants for other costs that come with purchasing a new vehicle, such as sales tax, title, and vehicle registration. This doesn't mean these costs will be paid up front, though.  66% of states mandate insurers pay for sales tax after the insured replaces a crashed vehicle with a new or used one.

What is notable is that the sales tax owed is usually based on the original vehicle-- not the vehicle that replaces the total loss. 

Please be patient as we are working on this chart. 

This chart is current as of the date I wrote it, but adjusters should be familiar with their state’s rules. I cannot guarantee the accuracy of the list. Because laws and regulations can change without notice, an attorney should be contacted if there are any questions regarding this chart. These materials are provided for informational and educational purposes only and do not constitute legal advice or legal opinions because I am not an attorney.

STATE
FIRST-PARTY CLAIM
FIRST-PARTY STATUTE
THIRD-PARTY CLAIM
THIRD-PARTY STATUTE

Alabama

In Alabama, the insurer must cover all applicable taxes, license fees, and other fees if the insurance policy provides for the settlement of first-party auto total losses based on ACV or comparable replacement. See Ex parte S & M, LLC, 120 So.3d 509 (Ala. 2012).

There are no applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims in Alabama.

Alaska

Alaska does not impose sales tax. However, the insurer must offer a comparable replacement vehicle with all applicable taxes, license fees, and other fees if the insurance policy indicates first-party settlement of auto total loss based on ACV or replacement with another of like kind and quality. See Bulletin 93-8, 1993 WL 13563685 (AK INS BUL), 2.

There are no applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims in Alaska.

Arizona

Insurers in Arizona must make prompt and reasonable settlements to both first and third-party total loss claims. They should offer a replacement auto with all applicable “taxes, license fees, and other fees” and or make a cash settlement including all applicable taxes, license fees, and other fees. 

Third-party insurers in Arizona must observe the same regulation as first-party insurers. If the insurer deviates from the rule, the vehicle’s condition and the dollar amount must be documented and itemized in detail.

Arkansas

Arkansas insurers must either offer a replacement auto with all applicable “taxes, license fees, and other fees” paid, or make a cash settlement including all applicable taxes, license fees, and other fees. This applies only if the insurance policy has adjustment and settlement of a first-party auto total loss clause. If the insurer deviates from the rule, they must include an itemized list of the amounts attributed to the value of the auto and the value of the sales tax.

In Arkansas, third-party insurers must follow the same rules as first-party insurers. If insurers deviate from those rules, they must provide an itemized list of the vehicle’s value and the attributed sales tax.

California

Insurers in California must offer to first-party claimants either a cash settlement based upon the actual cost of a comparable auto or offer a replacement comparable auto including all applicable taxes, license fees, and other fees. “Pro-rata” refund of a Vehicle License Fee (VLF) portion of the registration fees (in lieu of property tax) is required under the following circumstances: 1) when a vehicle is stolen and not recovered within 60 days after police report, 2) total loss 3) vehicle completely stripped or burned. When the insurer decides to fully repair the car to its pre-accident condition, payment is not required for any loss of value to the vehicle. See Carson v. Mercury Ins. Co., 148 Cal. Rptr. 3d 518 (Cal. App. 2012).  

California’s third-party total loss claims are assessed in the same manner as first-party total loss claims. Cal. Code of Regs. Tit. 10 § 2695.8(b)(6) specifies the rules in evaluating third-party automobile total loss claims but does not change existing law relating to the obligations of an insurer in third-party settlements.

Colorado  

Colorado insurers are required to pay first-party claimants title fees, sales tax, and any other fees associated with the total loss of a motor vehicle.

Third-party total loss claims in Colorado are assessed in the same manner as first-party total loss claims.

Connecticut

First-party claimants in Connecticut can demand payments from their insurers a settlement amount for the vehicle, plus when the insurer takes title, an amount determined by multiplying the settlement amount by the current tax rate percentage.

There are no regulations requiring payments of sales tax to third-party loss claims in Connecticut. Insurers have no duty of good faith to third parties since they are not bound both legally and ethically to act in each other's best interests. See Asmus Elc., Inc. v. G.M.K. Contractors, LLC, WL 758126 (2005); Sherrick v. Belanger, 43 Conn. L. Rptr. 878 (2007).

Delaware

There is no state sales tax in Delaware and there are no applicable statutes, case laws, or regulations governing the recovery of sales tax for first-party claimants. 21 Del. C. § 2118 (A)(4) describes only the following benefits: Compensation for damage and or loss of the insured motor vehicle, not exceeding its ACV at the time of loss and $10 per day, with the maximum payment of $300, for loss of use of such vehicle. Adjusters must refer to policy language.

There are no applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims in Delaware.

District of Columbia

There are no applicable statutes, case laws, or regulations governing the recovery of sales tax for first-party claims in the District of Columbia. However, an insured can claim damages resulting from having no vehicle for a reasonable amount of time needed to replace or repair the damaged vehicle. See Gamble v. Smith, 386 A.2d 692, 694 (1978). Adjusters must refer to policy language.

 

There are no applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims in District of Columbia.

Florida

First-party claimants in Florida are entitled to be reimbursed by the insurer for sales tax if the insurance policy provides for the adjustment and settlement of auto total losses based on ACV or comparable replacement.

Florida’s third-party insurers must follow the same rules as first-party insurers. Should the insurers deviate from the rules, they must present supporting documents giving details of the auto condition and specifying the dollar amount.

Georgia

Georgia's insurers must offer first-party claimants the following: 1) cash equivalent settlement based upon the ACV of a “comparable auto” including all applicable taxes and other fees or 2) a replacement auto including all applicable taxes, license fees, and other fees. 

There are no applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims in Georgia.

Hawaii

First-party claimants in Hawaii must be offered by insurers the following: 1) cash settlement based upon the ACV of a comparable auto, and if within 30 days the insured buys 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.

There are no applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims in Hawaii. However, courts have used different measures of damages to personal property but they only serve as guides to common sense aimed at fully compensating the injured party. Property damages are assessed depending on the facts and circumstances. See Richards v. Kailua Auto Mach. Serv., 10 Haw. App. 613, 623, 880 P.2d 1233, 1238 (1994).

Idaho

There are no applicable statutes, case laws, or regulations governing the recovery of sales tax for first-party claimants. However, the Idaho Department of Insurance states that an insured can recover sales tax, title fees, and release of liability fees. See http://www.doi.idaho.gov/consumer/claim_faq.aspx

There are no applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims in Idaho. A claim against an insurer for breach of duty of good faith is only available to first-party insured parties. See Idaho State Ins. Fund v. Van Tine, 132 Idaho 902, 908, 980 P.2d 566, 572 (1999).

Illinois

Illinois' law on recovery of sales tax for third-party claims requires insurers to offer 1) a cash settlement based upon the ACV of a “comparable auto”. If within 30 days the insured buys or leases a new vehicle, the insurer must cover the applicable sales tax, transfer, and title fees or 2) a replacement comparable auto including all applicable taxes, license fees, and other fees. If the insured buys a vehicle with a market value less than the amount previously settled upon, the insurer must settle only the amount of sales tax actually incurred including transfer and title fees.

There are no applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims in Illinois. In a third-party claim, the claimant has no direct contact with the party he is seeking to recover from since the insurers’ primary duty is to their own policyholder. See http://insurance.illinois.gov/autoinsurance/auto_own_ claim.pdf; and Cramer v. Ins. Exch. Agency, 174 Ill.2d 513, 531, 675 N.E.2d 897, 906 (1996).

Indiana

Indiana’s law on sales tax recovery requires insurers to pay sales tax in addition to the fair market value of the totaled vehicle. This is compulsory for the insured to be “made whole” for the loss. When reimbursing the insured for the loss of the vehicle, sales tax must be paid at the same time.

Indiana law requires insurers to execute a prompt, fair, and equitable settlement of both first-party and third-party claims. The Department considers sales tax payment as a necessary component of a fair and equitable settlement. However, there are no case laws to support this.

Iowa

Iowa’s insurers may offer third-party claimants 1) a comparable replacement vehicle including all applicable taxes, license fees, or other fees, or 2) a cash settlement based on the ACV of a comparable vehicle including all applicable taxes, license fees, and other fees.

It appears that Iowa has no applicable statutes, case laws, or regulations governing the recovery of sales tax. The Supreme Court held that “When the motor vehicle is totally destroyed or the cost of repair is more expensive than the market value before and after the injury, damages are measured through its lost market value and the reasonable value of the use of the vehicle while getting a replacement. See Long v. McAllister, 319 N.W.2d 256 (Iowa 1982).

Kansas

Kansas insurers may offer the following to first-party claimants: 1) a comparable replacement vehicle with all applicable taxes, license fees, and other fees or 2) a cash settlement equal to the actual cost of a comparable vehicle inclusive of all applicable taxes, license fees, and other fees. Sales tax is the product of the comparable vehicle’s ACV and the local income tax.

According to the Insurance Department Bulletin 2013-01, insurers in Kansas are required to pay sales tax and fees for all total loss claims whether it is by first-party or third-party.

Kentucky

In Kentucky, if the policy language indicates settlement of first-party auto total loss, the insurer may choose to offer 1) a comparable replacement auto including all applicable taxes, license fees, or other fees, or (2) a cash settlement based on the actual cost of a comparable vehicle including all applicable taxes, license fees, or other fees.

Kentucky statute defines “claimant” as either a first-party claimant or a third-party claimant. Bulletin 81-DM-007, 1981 provides that sales tax must be included in establishing the value of damage when such tax is the responsibility of the claimant upon replacing total losses. However, it appears that there are no other applicable statutes or case laws discussing this.

Louisiana

Vehicle owners in Louisiana can recover sales tax if the first-party policy requires payment of sales tax and such tax may be recovered in third-party action by the subrogated insurer. This was enacted in the 2001 amendment of Section 2315 which provides in part that, “damages shall include any sales taxes paid by the owner on the repair or replacement of the damaged property.” In the case of Clark v. Clarendon Ins. Co., 841 So.2d 1039 (La. App. 2003), the insured truck owner was not entitled to recover sales tax on his vehicle because policy language only covers the “actual cash value” of the damaged property. Even if he paid sales tax on the truck, it did not increase its value.

A third-party claim for sales tax by State Farm in State Farm Mut. Auto. Ins. Co. v. Berthelot, 732 So.2d 1230 (La. 1999) was denied by the Supreme court because the policy language only specifies first-party coverage. Section 1830 states that the subrogee cannot recover more than the extent of its role under the policy and since it did not obligate to pay sales tax, it could not recover sales tax from the tortfeasor.

 

Maine

Maine’s statute on payment of sales tax requires that all motor vehicle casualty insurance contracts must cover sales tax credit at the time of loss or damage of the insured vehicle.

It appears that there are no applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims in Maine.

Maryland

Insurers in Maryland may offer first-party claimants 1) a comparable replacement auto (does not mention if sales tax and fees are included) or 2) a cash settlement based on the actual cost of a comparable vehicle including all applicable taxes and transfer fees. Under Md. Code Ann., Ins. § 27-303 and § 27-304, insurers have been quoted for refusing to pay sales tax on a total loss claim.

Maryland insurers may only offer third-party claimants a cash settlement based on the actual cost of a comparable vehicle including all applicable taxes and transfer fees.

Massachusetts

Massachusetts statute “211 Mass. Code Regs. § 133.05” requires insurers to only pay for the ACV of a vehicle as of the day of the loss, and not the replacement cost. See http://www.mass.gov/ocabr/insurance/vehicle/auto-insurance/faq.html#q2.

It appears that there are no applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims in Massachusetts.

Michigan

It appears that there are no applicable statutes, case laws, or regulations governing the recovery of sales tax for first-party claims in Michigan.

Michigan does not allow third-party collision lawsuits due to no fault.

Minnesota

Minnesota’s first-party claimants may demand from insurers either 1) a comparable replacement vehicle including all applicable taxes, license fees, or other fees, or 2) a cash settlement based on the actual cost of a comparable vehicle including all applicable taxes, license fees, or other fees. This applies only if the policy provides for the settlement of first-party auto total loss.

It appears that there are no applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims in Minnesota.

Mississippi

Mississippi insurers must pay first-party claimants sales taxes, title fees, or license fees unless the policy clearly excludes this recovery for total loss claims.

It appears that Mississippi does not have any applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims. However, according to the Mississippi Department of Insurance, MS Bulletin 2007-4 does extend to third parties based on the public policy of making the injured party whole

Missouri

In Missouri, insurers are not required to pay sales tax to first-party claimants, unless it is stated in the policy language. To request a sales tax refund, the insured must file a request with the state. See https://insurance.mo.gov/Contribute%20Documents/autoclaimbrochure_002.pdf

For third-party claims, it appears that Missouri does not have any applicable statutes, case laws, or regulations governing the recovery of sales tax.

Montana

Montana does not impose sales tax and there are no applicable statutes, case laws, or regulations governing the recovery of sales tax both for first-party and third-party claims. According to Mont. Code Ann. § 27-1-306 the insured can only recover the cash value of the vehicle immediately prior to the accident.

Nevada

Nevada’s statute on sales tax payment requires insurers to offer first-party claimants 1) a cash settlement based upon the actual cost of a comparable vehicle inclusive of all applicable taxes and other fees, or 2) offer a replacement comparable vehicle including all applicable taxes, license fees, and other fees.

For third-party claims, it appears that Nevada does not have any applicable statutes, case laws, or regulations governing the recovery of sales tax.

 

New Hampshire

New Hampshire does not impose sales tax. There are no applicable statutes, case laws, or regulations governing the recovery of sales tax. Although N.H. A.D.C. Ins. § 1002.15 describes how to determine compensation for total loss claims, it does not mention anything about sales tax.

It appears that New Hampshire does not have any applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims.

New Jersey

New Jersey’s law on payment of sales tax requires insurers to offer a cash settlement based upon 1) the average retail of a comparable vehicle, (2) a quotation for a comparable vehicle from a dealer located within a reasonable distance, or 3) fair market value, plus applicable sales tax.

Third-party insurers in New Jersey must follow the same requirements as first-party insurers.

New Mexico

It appears that New Mexico does not have any applicable statutes, case laws, or regulations governing the recovery of sales tax for first-party claims. 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.

See http://www.nmprc.state.nm.us/consumerrelations/docs/settlement-total-loss.pdf.

There are no applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims in New Mexico.

New York

Insurers in New York are required to reimburse first-party claimants with the vehicle’s ACV. This means either repairing the damaged item or replacing it with a comparable vehicle including sales tax (added to the value of the vehicle prior to the accident) before salvage value is taken. An insurer is not obliged to include transfer or title fees.

See http://www.dfs.ny.gov/insurance/ogco2008/rg081013.html.

 

Third-party insurers in New York must follow the same rules as first-party insurers. They must comply with the requirements in N.Y. Comp. Codes R. & Regs. tit. 11, § 216.7(c)(1), (3), (4) (1999), which explains how the insurer’s minimum offer, subject to applicable deductions, should be computed.

North Carolina

There are no applicable statutes, case laws, or regulations governing the recovery of sales tax for both first-party and third-party claims in North Carolina.

North Dakota

North Dakota has no applicable statutes, case laws, or regulations governing recovery of sales tax both for first-party and third-party claims. Total loss payment would be the ACV during the time of the loss, minus depreciation cost.

See http://www.nd.gov/ndins/consumers/auto/ and http://www.nd.gov/ndins/consumers/auto/glossary/.

Ohio

Insurers in Ohio may offer first-party claimants 1) a comparable replacement vehicle 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) a cash settlement based on the ACV of a comparable vehicle including all applicable taxes, license fees, or other fees. Insurers are only required to pay sales tax based on the claim amount, not on the cost of vehicle replacement.

“Claimant” as defined in Ohio Admin. Code 3901-1-54 (C)(3) is either a first-party claimant or a third-party claimant. Third-party insurers must observe the same rules as first-party insurers.

Oklahoma

Oklahoma’s law on payment of sales tax depends on policy language. If it provides for the settlement of first-party auto total loss, insurers may offer 1) a replacement of a comparable vehicle inclusive of all applicable taxes, license fees, or other fees, or 2) a cash settlement based on the ACV of a comparable vehicle including all applicable taxes, license fees, or other fees.

It appears that Oklahoma does not have any applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims.

Oregon

There is no state sales tax in Oregon. However, if settlement of first-party auto total loss is included in the policy, the insurers may offer 1) a replacement comparable vehicle including all applicable taxes, license fees, or other fees, or 2) a cash settlement based on the ACV of a comparable vehicle including all applicable taxes, license fees, or other fees.

For third-party claims, insurers are only required to offer a cash settlement including all applicable taxes, license fees, or other fees.

Pennsylvania

In Pennsylvania, a first-party 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

The statute 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, it appears that there are no other applicable statutes, or case laws governing the recovery of sales tax.

Rhode Island

Rhode Island insurers should refer to policy language for first-party claims. If the policy provides, then the insurers may offer 1) a comparable replacement vehicle including all applicable taxes, license fees, or other fees, or 2) a cash settlement based on the ACV of a comparable vehicle including all applicable taxes, license fees, or other fees.

Rhode Island’s statute defines “claimant” as a first-party claimant, a third-party claimant, or both. In order to fully compensate for the loss, the insurer must cover applicable sales tax in computing the settlement value in any total loss claim.” See http://www.dbr.ri.gov/documents/rules/insurance/Insu ranceRegulation73.pdf or http://www.dbr.state.ri.us/documents/rules/proposed/ 2013-propd73.pdf.

South Carolina

South Carolina insurers are not required to reimburse for sales tax unless the policy provides for it. Effective July 1, 2017, owners of new vehicles need to pay an Infrastructure Maintenance Fee (IMF) instead of sales tax. For dealers, the IMF will be 5% of the gross proceeds of the sale price (not to exceed $500). For private sales of vehicles, the limit is $250. Those who move to South Carolina with a vehicle that needs to be registered in the state will automatically owe a $250 IMF per vehicle. Those who will buy a vehicle in the state, but will register it in a different state need to pay sales tax. Salvage title applications are exempt from the IMF. S.C. Stat. Ann. § 56-3-627 (A) through (D).

For third-party claims, it appears that South Carolina does not have any applicable statutes, case laws, or regulations governing the recovery of sales tax.

South Dakota

It appears that South Dakota does not have any applicable statutes, case laws, or regulations governing the recovery of sales tax for first-party claims. According to the South Dakota Dept. of Labor and Regulations, the results of first-party claims depend on the policy language.

It appears that South Dakota does not have any applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims. According to the South Dakota Dept. of Labor and Regulations, the results of first-party claims depend on the policy language.

Tennessee

Tennessee requires payment of sales tax to first-party claimants for the value of the damaged vehicle at the time the loss is owed on all losses.

Third-party insurers in Tennessee must observe the same rules as first-party insurers.

Texas

In Texas, first-party claimants are reimbursed for motor vehicle sales tax when the insurer buys a replacement vehicle for the insured on a total loss claim. If the policy language states that the insurer’s liability is limited to the ACV of the stolen or damaged property at the time of the loss, reduced by the applicable deductions and by its salvage value, it does not include taxes and fees paid to the state. Taxes and fees paid by the buyer to the state are not relevant in determining fair market value because they are not part of the price paid to the seller. See Singleton v. Elephant Ins. Co., 953 F.3d 334 (5th Cir. 2020).

It appears that Texas does not have any applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims. 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. Hence, the insurer argued that 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 regulation stating that they cannot be recovered.

Utah

Insurers in Utah may offer first-party claimants 1) a comparable replacement vehicle including all applicable taxes, license fees, or other fees, or (2) a cash settlement based on the actual cost of a comparable vehicle including all applicable taxes, license fees, or other fees.

Utah’s third-party insurers are required to follow the same rules as first-party insurers.

Vermont

Insurers in Vermont may offer first-party claimants 1) 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.

Third-party insurers are required to follow the same rules as first-party insurers.

Virginia

First-party claimants in Virginia may receive an offer from their insurer for 1) a replacement vehicle including all applicable taxes, license fees, or other fees, or 2) 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 quoted for not promptly paying sales tax, license fees, and title fees. See https://www.scc.virginia.gov/boi/adminords/11607.pdf

Washington

Washington’s first-party insurers may offer 1) a comparable vehicle, including all applicable taxes, license fees, or other fees, or 2) a cash settlement including all applicable taxes, license fees, or other fees. First-party coverage under clear ACV provision does not include sales tax because replacement cost considerations apply only when the property is replaced.  In cases where the ACV provision is not clear, the policy must be read to include sales tax in computing the fair market value of the damaged property, regardless of whether the insured replaced the damaged property or not. See Holden v. Farmers Ins. Co. of Wash., 239 P.3d 344 (Wash. 2010).

In Washington, third-party claimants are offered a settlement amount including all applicable government taxes and fees incurred by the claimant in buying a vehicle immediately prior to the loss. These taxes and fees must be included in the settlement amount whether the claimant retains or transfers ownership of the vehicle.

West Virginia

Insurers in West Virginia should offer first-party claimants either of the these two: 1) a comparable vehicle that does not include the reimbursement of sales tax, or 2) cash settlement based on the minimum cash value of the vehicle plus an extra 5% of the cash value as reimbursement for any excise tax imposed.

Third-party insurers in West Virginia must follow the same rules as first-party insurers.

Wisconsin

There are no applicable statutes, case laws, or regulations governing the recovery of sales tax for first-party claims in Wisconsin. In Wis. ADC § Ins. 6.11, insurers have been quoted for not paying sales tax in a total loss claim. See http://oci.wi.gov/pub_list/pi-057.pdf; http://oci.wi.gov/consumer/autohome-faqauto.htm#claims.

It appears that Wisconsin does not have any applicable statutes, case laws, or regulations governing the recovery of sales tax for third-party claims.

Wyoming

It appears that Wyoming does not have any applicable statutes, case laws, or regulations governing the recovery of sales tax both for first-party and third-party claims.