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
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.
