LR 8311
Taxability of Collision Damage Waiver
July 31, 2024
Dear Applicant:
This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated June 17, 2024.
The facts as presented in your letter ruling request are summarized as follows:
Applicant is a rental car service specializing in the rental of Tesla vehicles. As part of the rental process, Applicant offers a voluntary Collision Damage Waiver ("CDW") to renters. The CDW can be taken or declined. Applicant is currently being taxed on those CDW's, despite the fact that they appear to Applicant to be exempt from tax. The CDW is intangible property because it, has no independent value outside of the lease of the vehicle, cannot be independently acquired, and it is not valuable independent of the transaction.
ISSUE:
Is the Collision Damage Waiver offered, but not required by Applicant, subject to Missouri sales tax?
RESPONSE:
No. The collision Damage Waiver offered, but not required by Applicant, is not subject to Missouri sales tax.
Section 144.020, RSMo, imposes a tax on the sale of tangible personal property. Section 144.021, RSMo, similarly imposes a tax on the privilege of engaging in the business, in this state, of selling tangible personal property on the gross receipts produced thereby. It also taxes the sale price of any services that are part of such sales.
To conclude that the Collision Damage Waiver is taxable it would be necessary to determine that it is part of the rental transaction for the motor vehicle. Such is not the case. The CDW is optional and many decline to accept and pay for it. Such a choice is a hallmark of the cost of the extra service, the CDW, not being a part of the underlying sale. Enterprise Leasing Co. of Kansas v. Director of Revenue, 1993 WL 476514 (Mo. Admin. Hrg. Com.) (1993).
This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.
Should additional information be needed, please contact Senior Counsel, Kent L. Brown, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961,
e-mail Kent.Brown@DOR.mo.gov.
Sincerely,
Wayne Wallingford