New Jersey Administrative Code › Title 18 - TREASURY - TAXATION › Chapter 40 - DOMESTIC SECURITY FEE › Subchapter 1 - PROVISIONS › Section 18:40-1.6 - Motor vehicle dealer situations

Current through Register Vol. 56, No. 14, July 15, 2024
Motor vehicles loaned by a motor vehicle dealer to customers
				  under a warranty, service or similar agreement or contract, for any kind of
				  consideration, whether or not through a third party, and regardless of which party
				  pays the consideration, are considered motor vehicles for rental and, as such, are
				  subject to the fee imposed by the Domestic Security Fee law.
Example 1: A motor vehicle dealer provides a loaner vehicle at
				  "no cost" to a customer, but the agreement between the dealer and the customer
				  requires payment for mileage and provides an option for the purchase of insurance by
				  the customer. Charges for mileage, insurance waiver/damage liability all are common
				  elements of a rental agreement. Accordingly, where such items are charged, the
				  agreement is rental in nature, and the dealership would be responsible for the $
				  5.00 per day fee on all rental agreements entered into on or after July 8, 2006.
				  Multiple day usage under the same agreement terms would result in a multiple day
				  liability for the fee.
Example 2: A motor vehicle dealer gives a loaner vehicle to a
				  customer under a warranty agreement. There is no cost to the customer, but the
				  vehicle manufacturer pays dealer a reimbursement cost for lending the loaner vehicle
				  to the customer pursuant to the side agreement/warranty agreement. The dealer pays
				  the $ 5.00 per day fee on all rental agreements entered into on or after July 8,
				  2006 because there is a cost paid in return for the vehicle being loaned out (it
				  does not matter which party is paying the cost). However, if the manufacturer only
				  pays a periodic allowance to the dealer for a pool of vehicles to be given without
				  charge to customers, regardless of whether any of the vehicles actually get loaned
				  out, there is no rental agreement created. In this situation, the manufacturer is
				  merely providing a flat allowance to a dealer to keep available a vehicle or pool of
				  vehicles for possible loaner use. Any vehicles actually lent to customers would be
				  considered complimentary rentals (unless the customer must pay for gas used or
				  insurance coverage on the use of a particular vehicle--then the dealership has
				  created a "rental" situation).
Example 3: A vehicle manufacturer provides a pool of vehicles to
				  a dealer for use by warranty/service customers, for which the dealer pays a charge
				  to the manufacturer, but only if a particular vehicle is actually lent out. The
				  dealer's customers who have left their vehicles with the dealer for warranty or
				  other service, pay no charge for the loaner vehicles. A rental agreement exists
				  between the dealer and the manufacturer who must pay the $ 5.00 per day fee on all
				  rental agreements entered into on or after July 8, 2006.
Example 4: A motor vehicle dealer's department A lends a vehicle
				  to department B for use as a loaner vehicle to a customer for department B.
				  Department A charges department B for the specified use of the loaner vehicle. As
				  there is a cost charged for the use of the loaner vehicle, a $ 5.00 per day fee is
				  owed on all rental agreements entered into on or after July 8, 2006.
Example 5: A motor vehicle dealer obtains motor vehicles from
				  another company engaged in motor vehicle rentals to which the dealer pays all rental
				  costs. The motor vehicles are available for customer use under warranty agreements
				  with no cost to the customers. Rental agreements exist between the company and the
				  dealer or between the company and the customers depending on which entity is named
				  in the agreements as being the entity from which the vehicles are being rented. That
				  entity must pay the $ 5.00 per day rental fee on all rental agreements entered into
				  on or after July 8, 2006, whether or not the vehicles are actually loaned to
				  customers.
Example 6: A motor vehicle dealer has an agreement with another
				  company engaged in motor vehicle rentals for the latter to supply "loaner" vehicles
				  directly to the dealer's customers. The dealer refers its warranty customers to the
				  other company which then uses its rental agreement forms to arrange for vehicle
				  rentals. The customer is not charged for use of the vehicle. The dealer, however,
				  pays a rental charge to the company and, in turn, receives from the automobile
				  manufacturer reimbursement for the rental charge. In this situation, the company,
				  which actually supplies the vehicle, not the dealer, would be liable for payment of
				  the $ 5.00 per day fee on all rental agreements entered into on or after July 8,
				  2006, because the dealer is only acting in an agency capacity for the
				  company.
Example 7: A company engaged in the rental of motor vehicles
				  enters into an agreement to rent a vehicle to a dealer. The dealer then enters into
				  a separate agreement with its customer at an identical rental price. In this
				  situation, there are two separate agreements. Accordingly, the rental company must
				  pay the $ 5.00 per day fee on all rental agreements entered into on or after July 8,
				  2006, for the duration of the rental agreement with the dealer, and the dealer must
				  pay the $ 5.00 per day fee for the duration of the rental agreement with the
				  customer.