Correct. In some states, it's required to be paid as part of the total loss settlement. TX, NY, and many others are that way. In IL and OH, the state gives the insurance company the option to pay it at the time of settlement, or after the person replaces the totaled vehicle if done so within 30 days of settlement. In South Carolina, tax is owed but the amount owed is capped at $500. He's asking about offsetting the tax paid on the replacement vehicle though. Only way to do that is with a trade-in. But, if he was paid the sales tax on the totaled vehicle, he's in the same position as he would be if he were trading the car in pre-loss.