News and Insights

Missouri Department of Revenue Determines Optional Loss Damage Waivers Are Not Subject to Sales Tax

Tax Development May 02, 2011

The Missouri Department of Revenue (“Department”) recently issued a Letter Ruling (LR 6631), explaining that sales tax is not due on an optional fee paid for a loss damage waiver purchased by a vehicle lessee. In the Letter Ruling, motor vehicle lessees had the option of purchasing a loss damage waiver in lieu of obtaining collision and comprehensive auto insurance.

Missouri imposes sales tax on the amount paid or charged for the rental or lease of tangible personal property, including motor vehicles. Because the loss damage waiver was optional and not otherwise taxable, the optional payment was not subject to sales tax. If, however, the loss damage waiver were mandatory, the fees would be subject to sales tax as part of the vehicle lease payments.