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