Q. Our insured had a total loss on their auto and the adjuster is not paying sales tax. Is that correct?
A. No, the company owes sales tax to the insured on a total loss, it is part of the insured’s financial loss. If they don’t pay it they haven’t made the insured whole. The insured paid sales tax when the vehicle was purchased so compensating for the tax when the vehicle is totaled is part of the loss.
The TDI BAP or PAP do not address sales tax in those policies, but the ISO BAP states:
“If we pay for the loss, our payment will include the applicable sales tax for the damaged or stolen property.”
The ISO PAP states:
“If we pay for loss in money, our payment will include the applicable sales tax for the damaged or stolen property.”