Who is liable for paying the tax on business auto insurance?
Commercial auto insurance can cover property damage and injuries after an accident. But who is liable to pay the tax on business auto insurance?


Updated May 30, 2023.
Commercial auto insurance can cover vehicles used to operate your business, whether your business owns the vehicle or not. This insurance can protect you from unforeseen expenses related to accidents, including vehicle damage, injuries, towing and other costs.
The owner of the vehicle is liable to pay the tax on business auto insurance. The tax is typically a percentage of the premium, and the rate can vary by state.
1. Business-owned vehicles
The business owner is responsible for paying taxes on business insurance for vehicles owned by the company. These taxes may depend on factors such as the jurisdiction of the business's location and the type of vehicle.
The business owner may also have to pay taxes on business insurance for the personal use of company-owned vehicles, as it's considered a taxable benefit to the employee.
2. Self-employed individuals
Self-employed individuals are required to purchase business auto insurance if they use the vehicle to meet clients, visit sites, or ship goods and products. In this case, the self-employed individual will have to pay taxes for business auto insurance.
3. Employee-owned vehicles
If an employee is using their personal vehicle for business purposes, they are responsible for paying business insurance taxes on the vehicle. However, if the business is reimbursing the employee for the use of their personal vehicle, the employee may need to report this income on their personal tax return.
Similarly, if the business provides a vehicle allowance to the employee, the employee will need to report the allowance as income on their personal tax return and will be subject to personal income tax. The allowance is considered a taxable benefit.
4. Business vs. personal use
Vehicles used exclusively for business purposes are typically required to have commercial auto insurance with liability coverage. Alternatively, vehicles used for personal and business purposes can be covered by both a personal auto insurance policy as well as a commercial insurance policy in case there are any work-related accidents.
The key takeaway
Auto insurance can help business owners reduce the risks associated with their profession, including financial risks. So, we recommend you consult with an accredited insurance provider before you purchase business auto insurance coverage to make sure you're covered for everything you need.
With NEXT, you can get a personalized insurance quote to help you choose the plan that best fits your needs and budget. Get a fast online quote by following our simple online process.
» Explore NEXT's commercial auto insurance coverage