Auto accident loss takes a variety of different forms – from the total loss of
your vehicle, to lost wages at work, to reimbursement of medical expenses and
compensation for pain, suffering and injury. Insurance companies handle each of
these components differently during the auto claims process.
The purpose of a total loss property damage claim is to compensate you for
the cost of replacing your totaled car. The exact amount of a total loss settlement depends on the estimated worth of the totaled vehicle, and the estimated cost of purchasing a like-model car of the same year.
If you are in a collision and your vehicle is deemed a total loss by the
insurance company, you may not owe sales tax on your replacement car. In
Missouri, and some other states, when your vehicle is totaled you may obtain a
Sales Tax Credit Affidavit (different states use different names for this document). To benefit from this you need to ask the adjuster to provide the affidavit to you. You then provide the affidavit to the license bureau when you license the replacement vehicle. Under Missouri law, you will not be charged sales tax on the amount your insurance company paid to total out your vehicle. For example, if the insurance company values your car at $10,000, and you purchase a new car for $25,000 the portion of the sales tax you owe will be calculated on the $15,000 (not the $25,000).
To take advantage of the sales tax credit in Missouri, you must submit a
notarized total loss statement from your insurance company and all supporting
documentation when you apply for title on your replacement vehicle that was
purchased (or contracted to purchase) within 180 days of the date of the loss of your prior vehicle.
If you have already paid sales tax on your replacement vehicle you may apply
for a refund by sending a completed Motor Vehicle Refund Request Application
with supporting documentation to the Motor Vehicle and Driver Licensing Division
in Jefferson City. The Missouri Department of Revenue website(www.dor.mo.gov) provides helpful information on this process.
In states where there is no sales tax waiver available, and state statute does
not require the insurance company (it can be either the at fault party’s or your own insurance company depending on who is handling the property damage claim) to pay you sales tax on a total loss, some insurance companies may have a policy that pays the sales tax on any replacement vehicle as the Missouri state statute allows.
If you are faced with a total loss situation and intend to replace the vehicle,
you should make the request for a sales tax credit affidavit.