When was a replacement rental vehicle provided during repairs exempt from Florida's rental car surcharge?

Plain-English summary

Florida TAA 98A-080 ties the no-charge replacement-vehicle exemption to two facts: who pays the rental company and who performs the repair.

The Department treated the party paying the rental company as the vehicle's provider. The rental car surcharge did not apply when a dealer, body shop, independent service shop, or other repairer paid the entire rental charge and provided the vehicle free to the customer whose car it was repairing, adjusting, or servicing.

The repairer did not have to own the replacement vehicle. It could rent the car from the taxpayer, but the rental company needed a resale and exemption certificate stating that the vehicle would be provided at no charge to the repair customer.

Customer payments toward rent triggered the surcharge

If the customer paid all or part of the vehicle rental—including a deductible, co-pay, or specified rental days—the rental was not fully "at no charge." The surcharge applied to the customer-paid rental portion or days under the scenarios in the TAA.

But optional charges were different. A customer could pay separately for insurance, collision waiver, or liability waiver without destroying the exemption, as long as the repairer paid the entire charge for the rental vehicle itself.

Insurer-paid rentals generally did not qualify

When an insurance company paid the rental company, Florida treated the insurer as the vehicle provider. Section 212.0606(4) required the provider also to be the entity performing the repair, adjustment, or service. Unless the insurer performed that work, the rental remained subject to the surcharge.

What this means for you

Rental car companies

Identify the payer and obtain a transaction-specific resale and exemption certificate from the repairer. Do not assume every collision-replacement rental is exempt.

Dealers, body shops, and service shops

You can rent a replacement vehicle and provide it to the customer without surcharge if you perform the repair and pay the full vehicle-rental charge. A customer contribution toward rent changes the answer.

Insurance companies

Paying for the replacement car does not itself satisfy the exemption. The TAA treated the insurer as the provider, but the provider also had to perform the repair.

Accountants and tax professionals

Separate base rental charges from optional insurance and waiver charges, and separate days paid by the customer from days paid by the repairer. The TAA applied the surcharge only to customer-paid rental days in a split-duration example.

Common questions

Q: Must the repair shop own the loaner vehicle?
A: No. It may rent the vehicle from another company and still qualify if it pays the full rental and gives it to the repair customer at no charge.

Q: Does a customer deductible or co-pay trigger the surcharge?
A: Yes, when it pays part of the vehicle rental.

Q: Does customer-paid collision or liability waiver trigger the surcharge?
A: No, not by itself, if the repairer pays the full rental-vehicle charge.

Q: Can an independent body shop qualify?
A: Yes. Any entity repairing, adjusting, or servicing the vehicle could qualify under the stated conditions.

Q: Is an insurer-paid rental exempt?
A: Generally no on these facts, because the insurer providing the vehicle was not also performing the repair.

Q: What documentation did the TAA require?
A: A resale and exemption certificate from the repair dealer stating that the vehicle would be provided to the repair customer at no charge.

Citations and references

• Fla. Stat. § 212.0606(4), as amended by Ch. 98-342, § 6, Laws of Florida — no-charge replacement-vehicle exception.
• Fla. Admin. Code r. 12A-1.039 — suggested resale and exemption certificate referenced by the TAA.
• Fla. Admin. Code ch. 12-11 — TAA request procedure.
• Fla. Stat. § 213.22 — Technical Assistance Advisements.
• Fla. Stat. ch. 119 — public-record disclosure with identifying details deleted.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-080

Original ruling text

SUMMARY

Taxpayer rents motor vehicles to dealerships, repair
facilities, and insurance companies, and such vehicles are
used by persons while their vehicle is being repaired. In
1998, Section 212..0606(4), F.S., was amended to provide
that the rental car surcharge does not apply to motor
vehicles provided at no charge to a person whose motor
vehicle is being repaired, adjusted, or serviced by the
entity providing the replacement motor vehicle.

The Department interprets this law to mean that as long as
a motor vehicle is provided by the organization performing
the repairs, and such organization makes no separate charge
for the vehicle to the customer, the language of the
statutes is satisfied. The Department deems that the
organization that pays Taxpayer for the rental car is the
organization that is providing the vehicle to the person
whose vehicle is being repaired. Therefore, if Taxpayer
rents a motor vehicle to a dealer that is providing the
vehicle at not charge to a person whose vehicle is being
repaired by such dealer, no surcharge should be collected
by Taxpayer from the dealer on this transaction if taxpayer
obtains from the dealer a resale and exemption certificate
that indicates that the vehicle is to be provided at no
charge to the person whose vehicle is being repaired.

If an insurance company pays taxpayer for the rental
vehicle, the insurance company will be deemed the
"provider" of the vehicle for purposes of Section
212.0606(4), F.S. In order to qualify for the exemption,
the entity providing the motor vehicle at no charge must be
the entity that is performing the repair, adjustment, or
service. Therefore, unless the insurance company is
performing the repair, adjustment, or service, the rental
will be subject to the rental car surcharge.

Nov 04, 1998

Re: TAA 98A-080
Rental Car Surcharge -- "No charge" Vehicle Loans
Section 212.0606(4), F.S.
XXX ("Taxpayer")

Dear :

Your letter of September 22, 1998, requested a Technical
Assistance Advisement concerning the above referenced matter.
This response constitutes a Technical Assistance Advisement
(TAA) under Chapter 12-11, Florida Administrative Code, and is
issued to you under the authority of s. 213.22, Florida
Statutes.

STATED FACTS

Taxpayer is a motor vehicle rental/leasing company. Taxpayer
provides motor vehicles to many different consumers. Taxpayer
rents motor vehicles to dealerships, repair facilities, and
insurance companies, and such vehicles are used by persons while
their vehicle is being repaired. Repairs may be of a mechanical
nature, but they may also include repairs of motor vehicles that
were involved in traffic accidents.

REQUESTED ADVISEMENT

Taxpayer requests interpretation of the new law regarding "no
charge" motor vehicle loans as it relates to the Florida rental
car surcharge. Taxpayer has four specific questions for which
it requests a response. Taxpayer also sent in a matrix of
scenarios for which it requests a determination of the
applicability of the rental car surcharge.

APPLICABLE LAW

The following statutory law is relevant to the issue under
advisement:

Section 212.0606(4), F.S., as amended by Section 6, Chapter 98342, L.O.F., provides:

(4) The surcharge imposed by this section does not apply to
a motor vehicle provided at no charge to a person whose
motor vehicle is being repaired, adjusted, or serviced by
the entity providing the replacement motor vehicle.

DETERMINATION

Question 1: "Does the word 'provided' in [Section 212.0606(4),
F.S.] imply that the vehicle must be owned by the organization
doing the providing?"

No. As long as a motor vehicle is provided by the organization
performing the repairs, and such organization makes no separate
charge for the vehicle to the customer, the language of the
statute is satisfied. The Department deems that the
organization that pays Taxpayer for the rental car is the
organization that is providing the vehicle to the person whose
vehicle is being repaired.

Would the following cases be exempt from the surcharge?

a. A dealer owned service loaner provided to a dealer
customer at no charge.

Taxpayer is not involved in this transaction. A
dealer owned motor vehicle is being loaned to its
customer at no charge. No rental car surcharge is due
on this transaction, if the dealer is performing
repairs, adjustments, or service on its customer's
vehicle.

b. A rental car owned by another company but paid for by
the dealer doing the repairs with no charge to the
customer.

The surcharge will not be due on this transaction if
Taxpayer obtains from the dealer a resale and
exemption certificate (a sample of which is provided
in Rule 12A-1.039, F.A.C.) The resale and exemption
certificate must indicate that the vehicle is to be

provided at no charge to the person whose vehicle is
being repaired, and is thus exempt from rental car
surcharge pursuant to Section 212.0606(4), F.S.

c. A rental car owned by another company but paid for in
part by the dealer doing the repairs and paid in part
by the customer.

In this case, the rental would not be exempt from the
surcharge, since the motor vehicle is not being
provided "at no charge" to the person whose vehicle is
being repaired.

d. A rental car owned by another company but the rentals
are paid entirely by the dealer and the customer pays
for optional insurance, collision waiver or liability
waiver.

Optional charges by the rental car company for
insurance, collision waiver, or liability waiver, that
are paid for by the customer, do not taint the
exemption. As long as the charge for the rental
vehicle is being paid entirely by the dealer
performing the repairs, the transaction is exempt from
the rental car surcharge.

2. "Then, once we have established the basics for an auto
   dealership, can we assume that the same rules apply to
   independent service shops, body shops and other such
   automobile suppliers?"

Any entity that repairs, adjusts, or services a motor
vehicle may qualify for the exemption. Independent service
shops, body shops, and other auto repair shops may rent a
motor vehicle from taxpayer without paying the rental car
surcharge, as long as they extend a resale and exemption
certificate (a sample of which is provided in Rule 12A1.039, F.A.C.) that indicates the vehicle is to be provided
to their customer at no charge, and is thus exempt from
rental car surcharge pursuant to Section 212.0606(4), F.S.

3. "The next major question is when a 'motor vehicle is
provided at no charge to a person whose motor vehicle is
being repaired, adjusted, or serviced' by an insurance
company as part of their settlement of a claim or insurance
policy coverage. Since the insurance company is the
'entity providing the motor vehicle' by virtue of their
payment for the rental, would they not also be exempt from
the surcharge. And then we have the same series of
questions if any of these billings are split rentals where
the person obtaining the rental car may pay for some part
of the rental, insurance or waiver items."

As stated previously, the Department deems that the party
that pays Taxpayer for the rental vehicle is the entity
that is providing the vehicle to the person whose vehicle
is being repaired. Therefore, if an insurance company pays
taxpayer for the rental vehicle, the insurance company will
be deemed the "provider" of the vehicle for purposes of
Section 212.0606(4), F.S. In order to qualify for the
exemption, the entity providing the motor vehicle at no
charge must be the entity that is performing the repair,
adjustment, or service. Therefore, unless the insurance
company is performing the repair, adjustment, or service,
the rental will be subject to the rental car surcharge.

4. "Since we will rent to dealerships for many different
   purposes, what type of evidence would we need to establish
   that on one particular rental the dealership is exempt
   while on the next rental he may be subject to the surcharge
   since on that rental the customer may be paying for the
   rental as part of the repair order. Is there such a thing
   as an exempt certificate that applies to only one invoice
   at a time?"

A resale and exemption certificate must be procured from
the repair dealer that indicates the motor vehicle is to be
provided at no charge to the customer whose vehicle is
being repaired. This certificate will be sufficient to
establish that the transaction is exempt from tax, and
should be retained by taxpayer for a period of five years.
See Rule 12A-1.039, F.A.C., for a suggested resale and

exemption certificate.

Based on the above answered questions and the accompanying
reasoning, the following represents the Department's answers to
the table of scenarios that was sent in:

Scenario Where car

Who Pays

Rental

Does

is being

Taxpayer

amount paid Surcharge

repaired

for rental? by customer Apply?

1.
Warranty,

Dealership/

Dealership/

repair,

Repair

Repair

mfg. or

Facility

Facility

None

No

extended

2.
Warranty,

Dealership/

Dealership/

repair,

Repair

Repair

mfg. or

Facility

Facility

All

Yes

extended

3.
Warranty,

Dealership/

Dealership/

repair

Repair

Repair

mfg. or

Facility

Facility

extended

Rental Car Yes

Deductible

(cust. pays
deductible)

4.
Warranty,

Dealership/

Dealership/

repair

Repair

Repair

mfg. or

Facility

Facility &

extended

Co-pay

Yes

First few

See

Customer

5.
Warranty,

Dealership/

Customer (1st

repair

Repair

few days)

mfg. or

Facility

Dealer/Rep.

extended

6.

Fac. thereafter

days

n.1*

Other

Dealership/

Dealership/

None

No

repairs

Repair

Repair

or body

Facility

Facility

Customer

All

Yes

Dealership/

Rental Car Yes

shop work

7.
Other

Dealership/

repairs

Repair

or body

Facility

shop work

8.
Other

Dealership/

repairs

Repair

Repair

or body

Facility

Facility

shop work

Deductible

(cust. pays
deductible)

9.
Other

Dealership/

repairs

Repair

Repair

or body

Facility

Facility &

shop work

Dealership/

Co-pay

Yes

First

See

few days

n.1*

Customer

10.
Other

Dealership/

repairs

Repair

few days),

or body

Facility

dealership

shop work

Customer (1st

thereafter

11.
Temporary

Dealership/

Insurance

Repair

Insurance

None

Yes

Company

Replacement Facility

12.
Temporary

Dealership/

Insurance

Repair

Replacement Facility

13.

Customer

(reimbursed
by insur.)

All

Yes

Temporary

Dealership/

Insurance

Repair

Insurance

Deductible Yes

(customer

Replacement Facility

pays ded.)

14.
Temporary

Dealership/

Insurance

Repair

Insurance

Co-pay

Yes

First

Yes

Company &

Replacement Facility

Customer

15.
Temporary

Dealership/

Insurance

Repair

Replacement Facility

Customer (1st

few days)

Few Days

Insurance Co.

thereafter

*n.1 Rental car surcharge will be due for only the days for
which the customer pays for the rental. For example, if
customer must pay for first two days of the rental, $4
rental car surcharge ($2 per day) will be due on the
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 on 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 than
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 which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect confidential
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,

Ralph G. Pepe
Tax Law Specialist
Technical Assistance & Dispute Resolution

Control #: 35403