Rhode Island Insurers Must Now Include Sales Tax in Settlement Calculation of Total Loss Motor Vehicle Claims

Jul 22, 2011

 

Effective October 1, 2011, Rhode Island consumers who suffer the total loss of a motor vehicle as the result of an insurance claim must pay sales tax on the full value of the corresponding replacement vehicle.

However, to comply with the amendment, insurers must include sales tax in their settlement calculation in any total loss in order to fully compensate consumers for the loss.

An amendment to  R.I. Gen. Laws § 44-18-30(23) that appears in Article 19, section 24, removed the current sales tax exemption of proceeds applicable to total loss motor vehicles received as a result of an insurance claim. 

Rhode Island Department of Business Regulation’s Insurance Division Bulletin 2011-4 about the amendment is attached below.