Was Florida sales tax due when an insurance company paid an equipment lessor for a loader-backhoe stolen from its lessee?

Plain-English summary

Florida sales tax was not due on the insurance proceeds paid to the equipment lessor after its rented loader-backhoe was stolen. The lessee's insurer paid the lessor for the equipment after the lessee refused to pay sales tax on that amount.

The Department said the payment satisfied a claim against the customer. It did not represent a transfer of title or possession, a lease, rental, exchange, or other transaction fitting the statutory definition of a sale. Because no sale was consummated, the payment was not taxable.

What this means for you

Insurance or claim proceeds are not automatically sales receipts. The decisive question here was whether the payment was consideration for a statutory sale; on these facts, it was only compensation for the stolen property.

Common questions

Q: Was tax due because the insurer paid the equipment's value?
A: No. The amount of the payment did not turn the claim settlement into a sale.

Q: Did the Department treat the insurer as buying the equipment?
A: No. The ruling described the payment as satisfying a claim against the customer.

Q: Does this decide every insurance settlement involving property?
A: No. The ruling was limited to the stolen leased equipment and payment described.

Citations and references

• Fla. Stat. § 212.02(15)(a) — definition of sale
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-010

Original ruling text

Jan 22, 1996

Re: Technical Assistance Advisement 96A-010
Sales and Use Tax - Sales Tax on Stolen Tangible Personal
Property
Section: 212.02, F.S.
Petitioner:

XXXX (herein "Taxpayer")

FEI: XXX

Dear :

This is a response to your petition received October 3,
1995, for the Department's issuance of a Technical Assistance
Advisement ("TAA") concerning the above referenced party and
matter. Your petition has been carefully examined and the
Department finds it to be in compliance with the requisite
criteria set forth in Chapter 12-11, F.A.C. This response to
your request constitutes a TAA and is issued to you under the
authority of s. 213.22, F.S.

DISCUSSION OF FACTS

Your letter imparts the following discussion concerning the
matter under advisement:

The Taxpayer had a customer who was renting a Caterpillar
loader/backhoe (heavy equipment). This piece of equipment
was stolen and the customer's insurance company paid the
Taxpayer for the equipment. However, the Taxpayer's
customer refused to pay sales tax.

REQUESTED ADVISEMENT

Is sales tax due on the proceeds received from a lessee's
insurance company for stolen equipment which was being leased?

DISCUSSION, ANALYSIS AND CONCLUSION OF LAW

Section 212.02, F.S., provides in part:

"(15) `Sale' means and includes:

"(a) Any transfer of title or possession, or both,
exchange, barter, license, lease, or rental, conditional or
otherwise, in any manner or by any means whatsoever, of
tangible personal property for a consideration...."

The proceeds from the insurance company to pay the Taxpayer
for the stolen property do not constitute a sale as defined in
Section 212.02(15)(a), F.S., but are rather a payment to satisfy
a claim against customer for the stolen property. Because a
sale was not consummated, tax is not due on the above
transaction.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the department only
under the facts and circumstances described in the request for
this advice, as specified in s. 213.22, F.S. Our response is
predicated upon those facts and the specific situation
summarized above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment from that
which is expressed in this response.

You are further advised that this response and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details that might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or this response.

Sincerely,

Leigh C. Lindsay

Senior Tax Specialist

Control #23385