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Loaner Vehicles

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You must charge sales tax or accrue use tax on loaner vehicle rental fees depending on who pays for use of the vehicle.

If you get the loaner vehicle from a third party, do not pay sales tax or rental fees. Give your vendor a completed Form ST3, Certificate of Exemption. Specify the Resale exemption.

Who is paying for use of the loaner vehicle? How is sales and use tax handled
Customer

Charge these taxes on the rental fee:

  • 9.2 percent rental tax
  • the 5 percent rental fee
  • general state sales tax
  • local sales taxes that apply
Dealer (dealer absorbs the rental cost)

If you own the loaner vehicle, accrue use tax on the reasonable rental value, including any local taxes that apply.

If you do not own the loaner vehicle, the dealer pays these taxes and fees when they pay the third party for the vehicle:

  • 9.2 percent rental tax
  • the 5 percent rental fee
  • general state use tax
  • local use taxes that apply

Note: If you own the vehicle and paid the Motor Vehicle sales tax on the loaner vehicle, no additional tax is due.

Transportation Assistance Program Accrue general state use tax and any local use taxes that apply on the rental fee.
A third party (under the original manufacturer's warranty) No 9.2 percent rental tax, 5 percent rental fee, or state or local sales taxes, is due.
A third party (under an extended warranty)

Charge these taxes on the rental charge:

  • 9.2 percent rental tax
  • the 5 percent rental fee
  • general state sales tax
  • local sales taxes that apply