You may not owe sales tax on your replacement car if your insurance company determines the original car was totaled. Twenty-eight states require auto insurers to pay for the sales tax when you replace your totaled vehicle with a new or used car: 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. Tip: Make the request; don't expect the insurer to offer to pay upfront. Even in states that do not require sales-tax reimbursement, you should request it from your auto insurance company. Many auto insurers will not deny the request because the policy requires that they make you "whole," returning you to where you were before the accident at no cost to you. The tax will be calculated based on the pre-accident value of your car. If the insurance company values your car at $12,000, and you purchase a new car for $20,000, the portion of the sales tax you owe will be calculated on $8,000 you paid.
<div class='quotetop'>QUOTE(walt @ Jul 29 2007, 11:41 AM) [snapback]487094[/snapback]</div> Just to clarify a little , in Missouri and some other states when your vehicle is totaled you may obtain a Sales Tax Credit Affidavit (different states a different name). Your adjuster will provide it and you give it to the license bureau (or whatever your state calls it) when you license your new (replacement) vehicle for the one totaled. You won't be charged sales tax on the amount your insurance company paid. So in effect you're receiving a sales tax waiver on the money your insurance company paid you when they totaled your vehicle. As Walt stated, you pay sales tax on the difference if you pay more for your replacement vehicle than what your insurance company paid you. The reasoning for a waiver, or even direct reimbursement of the sales tax, is that you paid sales tax once when you bought it and then you experienced a casualty loss - your vehicle is being replaced due to the loss and not your choice so...no sales tax owed on the money paid to you by your insurance company for your totaled vehicle. In states where there is no sales tax waiver available, and state statute does not require your company to pay you sales tax on a total loss, it will be up to the individual insurance company to pay, or not pay, sales tax based on whatever their internal company policy is.
