Legislature(2019 - 2020)ADAMS ROOM 519

05/03/2019 01:30 PM FINANCE

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Audio Topic
01:30:27 PM Start
01:31:01 PM HB96
01:45:33 PM HB102
02:56:14 PM HB131
02:56:50 PM Presentation: Appropriation Limit by Office of Management and Budget
04:01:09 PM Recessed to the Call of the Chair: the Meeting Reconvened on Saturday, May 4, 2019 at 12:00 P.m.
04:01:09 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to 5/4/19 at 12:00 pm --
Heard & Held
-- Public Testimony --
Scheduled but Not Heard
<Bill Hearing Canceled>
<Pending Referral>
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 96(FIN) Out of Committee
Heard & Held
+ Presentation: Appropriation Limit by TELECONFERENCED
Ed King, Chief Economist, Office of Management
and Budget
HOUSE BILL NO. 102                                                                                                            
     "An  Act  relating  to  rental  vehicles;  relating  to                                                                    
     vehicle  rental  networks;  relating to  liability  for                                                                    
     vehicle rental  taxes; and  providing for  an effective                                                                    
1:45:33 PM                                                                                                                    
REPRESENTATIVE ADAM  WOOL, BILL SPONSOR,  introduced himself                                                                    
and  his  staff.  He  indicated HB  102  was  essentially  a                                                                    
vehicle rental  bill. He  provided an  overview of  the bill                                                                    
which  applied to  peer-to-peer  car  rental companies.  The                                                                    
largest company,  Turo, operated in Alaska.  The service was                                                                    
similar to  Airbnb where someone  rented out rooms  in their                                                                    
private home  much like a  hotel. Customers paid for  a room                                                                    
via  a phone  application. The  home owner  received payment                                                                    
for the  room rental  and Airbnb received  a portion  of the                                                                    
money. The  same business model  applied to car  rentals and                                                                    
Turo. If  someone wanted to  rent their private  vehicle out                                                                    
it would be  done through a phone  application. The business                                                                    
model  was called  car sharing  where  a financial  exchange                                                                    
occurred. He  liked to  refer to the  exchange as  a rental.                                                                    
Alaska's  state  law applied  a  vehicle  rental tax  of  10                                                                    
percent.  Everyone paid  a  rental tax  when  they rented  a                                                                    
vehicle.  He  explained  that  peer-to-peer  companies  were                                                                    
liable for the tax. The state  had been trying to obtain the                                                                    
tax money from the industry.  When a person rented from Avis                                                                    
or Hertz  they had to pay  a tax. Through Turo  a person did                                                                    
not pay the tax. The rental  company and the State of Alaska                                                                    
would like to have the  entities pay the vehicle rental tax.                                                                    
House Bill  102 would  define the vehicle  rental tax  as it                                                                    
applied to  peer-to-peer businesses. It would  also have the                                                                    
corporation pay  the tax to  the State of Alaska  instead of                                                                    
the renter  or owner of  the vehicle.  The idea of  the bill                                                                    
was  to  have  the  application  companies,  like  Turo,  be                                                                    
responsible  for paying  the state.  He mentioned  a lawsuit                                                                    
between  the  State  of  Alaska  and  Turo  because  it  was                                                                    
difficult to  know who the  owners of the vehicles  were. He                                                                    
noted that the same kind  of thing applied to cigarette tax.                                                                    
A  person could  avoid paying  taxes by  ordering cigarettes                                                                    
online. However,  it was  against state  law. The  state had                                                                    
targeted  buyers   of  cigarettes   going  after   them  for                                                                    
cigarette taxes. Instead  of the State of  Alaska looking to                                                                    
collect  taxes  from owners  of  cars  (700 owners  of  cars                                                                    
operated with Turo), the bill  would require Turo to pay the                                                                    
taxes. He noted  an article in the Anchorage  Daily News and                                                                    
the Fairbanks paper that listed  Alaska as one of the states                                                                    
pursuing a vehicle  rental tax. The bill would  not raise or                                                                    
lower the  tax. Rather, if a  person were to rent  a vehicle                                                                    
through Turo,  similar to Avis  or Hertz, the  company would                                                                    
have to pay the vehicle tax.                                                                                                    
1:50:20 PM                                                                                                                    
Vice-Chair  Johnston asked  how taxes  were handled  through                                                                    
Airbnb and  VBRO. Representative Wool explained  that Alaska                                                                    
did  not have  a statewide  hotel  tax. It  was governed  by                                                                    
municipalities. He  was aware that  in Fairbanks  the owners                                                                    
paid   the   taxes.   He   could   not   speak   for   other                                                                    
Vice-Chair  Johnston asked  if  Turo had  a  fleet of  cars.                                                                    
Representative  Wool  explained  that   Turo  did  not  have                                                                    
vehicles. The company was a  technology platform. There were                                                                    
some people that  had multiple cars they rented  out. He had                                                                    
a friend that had a third car that she only rented out.                                                                         
Representative  Merrick  read  a portion  of  an  opposition                                                                    
letter from Turo:                                                                                                               
     "We  urge  you  to consider  holding  this  legislation                                                                    
     until it  can be worked  on in a  structured reasonable                                                                    
     way  with  the  most   important  stakeholders  at  the                                                                    
Representative Merrick asked  if Turo had been  at the table                                                                    
regarding the bill. Representative  Wool responded that Turo                                                                    
had testified  in another committee.  The company  had flown                                                                    
some of  their representatives from California,  and some of                                                                    
their legal  people were  on the  phone. They  had indicated                                                                    
they wanted  to work with  the legislature to craft  a bill.                                                                    
He interpreted their  attitude as wanting a  rate lower than                                                                    
10 percent. He was not  addressing the vehicle rental tax in                                                                    
Alaska, nor  was he  trying to  do a  carve-out specifically                                                                    
for Turo  or other  companies relating  to the  business. He                                                                    
asserted  he just  wanted to  see the  people renting  a car                                                                    
through Turo  paying the same  10 percent tax as  people who                                                                    
rented cars elsewhere.                                                                                                          
Representative  Sullivan-Leonard  asked  whether  a  vehicle                                                                    
owner working under  the umbrella of Turo  would be required                                                                    
to have  a limited  liability corporation (LLC),  a business                                                                    
license or  any type of  license to rent out  their vehicle.                                                                    
Representative  Wool  did  not write  any  legislation  that                                                                    
allowed  peer-to-peer car  rental to  operate in  Alaska. He                                                                    
was certain  an LLC  was not necessary.  He did  not believe                                                                    
business licensing was required.                                                                                                
1:54:08 PM                                                                                                                    
ASHLEY STRAUCH,  STAFF, REPRESENTATIVE ADAM  WOOL, responded                                                                    
that a  person did not  have to  have a business  license to                                                                    
register with  Turo. A person  could simply sign up  for the                                                                    
app as  a car sharer which  allowed someone to be  able rent                                                                    
their vehicle.                                                                                                                  
Representative  Sullivan-Leonard thought  it looked  like it                                                                    
was an opportunity for a  small business type entity to fill                                                                    
a niche  where vehicles  might not  be available.  She asked                                                                    
about the  price variation between  a rental car  agency and                                                                    
Ms.  Strauch responded  there was  a  significant amount  of                                                                    
price  variation  in  rental  vehicles  through  traditional                                                                    
outlets. For example, if a person  were to try to get online                                                                    
to Enterprise Car Rental to try  to rent a vehicle, it might                                                                    
be  between  $12  per  day  to greater  than  $100  per  day                                                                    
depending on the  type of vehicle a person  was renting, the                                                                    
duration of  the rental, and  other factors.  Generally, the                                                                    
prices a person would find on  such a platform as Turo would                                                                    
be lower per  day than the prices  found through traditional                                                                    
car rental platforms.                                                                                                           
Representative Sullivan-Leonard asked if  the reason for the                                                                    
price   difference  was   because  traditional   car  rental                                                                    
companies  had full  fleets  for people  to  choose from  as                                                                    
opposed  to an  individual who  might only  have one  or two                                                                    
vehicles available.  Ms. Strauch  relayed that  someone from                                                                    
Enterprise  Car Rental  was available  online to  answer the                                                                    
representative's question.                                                                                                      
Co-Chair  Wilson   remarked  that  hopefully  some   of  the                                                                    
questions  could be  answered  during  the public  testimony                                                                    
portion of the bill.                                                                                                            
Representative Wool  commented that  in the  bill's previous                                                                    
committee there  had been a  caller from Anchorage  that had                                                                    
used Turo  to rent  his Jeep.  He had  a 4-wheel  drive Jeep                                                                    
that was  good on certain  kinds of  roads. He placed  it on                                                                    
Turo. The charge  was $50 or $60  per day for his  car to be                                                                    
rented.  The   representative  did   not  find   the  amount                                                                    
particularly inexpensive.  He thought  it depended  upon the                                                                    
individual and  the vehicle. He  commented that  the article                                                                    
in the Anchorage  Daily News reported that a guy  that had a                                                                    
BMW sportscar rented it out  through Turo and managed to pay                                                                    
for it.                                                                                                                         
Representative LeBon  wondered that if  he wanted to  rent a                                                                    
vehicle  as an  individual but  did not  want to  go through                                                                    
Turo, would  he be expected to  submit a 10 percent  tax for                                                                    
renting   the  vehicle.   Ms.  Strauch   responded  in   the                                                                    
affirmative and added it would  also include individuals who                                                                    
rented their  vehicle through Craigslist, for  example. They                                                                    
would still  be subject to  the tax of 10  percent. However,                                                                    
the tax  division did not  tend to  have the staff  to chase                                                                    
down individuals through the other outlets.                                                                                     
Representative  LeBon  asked  if  the  state  was  currently                                                                    
expecting  a  remittance of  a  10  percent sales  tax  from                                                                    
individuals if they were renting  their own private vehicle,                                                                    
but  not through  a clearing  house.  Ms. Strauch  responded                                                                    
that they would  still be required to pay  the tax. However,                                                                    
it would be difficult to enforce.                                                                                               
Representative  LeBon commented  that  the  state law  asked                                                                    
everyone who rented  out their car to remit  the 10 percent.                                                                    
Ms. Strauch responded, "That is correct."                                                                                       
1:58:24 PM                                                                                                                    
Representative  Josephson suggested  that  to  get into  the                                                                    
transportation  network companies  (TNC) the  state insisted                                                                    
on  some  oversight  from  a   regulatory  stand  point.  He                                                                    
wondered  if there  was anything  that prohibited  Turo from                                                                    
acting at  the outset.  He wondered  if they  were presently                                                                    
acting legally.                                                                                                                 
Representative Wool answered that  there was a liability for                                                                    
vehicle rental tax. The person  that rented the vehicle paid                                                                    
the tax.  The person  that owned  the car,  if they  did not                                                                    
collect it  from the renter, would  have to pay the  tax. He                                                                    
noted a  lawsuit between the  State of Alaska and  Turo. The                                                                    
point of  the lawsuit was  to determine who were  the people                                                                    
renting the cars and could  the state recover its taxes. The                                                                    
case stemmed from Turo not  releasing the needed information                                                                    
to the state.  He did not believe Turo was  breaking the law                                                                    
by not remitting  taxes. The bill would provide  the state a                                                                    
vehicle to recover  the taxes. He thought  the Department of                                                                    
Revenue (DOR) might be able to add to his answer.                                                                               
Representative  Josephson   asked  if  there  had   been  an                                                                    
insistence that a law was  passed for companies such as Turo                                                                    
to operate, similar to the TNCs.                                                                                                
Co-Chair  Wilson asked  Representative  Josephson to  define                                                                    
TNC.  Representative  Josephson  responded,  "Transportation                                                                    
Network Companies."                                                                                                             
Representative Wool  believed the requirement that  TNCs had                                                                    
a state law was put in  only after they arrived. There was a                                                                    
discrepancy  with  the  Department of  Labor  and  Workforce                                                                    
Development when TNCs  arrived in the City  of Anchorage. He                                                                    
did not  believe there was  a specific statute in  place for                                                                    
Turo to operate.                                                                                                                
Ms. Strauch explained that the  state was already considered                                                                    
Turo to  be liable to pay  the 10 percent vehicle  tax. They                                                                    
had already started  the process of trying to  collect it by                                                                    
asking Turo for information about  the number of drivers the                                                                    
company had in Alaska.                                                                                                          
Co-Chair  Wilson   asked  Mr.   Spanos  to  help   with  the                                                                    
conversation.  She  wondered  if  the  state  was  currently                                                                    
collecting taxes from vehicle rental networks.                                                                                  
2:01:56 PM                                                                                                                    
BRANDON  SPANOS, DEPUTY  DIRECTOR, TAX  DIVISION, DEPARTMENT                                                                    
OF REVENUE (via  teleconference), restated Co-Chair Wilson's                                                                    
question. He  responded in the affirmative.  The statute was                                                                    
very broad  and stated  that a renting  of a  vehicle within                                                                    
the  state boundaries  was a  taxable event  - a  10 percent                                                                    
tax.  The state  already considered  in the  current statute                                                                    
that the  vehicle rental  networks would  be subject  to the                                                                    
tax.  It specified  that the  individual making  the vehicle                                                                    
available for  rent was  the tax payer.  For example,  if an                                                                    
owner of  a vehicle  made it  available on  Craigslist, they                                                                    
would be  responsible. In  the past,  the division  had gone                                                                    
after the  individuals, particularly  people who  had rented                                                                    
out their RV  for the entire summer. There  had been appeals                                                                    
that had gone  to the courts, and the  courts had determined                                                                    
that they  were taxable events  requiring the owners  to pay                                                                    
the  tax.  In  the  case  where  there  was  a  peer-to-peer                                                                    
network, there was a veil over  the identity of the owner of                                                                    
a  vehicle.  The  division  did  not  have  the  ability  to                                                                    
determine  the owners  of the  vehicles. The  vehicle rental                                                                    
was subject  to tax, but it  was difficult to enforce  a tax                                                                    
without the ability to determine the vehicle owner.                                                                             
2:03:23 PM                                                                                                                    
Co-Chair Wilson  asked for a better  understanding between a                                                                    
peer-to-peer platform  and the TNCs. She  thought it sounded                                                                    
as if it was already illegal not to pay the taxes.                                                                              
Mr. Spanos  relayed that the  administration was  neutral on                                                                    
the bill. He reported that  currently if someone listed on a                                                                    
peer-to-peer network  the transaction was  taxable. However,                                                                    
the individual owner of the  vehicle was subject to the tax.                                                                    
Therefore, the  peer-to-peer online service, while  they had                                                                    
the information  identifying the owner of  the vehicle, they                                                                    
were  not breaking  the  law  by not  remitting  a tax.  The                                                                    
statute currently  did not state that  the network providing                                                                    
the service would collect and remit  the tax - it stated the                                                                    
owner of  the vehicle would  collect and remit the  tax. The                                                                    
individual  should  be  remitting   the  tax.  The  division                                                                    
researched many  of the websites,  most of which  state that                                                                    
the onus  for the tax  was on the  owner and they  needed to                                                                    
know and  follow the law.  One of the  peer-to-peer networks                                                                    
testified in a previous committee  that they were a business                                                                    
and had  insurance on the  vehicles that was  made available                                                                    
when a rental  occurred. They also took a  percentage of the                                                                    
rental in the  transaction. If the bill were  to pass, there                                                                    
would be another  line item where a tax would  be charged to                                                                    
the  renter.  The  peer-to-peer network  would  collect  and                                                                    
remit the tax to the state.                                                                                                     
Co-Chair  Wilson  thought  it  would be  good  to  have  the                                                                    
Department of Law present at the next hearing.                                                                                  
Representative  Josephson  asked   if  peer-to-peer  network                                                                    
companies  could  exist  legally in  Alaska.  Representative                                                                    
Wool reported  that peer-to-peer  networks could  operate in                                                                    
Alaska.  They  did  not require  a  specific  statute.  Ride                                                                    
sharing  companies, Uber  and Lyft,  came  to Anchorage  and                                                                    
operated before  a statute  was established.  However, there                                                                    
was an  issue with  the municipality,  and they  were kicked                                                                    
out.  The  Department  of Labor  and  Workforce  Development                                                                    
issued a  statement requiring a  change in statute  for them                                                                    
to return  to Alaska. It  prompted the TNC statute  that was                                                                    
currently  in  place.  He  relayed that  part  of  the  ride                                                                    
sharing  bill included  a provision  that  assessed a  local                                                                    
sales tax as a ride sharing  customer. The money went to the                                                                    
ride  sharing who  in turn  submitted the  corresponding tax                                                                    
payment.  He was  trying  to incorporate  the  same type  of                                                                    
provision for peer-to-peer car rentals in the bill.                                                                             
2:07:59 PM                                                                                                                    
Representative Knopp spoke about  working on the legislation                                                                    
for TNCs.  At the time  of the debate he  and Representative                                                                    
Wool   argued   for   local    control   to   enable   local                                                                    
municipalities  to  collect  the  tax. He  noted  that  ride                                                                    
sharing involved  renting both  the driver and  the vehicle,                                                                    
whereas, peer-to  peer vehicle  rentals was limited  only to                                                                    
renting a  vehicle. He  thought it would  be much  easier to                                                                    
collect the tax from the  enterprise company rather than the                                                                    
individual owner of  the vehicle. He suggested  that the law                                                                    
could simply  require peer-to-peer companies to  release the                                                                    
names  of the  participants and  let the  state collect  the                                                                    
taxes  from  individual owners.  He  thought  the issue  was                                                                    
debatable. He  spoke of equality  between taxi  services and                                                                    
TNCs. He was unclear his position on the bill.                                                                                  
Representative Merrick  asked Representative Wool  to confer                                                                    
that the  vehicle rental tax  went into the  state's general                                                                    
fund. Representative  Wool believed  the vehicle  rental tax                                                                    
was  designated but  not dedicated  to certain  other funds,                                                                    
but he believed it went into the general fund.                                                                                  
Co-Chair Wilson thought  the tax went to  a designated fund.                                                                    
It was not dedicated and could be used for any purpose.                                                                         
Representative  Merrick clarified  that Co-Chair  Wilson was                                                                    
talking about  the rental tax  and that it  did not go  to a                                                                    
dedicated   fund.   Co-Chair   Wilson   responded   in   the                                                                    
Representative  Merrick asked  what the  fund was  typically                                                                    
used for. She  wondered if the funds were  used for tourism.                                                                    
Co-Chair Wilson  explained that the  fund had been  used for                                                                    
public safety  and roads. The  House intended to use  it for                                                                    
tourism. The Senate had made a  change in the budget and she                                                                    
was unsure  where the rental  tax funds would be  spent. For                                                                    
the public  that was  listening in,  she explained  that the                                                                    
state  constitution  did  not  allow  for  dedicated  funds.                                                                    
Designated  funds were  different  in  that the  legislature                                                                    
could indicate how it wanted  the funds spent but they could                                                                    
be used for anything.                                                                                                           
2:12:03 PM                                                                                                                    
Representative  LeBon mentioned  hearing  earlier about  700                                                                    
clients participating  in the Turo program.  He wondered how                                                                    
many  of the  clients were  remitting the  10 percent  sales                                                                    
tax. He wondered if the department tracked the information.                                                                     
Mr. Spanos could not speak  to specifics but could aggregate                                                                    
information. The  division had  not received any  taxes from                                                                    
anyone operating with a  peer-to-peer platform. The division                                                                    
had tried to determine how  many vehicles were available for                                                                    
rent.  There  were  2  numbers   provided  in  the  previous                                                                    
committee  by one  of the  peer-to-peer networks.  The first                                                                    
number was 700  and in a later hearing they  reported 200 or                                                                    
more. He was  unclear of the number. The  number was between                                                                    
200 and 700.                                                                                                                    
Representative  LeBon   asked  how  many   individuals  were                                                                    
remitting  10  percent  sales  tax  for  renting  out  their                                                                    
vehicle.  Mr. Spanos  clarified  whether the  representative                                                                    
meant  through  a peer-to-peer  car  sharing  network or  in                                                                    
general including other vehicle rental companies.                                                                               
Representative  LeBon  provided  his  previous  scenario  in                                                                    
which he  listed his car  for rent  on craigslist or  in the                                                                    
newspaper. He wondered if any  of those people had submitted                                                                    
a tax.  Mr. Spanos indicated  the number was very  low. Most                                                                    
people submitting  a payment paid  a 3 percent or  5 percent                                                                    
rate for  an RV  rental. He  did not  believe the  state had                                                                    
received  any   remittance  for  an  individual.   He  could                                                                    
investigate  the number  further.  Representative LeBon  did                                                                    
not need a response. He suspected the number would be low.                                                                      
Vice-Chair  Johnston likened  Airbnb to  Uber and  Lyft. She                                                                    
spoke of  a bed  tax in the  municipality of  Anchorage. The                                                                    
municipality collected  tax from each participant  of Airbnb                                                                    
rather  than the  platform. She  thought the  intent of  the                                                                    
bill was  worthy. However,  her concern had  to do  with new                                                                    
and  rapidly  changing technology.  She  asked  if the  bill                                                                    
sponsor was open  to creating a small  section or subsection                                                                    
for  platforms similar  to Turo,  rather  than wrapping  the                                                                    
idea into  the regular  car rental  section in  statute. She                                                                    
suggested  that ride  sharing in  urban areas  had taken  on                                                                    
many  different  dynamics.  She thought  things  were  of  a                                                                    
high-intensity nature in the urban  areas versus anywhere in                                                                    
Alaska. She  could see a  platform like Turo working  in the                                                                    
smaller  communities. She  thought leaving  the peer-to-peer                                                                    
model in a  different section of the statue  would allow for                                                                    
future adjustments.                                                                                                             
Representative Wool would have to  think about his answer to                                                                    
her  question.   He  relayed  that  in   previous  testimony                                                                    
peer-to-peer  companies  alluded   to  being  different  and                                                                    
needing a  different rule. He  had asked the  companies what                                                                    
they thought was  so different about their  model to justify                                                                    
a lower tax percentage. At the  time of his question, he did                                                                    
not receive a satisfactory answer.  He thought at the end of                                                                    
the day it was a person  needing to rent a car. He suggested                                                                    
that both car  rentals and peer-to-peer rentals  had to take                                                                    
care of  and store their  vehicles. He also did  not believe                                                                    
the  best way  to  collect the  tax would  be  by trying  to                                                                    
collect  from   individuals.  He  provided  an   example  of                                                                    
inefficiency  by having  individuals  pay the  tax on  their                                                                    
Vice-Chair Johnston was uncertain  whether they should pay a                                                                    
lesser  rate. She  noted how  platforms such  as Airbnb  had                                                                    
taken off.  She thought it  was important to be  flexible in                                                                    
addressing  the  issue.  She  was  unsure  of  how  to  move                                                                    
forward. She did  not want to lock the  state into something                                                                    
that would not be appropriate in 2 years.                                                                                       
Co-Chair Wilson added that  rental companies like Enterprise                                                                    
owned the cars.  They were renting cars they  own and should                                                                    
be responsible  for paying the tax.  The individuals renting                                                                    
their cars  were currently  liable for  paying the  tax. She                                                                    
was concerned  with going after  an entity that was  not the                                                                    
owner of the vehicles. She  informed members that they would                                                                    
be hearing public testimony during  the meeting and that she                                                                    
did not intend to move the bill presently.                                                                                      
Representative   Wool   appreciated    the   comments   from                                                                    
Representative  Johnston. He  agreed  that Enterprise  owned                                                                    
the cars,  but Turo  did not. Turo  was only  the technology                                                                    
platform  but made  a  significant amount  of  money on  the                                                                    
transactions, much  more that  the individual  drivers. Turo                                                                    
was   working  as   a  central   clearing   house  for   the                                                                    
Co-Chair  Wilson  clarified  that  Representative  wool  was                                                                    
suggesting  that  they should  be  taxed  because they  were                                                                    
making a significant amount of  money, not because they were                                                                    
the  responsible party.  Representative  Wool rebutted  that                                                                    
the tax  would be paid by  the person renting the  car. Turo                                                                    
was  just a  clearing house.  For  example, if  he rented  a                                                                    
vehicle  from Representative  Josephson.  he  would use  his                                                                    
phone to  rent the  vehicle through  Turo's app.  His credit                                                                    
card  would be  processed through  Turo. Turo  would keep  a                                                                    
portion of the  payment and send along the  other portion of                                                                    
funds  to  Representative  Josephson. The  transaction  went                                                                    
through Turo who kept a percentage of the money.                                                                                
Co-Chair  Wilson provided  an  example of  using her  credit                                                                    
card. She  wanted to make  certain that the  legislature was                                                                    
not going  after a  company because of  the money  they made                                                                    
but  because  they were  responsible  for  the actions  that                                                                    
2:25:09 PM                                                                                                                    
Representative Knopp  wondered what  would prevent  a person                                                                    
from  becoming  a  rental  car   company  simply  using  the                                                                    
Vice-Chair  Ortiz  thought  the  sponsor  of  the  bill  was                                                                    
introducing the bill  to level the playing  field and create                                                                    
additional revenue for the  state. Co-Chair Wilson clarified                                                                    
that it was  illegal for individuals to rent  their cars out                                                                    
without paying a tax. She  thought the question came down to                                                                    
who was  paying. Vice-Chair Ortiz commented  that the person                                                                    
renting the  car would  be paying  the tax.  Co-Chair Wilson                                                                    
commented that they were going into dangerous territory.                                                                        
2:28:15 PM                                                                                                                    
Co-Chair Wilson OPENED Public Testimony.                                                                                        
2:28:25 PM                                                                                                                    
ROSE   FELICIANO,   INTERNET   ASSOCIATION,   SEATTLE   (via                                                                    
teleconference),    relayed   that    Internet   Association                                                                    
represented  more than  40 of  the world's  leading internet                                                                    
companies   and  advanced   public  policy   solutions  that                                                                    
fostered   innovations,   promoted  economic   growth,   and                                                                    
empowered  people  through a  free  and  open internet.  She                                                                    
spoke  in   opposition  to  HB  102.   Internet  Association                                                                    
appreciated  the  Alaska  State Legislature  for  acting  to                                                                    
provide  regulatory   clarity  for   transportation  network                                                                    
companies  and   phone  sharing  platforms  so   they  could                                                                    
continue to  operate in  Alaska to  the benefit  of tourists                                                                    
and residents. Similarly, she believed  clear and fair rules                                                                    
for  peer-to-peer car  sharing platforms  would benefit  the                                                                    
State  of   Alaska.  Unfortunately,   HB  102   treated  the                                                                    
peer-to-peer vehicle  sharing platform the same  as a rental                                                                    
car  company. They  were two  different business  models and                                                                    
should  not be  considered the  same. Most  prominently, car                                                                    
rental companies  owned and maintained  a fleet  of vehicles                                                                    
while peer-to-peer  car shares did  not. She thought  HB 102                                                                    
needed  some work  with  shareholders. Internet  Association                                                                    
and its  members were willing  to figure out a  solution for                                                                    
appropriate  regulations. She  argued that  categorizing and                                                                    
defining a  peer-to-peer car share  as a car  rental company                                                                    
did  not  work.  Peer-to-peer  vehicle  shares  offered  car                                                                    
owners  a  chance  to  earn   extra  money  at  the  owner's                                                                    
convenience.  She thought  it  provided  an opportunity  for                                                                    
residents  and tourists  to have  access to  cars that  they                                                                    
would  not  otherwise  have. Internet  Association  and  its                                                                    
members were willing  to work with the bill  sponsor and DOR                                                                    
to try to figure out a solution.                                                                                                
2:31:36 PM                                                                                                                    
BRIAN   ROTHERY,   VICE   PRESIDENT,   ENTERPRISE   HOLDING,                                                                    
SACRAMENTO, CA (via  teleconference), shared some background                                                                    
information about  the company. The company  had operated in                                                                    
Alaska  since 1989  and  had more  than  100 employees  that                                                                    
lived  in Alaska.  They  had  a fleet  of  1900  cars in  20                                                                    
locations  in the  state. They  recruited college  students,                                                                    
had a broad base of employees,  and paid taxes in Alaska. He                                                                    
thought  the taxes  reflected the  company's  fair share  of                                                                    
contributions  into the  economy.  He  continued to  provide                                                                    
additional information about  the company's contributions to                                                                    
the state. He spoke in support  of HB 102. He thought it was                                                                    
the right  way to embrace  a new  source of supply  into the                                                                    
car  rental market.  He believed  enacting fair  rules would                                                                    
result  in   greater  choice   to  rental   customers,  more                                                                    
competition in  the industry, and  allow car owners  to make                                                                    
extra money.  In particular, remote locations  could benefit                                                                    
from increased  access to  transportation options.  He spoke                                                                    
of additional  benefits. He  argued that  the rules  for the                                                                    
new  source  of supply  should  be  clear to  customers  and                                                                    
service providers.                                                                                                              
Mr. Rothery  offered that the  need for rental cars  was not                                                                    
impacted by  the ownership model  for the  service provider.                                                                    
He suggested  that the  supply was also  the same.  From the                                                                    
vantage point  of the  customer, the  supply and  the demand                                                                    
were  the   same.  His  company  believed   that  for-profit                                                                    
companies  competing  for the  same  demand  using the  same                                                                    
supply should be treated the  same under the law. The source                                                                    
of the supply  was not material to the issues  in HB 102. He                                                                    
thought the bill  related to the companies  operating in the                                                                    
space and  about making sure  all for-profit  companies paid                                                                    
their fair share.                                                                                                               
2:36:45 PM                                                                                                                    
MICHELLE  PEACOCK,  VICE  PRESIDENT,  TURO,  SAN  FRANCISCO,                                                                    
CALIFORNIA   (via  teleconference),   referenced  a   letter                                                                    
submitted  to  members.  She  explained   that  Turo  was  a                                                                    
platform and a  marketplace where car owners  and people who                                                                    
needed  cars   could  find  each   other  to  work   out  an                                                                    
arrangement to  share a car.  It was similar to  eBay except                                                                    
instead  of  buying  and  selling   goods  people  were  car                                                                    
sharing. Turo  was headquartered in California  but operated                                                                    
in several places in the  world. Turo's customers were eager                                                                    
to  share cars  for several  reasons. First,  they liked  to                                                                    
monetize an  under used asset. Turo  provided an opportunity                                                                    
to cut costs for  a person to own their car.  It was a great                                                                    
way to  cover car  payments. It also  provided opportunities                                                                    
for people looking  to rent cars as well. Turo  had over 850                                                                    
different makes and  models made available by  the car owner                                                                    
customers. The owner decided on  the price. She relayed that                                                                    
TNCs were very  different as businesses from  Turo. The only                                                                    
thing they  really had  in common  was a car.  It was  a new                                                                    
idea  being embraced  in  Alaska. Turo  opposed  HB 102  and                                                                    
would   appreciate  an   opportunity   to   work  with   the                                                                    
legislature to craft a piece  of legislation that made sense                                                                    
for  the state.  She encouraged  Alaska  to put  in place  a                                                                    
regulatory  framework.  The  company had  great  experiences                                                                    
working  and  collaborating  with  legislatures  across  the                                                                    
country  over   the  prior  couple  of   years.  Legislation                                                                    
creating a  framework had  passed in  2018 in  Maryland and,                                                                    
more recently,  in Indiana and Colorado.  The company's goal                                                                    
was to  recognize what made  sense for  a state and  for the                                                                    
people of Alaska. She reported  that 13 other states had put                                                                    
forward  similar legislation  that was  rejected. The  trend                                                                    
was  collaborating  with  a community  of  peer-to-peer  car                                                                    
sharing companies to work out the issues.                                                                                       
2:43:30 PM                                                                                                                    
Representative LeBon asked about  the process of applying on                                                                    
Turo  to list  his car  for sharing.  Ms. Peacock  explained                                                                    
that a  person would apply  online at Turo's website  and go                                                                    
through a  screening process. Following the  steps, a person                                                                    
would be allowed by Turo to list their car for sharing.                                                                         
Representative   LeBon  continued   that  assuming   he  was                                                                    
accepted as  part of the  clearing house, he would  be added                                                                    
to  the group  of car  owners that  were renting  their cars                                                                    
through  Turo's  system.  He asked  how  many  clients  Turo                                                                    
numbered in  Alaska at present.  Ms. Peacock  responded that                                                                    
700 customers  in Alaska had  listed their cars on  the Turo                                                                    
Representative  LeBon  assumed  Turo was  present  in  every                                                                    
state in  the United States. He  asked if Turo had  run into                                                                    
the  issue in  other states  about who  was responsible  for                                                                    
collecting a sales  tax. He wondered if  Turo remitted sales                                                                    
taxes on behalf of its  clients in other states. Ms. Peacock                                                                    
responded in  the affirmative. She  noted that when  the law                                                                    
required Turo  to collect  and submit the  tax on  behalf of                                                                    
its customers,  the company did so.  Presently, Maryland was                                                                    
the  only state  that had  the requirement.  The legislation                                                                    
which  passed more  recently in  Indiana would  also require                                                                    
Turo to remit sales taxes on behalf of its clients.                                                                             
Representative  Merrick  asked  if the  consumer  ultimately                                                                    
paid  the  10 percent  tax.  Ms.  Peacock responded  in  the                                                                    
affirmative. The  customers would pay the  tax. However, she                                                                    
thought it was  important to draw a  distinction between the                                                                    
operations that  a rental car  company underwent  to address                                                                    
the  tax collecting  and remittance  and  the impacts  there                                                                    
would be on an individual  citizen of Alaska. The main issue                                                                    
was about the  chilling effect that a new tax  on a new kind                                                                    
of business platform  in Alaska would have on  the growth of                                                                    
the business.                                                                                                                   
2:46:34 PM                                                                                                                    
Representative  Merrick  wanted  to   hear  more  about  the                                                                    
impacts on the  citizens of Alaska. She also  wanted to know                                                                    
if  Ms.  Peacock  was  aware  that Alaska  did  not  have  a                                                                    
statewide sales or  income tax. Ms. Peacock  was not opposed                                                                    
to a  tax but wanted to  be included in the  conversation to                                                                    
figure out  what would  be appropriate.  She brought  up the                                                                    
issue of certain complexities in Alaska.                                                                                        
Co-Chair  Wilson  asked if  she  knew  the State  of  Alaska                                                                    
charged a  different rental tax  to different  entities. Ms.                                                                    
Peacock responded that the RV  industry paid a different tax                                                                    
than  the car  rental  industry.  Co-Chair Wilson  clarified                                                                    
that there was a different RV  tax and a motorcycle tax. She                                                                    
wondered if Turo was comfortable  with the fees if the state                                                                    
was  consistent.  Ms.  Peacock  asked  her  to  restate  her                                                                    
question. Co-Chair Wilson  asked if Turo would  be okay with                                                                    
collecting taxes as long as the state was consistent.                                                                           
Ms. Peacock  clarified that Alaska had  clearly undergone an                                                                    
evaluation of  other industries such as  motorcycles and RVs                                                                    
and  determined, because  they were  different, they  should                                                                    
have  a  different tax  rate.  Turo  was  asking to  have  a                                                                    
conversation about the tax rate.  Turo believed the tax rate                                                                    
should be  less than the  car rental industry.  The peer-to-                                                                    
peer car  sharing industry had  a lower impact on  roads and                                                                    
services and  a different impact  on communities than  a car                                                                    
rental company.                                                                                                                 
Co-Chair Wilson commented that  taxes for motorcycle rentals                                                                    
were lowered because  of the vehicle type. She  did not know                                                                    
why  Turo thought  it  should  have a  lower  tax rate.  Ms.                                                                    
Peacock  respectfully   argued  that  the  business   was  a                                                                    
different business.  She returned  to the notion  of working                                                                    
collaboratively to craft legislation.                                                                                           
2:52:35 PM                                                                                                                    
Co-Chair Wilson CLOSED Public Testimony.                                                                                        
Co-Chair Wilson wanted  to have the Department  of Law speak                                                                    
to the  committee about  the bill. She  also wanted  to look                                                                    
into  the  recently  adopted  legislation  in  Maryland  and                                                                    
Representative  Wool indicated  that HB  102 also  defined a                                                                    
vehicle   rental  network   modernizing  some   language  in                                                                    
statute. It  also included traditional rental  car companies                                                                    
such  as Enterprise  -  it  would be  defined  as a  vehicle                                                                    
rental network. The  direct renter of vehicles  would be the                                                                    
individual  on Craigslist  for example.  He  asked Turo  why                                                                    
they should  have a discount  on vehicle rental tax.  He had                                                                    
not  heard  a  satisfactory  answer. He  suggested  that  no                                                                    
matter  the modality  of  purchase, it  made  sense for  the                                                                    
peer-to-peer  networks  to  collect  and  pay  the  tax.  He                                                                    
thought they  should be  liable for the  tax. Since  all the                                                                    
transactions  went  through Turo,  it  made  sense that  the                                                                    
company would be  responsible for submitting the  tax to the                                                                    
state  rather than  DOR searching  out  700 individuals.  He                                                                    
relayed that  the average Turo  renter host had  3 vehicles.                                                                    
He thought  the state  should be getting  its fair  share of                                                                    
vehicle rental taxes.                                                                                                           
Co-Chair  Wilson   argued  that  there  were   several  more                                                                    
questions to  be answered  prior to moving  the bill  out of                                                                    
committee. She would not set a time for amendments.                                                                             
HB  102  was  HEARD  and   HELD  in  committee  for  further                                                                    

Document Name Date/Time Subjects
HB 102 Sponsor Statement Version U.pdf HFIN 5/3/2019 1:30:00 PM
HB 102
HB 102. Sectional Version U.pdf HFIN 5/3/2019 1:30:00 PM
HB 102
HB 102.Backup Support Letter Enterprise.pdf HFIN 5/3/2019 1:30:00 PM
HB 102
HB 102 Public Testimony.pdf HFIN 5/3/2019 1:30:00 PM
HB 102
HB 96 Amendment 2 Wilson .pdf HFIN 5/3/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96
HB 96 Amendment 1 Josephson.pdf HFIN 5/3/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96
HB 102 Opposition Letter.pdf HFIN 5/3/2019 1:30:00 PM
HB 102
HB 131 Spending Limit Comparison.pdf HFIN 5/3/2019 1:30:00 PM
HB 131
HB 49 CS WORKDRAFT FINv.E.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB 49 v.E CS FIN Sectional Summary.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB 102 Opposition Comptia.pdf HFIN 5/3/2019 1:30:00 PM
HB 102
HB 49 HB 49 Public Testimony Pkt 3.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB 49 Public Testimony Pkt 2.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB 49 DRAFT Fiscal Note Packet.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB 49 Public Testimony PKT 4.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB049CS(FIN)-DPS-PT-DRAFT 05-04-19.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB 49 HB 49 Public Testimony Pkt 3.pdf HFIN 5/3/2019 1:30:00 PM
HB 49
HB 96 Amendment 3 Knopp.pdf HFIN 5/3/2019 1:30:00 PM
SHSS 2/12/2020 1:30:00 PM
HB 96