Did Florida's rental-car surcharge apply when a repair dealer paid for a customer's replacement car but the customer bought extras or an upgrade?

Plain-English summary

Florida exempted the replacement vehicle from the rental-car surcharge when the repair dealer paid the full vehicle charge and provided it to the repair customer at no charge. The rental company had to obtain a signed dealer certificate documenting the exemption.

Customer-paid insurance, collision-damage waiver, or cell-phone rental did not destroy the exemption because those were optional products rather than payment for the vehicle itself.

The exemption did not apply when the customer paid to upgrade to a higher vehicle class. It also failed if the repair dealer did not pay and the customer became responsible for the rental charge.

What this means for you

Separate the vehicle charge from optional extras and document who actually pays for the replacement vehicle. Any customer payment toward the vehicle itself changed the result in this ruling.

Common questions

Q: Did optional insurance make the surcharge apply? No.

Q: Did a customer-paid upgrade make it apply? Yes.

Citations and references

• Fla. Stat. § 212.0606(4) — no-charge replacement-vehicle surcharge exemption
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-062

Original ruling text

SUMMARY

QUESTION: Whether Taxpayer (a rental car company) must
collect and remit the rental car surcharge when it rents a
motor vehicle to a repair dealer under the following
circumstances:

1.) Vehicle is rented to a repair dealer who then provides
the vehicle to a customer at no charge;

2.) Vehicle is rented to a repair dealer who then provides
the vehicle to a customer at no charge for the vehicle
itself, but there are charges for optional services or
products, such as a collision damage waiver, insurance, or
cell phone rental; and

3.) Vehicle is rented to a repair dealer who then provides
the vehicle to a customer, but there is a charge for
upgrade in class.

ANSWER - Based on Facts Below:

1.) The rental is exempt from the surcharge. As long as a
motor vehicle is provided by the dealer performing the
repairs, and there is no separate charge for the vehicle to
the customer, the language of the statute is satisfied.

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

3.) This rental would not be exempt from the rental car
surcharge under this scenario. The exemption does not
apply, because the payment for the upgraded motor vehicle
is not being paid entirely by the dealer performing the
repairs, and the vehicle is therefore not being provided by
such dealer at no charge.

***********

Nov 15, 1999

Re: TAA 99A-062
Rental Car Surcharge
"No charge" Vehicle Loans
Section 212.0606(4), F.S. (Supp. 1998)
XXX ("Taxpayer")

Dear :

Your letter of June 22, 1999, 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

The following facts are reprinted, as stated in your request:

The Taxpayer is engaged in the business, among other
things, of providing replacement motor vehicles to the
customers of motor vehicle dealers and repair businesses
("dealers"). Taxpayer owns a fleet of motor vehicles which
it provides at no charge to persons whose own vehicles are
being serviced by a dealer. The dealer compensates
Taxpayer for the use of the vehicle by the customer....

The customer signs a contract with Taxpayer (example
attached as Exhibit "A"), which provides that the vehicle
will be provided at no charge to the customer, but customer
agrees to pay a rental charge to Taxpayer in the event that
the dealer fails to pay the rental charge (in which event
Taxpayer agrees that the exemption in S.212.0606(4) does
not apply). You will note that the contract attached as
Exhibit "A" refers to insurance company billing. While in
some instances the customer's insurance company pays for

the replacement vehicle, the transaction we are asking you
to consider here is when the dealer, rather than the
insurance company, pays Taxpayer for the replacement
vehicle, and thus the vehicle is being provided by the
dealer to the customer at no charge.

Replacement vehicles are physically delivered to the
customer in three different ways: 1) the vehicle may be
located on the dealer's lot and provided directly to the
customer, 2) the vehicle may be located at Taxpayer's
location and delivered to the dealer's lot or another
location for delivery to the customer, or 3) the customer
may be transported to Taxpayer's location and receive the
vehicle there.

Three different scenarios may arise with regard to whether
the customer pays any charges to the Taxpayer:

1. No charge - The dealer, through the arrangement
   described above with the Taxpayer, provides the vehicle at
   no charge to the customer.

2. Charge for optional services or products - The dealer,
   through the Taxpayer, provides the vehicle at no charge to
   the customer, but the customer desires to purchase
   additional services or products, such as a collision damage
   waiver ("CDW"), insurance, or cell phone rental. In this
   event, Taxpayer charges the customer for the optional
   service or product, but not for the vehicle itself.

3. Charge for upgrade in class - Again the dealer, through
   the Taxpayer, provides the vehicle at no charge to the
   customer, but the customer desires to upgrade to a higher
   class of vehicle than is offered free. The customer pays
   the Taxpayer for the upgrade (the difference between the
   class offered and the higher class chosen).

REQUESTED ADVISEMENT

Whether the rental car surcharge exemption in s. 212.0606(4),
F.S., (Supp. 1998), applies to the three transactions described

above such that neither the Taxpayer nor the repair dealer are
required to collect the surcharge.

APPLICABLE LAW

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

Section 212.0606(4), F.S. (Supp. 1998), 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

Scenario 1 (No charge):

As long as a motor vehicle is provided by the dealer performing
the repairs, and there is no separate charge for the vehicle to
the customer, the language of the exemption statute is
satisfied. The Department considers the dealer that pays
Taxpayer for the rental car to be the person that is providing
the vehicle to the person whose vehicle is being repaired.
Neither Taxpayer nor the dealer performing the repairs would be
required to collect or pay the rental car surcharge on this
transaction.

In order to document the exempt nature of this transaction,
Taxpayer must obtain a certificate from the repair dealer. The
certificate must be signed by the repair dealer, and must
contain a statement that the vehicle is to be provided at no
charge to the person whose vehicle is being repaired, and is
thus exempt from the rental car surcharge pursuant to Section
212.0606(4), F.S.

The contract at issue provides that if the repair dealer fails
to pay the rental charge, the customer must pay the rental
charge. The Department agrees with Taxpayer's interpretation
that if the dealer does in fact fail to pay for the rental car

and the customer pays for the car, the exemption in s.
212.0606(4), F.S. (Supp. 1998) would not be applicable.

Scenario 2 (Charge for optional services or products):

The Department agrees with Taxpayer's interpretation that
optional charges by the rental car company for insurance,
collision damage waiver, or cell phone rental that are paid for
by the customer, do not taint the exemption in s. 212.0606(4),
F.S. (Supp. 1998). As long as the charge for the rental vehicle
itself is being paid entirely by the dealer performing the
repair, the transaction is exempt from the rental car surcharge.
Neither Taxpayer nor the dealer performing the repairs would be
required to collect or pay the rental car surcharge on this
transaction. As stated in the above paragraph, Taxpayer must
obtain a certificate from the repair dealer in order to document
the exempt nature of the transaction.

Scenario 3 (Charge for upgrade in class):

The Department agrees with Taxpayer's interpretation that the
rental would not be exempt from the rental car surcharge under
this scenario. The exemption does not apply, because the
payment for the upgraded motor vehicle is not being paid
entirely by the dealer performing the repairs, and the vehicle
is therefore not being provided by such dealer at no charge.
When any part of the payment for the motor vehicle is paid by
someone other than the repair dealer, the exemption is not
applicable.

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, your request, and
related backup documents are public records under Chapter 119,
F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names,
addresses, and any other details which might lead to
identification of the taxpayer. Your response should be
received by the Department within 15 days of the date of this
letter.

Sincerely,

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

Control #: 38146