Legislature(2007 - 2008)CAPITOL 17
02/25/2008 03:00 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB413 | |
| HB379 | |
| HB350 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 413 | TELECONFERENCED | |
| *+ | HB 350 | TELECONFERENCED | |
| *+ | HB 379 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 25, 2008
3:03 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Mark Neuman, Vice Chair
Representative Carl Gatto
Representative Gabrielle LeDoux
Representative Robert L. "Bob" Buch
Representative Berta Gardner
MEMBERS ABSENT
Representative Jay Ramras
COMMITTEE CALENDAR
HOUSE BILL NO. 413
"An Act extending the termination date for the Real Estate
Commission; and providing for an effective date."
- MOVED HB 413 OUT OF COMMITTEE
HOUSE BILL NO. 379
"An Act relating to educational requirements for licensure as a
certified public accountant."
- MOVED HB 379 OUT OF COMMITTEE
HOUSE BILL NO. 350
"An Act providing for an amount to be deducted and retained for
collecting and submitting the vehicle rental tax."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 413
SHORT TITLE: EXTENDING THE REAL ESTATE COMMISSION
SPONSOR(s): LABOR & COMMERCE
02/20/08 (H) READ THE FIRST TIME - REFERRALS
02/20/08 (H) L&C, FIN
02/25/08 (H) L&C AT 3:00 PM CAPITOL 17
BILL: HB 379
SHORT TITLE: CPA EDUCATION REQUIREMENTS
SPONSOR(s): REPRESENTATIVE(s) HAWKER
02/19/08 (H) READ THE FIRST TIME - REFERRALS
02/19/08 (H) L&C, FIN
02/25/08 (H) L&C AT 3:00 PM CAPITOL 17
BILL: HB 350
SHORT TITLE: VEHICLE RENTAL TAX COLLECTION
SPONSOR(s): REPRESENTATIVE(s) HARRIS
02/04/08 (H) READ THE FIRST TIME - REFERRALS
02/04/08 (H) L&C, FIN
02/25/08 (H) L&C AT 3:00 PM CAPITOL 17
WITNESS REGISTER
ELEANOR WOLFE, Staff
to Representative Kurt Olson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 413 on behalf of the prime
sponsor, the House Labor and Commerce Committee.
PAT DAVIDSON, Legislative Auditor
Division of Legislative Audit
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented auditor findings and
recommendations and answered questions on HB 413.
REPRESENTATIVE MIKE HAWKER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as the prime sponsor of HB 379.
MAX MERTZ, CPA; Chair
Board of Public Accountancy
Division of Corporations, Business, and Professional Licensing
Department of Commerce, Community, & Economic Development
(DCCED)
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions on HB 379.
PETE FELLMAN, Staff
to Representative John Harris
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions on behalf
of the prime sponsor of HB 350, Representative John Harris.
JOHANNA BALES, Deputy Director
Tax Division
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Answered questions on HB 350.
GARY ZIMMERMAN,
General Manager
Avis Rent A Car (AVIS)
Anchorage, Alaska
POSITION STATEMENT: Testified on HB 350.
JIM POLYEFKO, General Manager
National and Alamo Car Rental
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 350.
CRAIG FLOYD, Co-owner
Thrifty Car Rental; Dollar Car Rental Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 350.
DARYL BENNETT, Owner
Great Alaskan Holidays
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 350.
LEON MCKEAN, General Manager
Great Alaskan Holidays
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 350.
LYNN ZEILER, Representative
Budget Rent-A-Car (Budget)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 350.
WAYNE MARTIN, Employee
ABC Motor Homes
Palmer, Alaska
POSITION STATEMENT: Testified in support of HB 350.
JOHN COOK, Legislative Director
Alaska Auto Dealers Association
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 350.
ACTION NARRATIVE
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:03:51 PM. Representatives
Gardner, Buch, Neuman, and Olson were present at the call to
order. Representatives Gatto and LeDoux arrived as the meeting
was in progress.
HB 413-EXTENDING THE REAL ESTATE COMMISSION
3:04:13 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 413, "An Act extending the termination date for
the Real Estate Commission; and providing for an effective
date."
ELEANOR WOLFE, Staff, to Representative Kurt Olson, Alaska State
Legislature, explained that HB 413 would extend the Real Estate
Commission until June 30, 2016.
3:04:49 PM
PAT DAVIDSON, Legislative Auditor, Division of Legislative
Audit, Alaska State Legislature, stated that the audit
recommends extending the termination date of the Real Estate
Commission until June 30, 2016. The report contained several
recommendations. Although one recommendation is more related to
finance, she pointed out one fiscal change that affected the
recommendation to increase license fees. The auditors concluded
the field audit work in May and recommended increasing fees.
However, due to subsequent fiscal activity, it is no longer a
valid recommendation. The board is licensing and regulating
real estate professionals in a manner to serve the public. The
division recommends extending the termination date of the Real
Estate Commission.
3:06:06 PM
REPRESENTATIVE BUCH inquired as to recommendation two, which
identified that a board member had been appointed to the
commission without having met the professional experience
requirements.
MS. DAVIDSON explained that the audit identified that the
experience requirement for board member was not met. The
statute requires three years of experience and the board member
only had two years of experience at the time of appointment.
The division addressed a recommendation to the governor's
office, who agreed all members of the board should meet
statutory requirements and appreciated the division bringing
this matter to their attention. She offered that the passage of
time has remedied the problem.
REPRESENTATIVE BUCH inquired as to whether any legislation
passed during the time period when the board member was not
eligible to serve, or were any decisions made that are moot.
MS. DAVIDSON answered that all formal actions taken by the board
would have to be reviewed to determine if the individual's vote
mattered. The auditors did not find anything in particular, she
related, but that brings up the core of the problem.
3:08:25 PM
REPRESENTATIVE GARDNER referred to the audit's prior findings
with respect to the Real Estate Surety Fund (RESF). She
inquired as to whether pending legislation that would replace
the surety fund with a recovery fund would be in keeping with
the division's recommendations.
MS. DAVIDSON offered she is aware that there is a bill before
the legislature, but that she has not done in-depth review of
it. In the course of audit, the auditors reviewed the RESF with
reference to whether it duplicates activities. The division's
concern is whether there is private insurance available for
approximately the same value that is available to members. Of
11 western states surveyed, seven states had surety funds and
did not require professional liability insurance, she noted.
Another two states did not have surety funds nor required
professional liability insurance. The remaining two states did
not have surety funds but did require professional liability.
Annual premiums on these Errors and Omissions (E&O) insurance
policies can range from $500 to $5,000 for coverage equal to or
more than the coverage provided by the RESF. The auditors did
not find a ready market for that type of insurance for the same
cost. If you increase the cost to the licensees, that cost is
typically passed on to consumers, she opined. The sunset
legislation surrounds public interest. Thus, the auditors
examined duplicate activity and concluded there is none. She
reaffirmed she has not reviewed pending legislation that affects
the RESF.
REPRESENTATIVE GARDNER inquired as to whether the surety fund is
the recourse when the claim is not an error or omission, but is
the result of fraud or misrepresentation.
3:12:02 PM
MS. DAVIDSON answered that the division examined the cost of a
surety bond and cost of E&O insurance as a benchmark.
CHAIR OLSON noted that HB 413 extends the Real Estate
Commission. Another bill, HB 357 -CLAIMS AGAINST REAL ESTATE
LICENSEES is currently before the House Labor and Commerce
Standing Committee, but is being held pending additional
committee work on issues, he noted. He offered to have Ms.
Davidson testify on the other bill when HB 357 is heard.
3:12:43 PM
MS. DAVIDSON, in response to Representative Neuman, stated that
board membership information is posted to the Department of
Commerce, Community, & Economic Development web site, as well as
individual professionals who are licensed. However, she was
uncertain whether their credentials are also listed. In further
response to Representative Neuman, Ms. Davidson offered that the
governor's office, Boards and Commissions would have
information. Additionally, confirmation hearings are held on
appointees to boards, so there may be credential information
contained in the committee minutes. She explained that the Real
Estate Commission licenses and regulates the occupation, but
that there are also professional organizations.
3:15:30 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 413.
3:15:48 PM
REPRESENTATIVE NEUMAN moved to report HB 413 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 413 was reported from the
House Labor and Commerce Standing Committee.
3:16:02 PM
The committee took an at-ease from 3:16 p.m. to 3:18 p.m.
HB 379-CPA EDUCATION REQUIREMENTS
3:18:08 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 379, "An Act relating to educational requirements
for licensure as a certified public accountant."
REPRESENTATIVE MIKE HAWKER, Alaska State Legislature, stated
that HB 379 adds transitional language to correct a problem that
resulted from passage of HB 274 in 2006, which was a rewrite of
the Certified Public Accountant's (CPA) licensure statutes.
Once the statutes were applied to the actual practice, some
imperfections arose. The omnibus bill that passed the
legislature in 2006 moved Alaska much closer to the national
standards for CPAs. Previously in the state, a person could
become licensed as a CPA by obtaining an accounting degree at an
accredited university, working for two years under the
supervision of a licensed CPA, and passing the qualifying
examination. However, prior to passage of HB 274 in 2006,
people could get licensed without first obtaining an
undergraduate degree in accounting. Thus, a person with an
undergraduate degree, other than accounting, could meet the
other requirements, including passage of the uniform public
accounting examination, but was also required to work for three
years under the supervision of a licensed CPA. The bill
neglected to phase out those people who acquired a degree other
than accounting, such as in finance, who planned on using the
three years of experience to become a CPA. Thus, the bill would
essentially "grandfather in" people who received their
baccalaureate degrees prior to January 1, 2008. Those seeking
licensure as CPAs, who receive their baccalaureate degree after
January 1, 2008, will be required to have a degree in
accounting. He related that this change is wholly supported by
the Alaska Board of Public Accountancy.
3:22:12 PM
REPRESENTATIVE LEDOUX inquired as to whether people with a
degree such as paleontology or biology seek CPA licensure.
REPRESENTATIVE HAWKER answered that it is possible, but that the
individual would still have to pass the stringent national exam.
REPRESENTATIVE HAWKER in response to Representative Neuman,
explained that the board could provide a specific interpretation
of baccalaureate degrees including foreign degrees that would be
considered as equivalent.
3:25:42 PM
MAX MERTZ, CPA, Chair, Board of Public Accountancy, Division of
Corporations, Business, and Professional Licensing, Department
of Commerce, Community, & Economic Development (DCCED), in
response to Representative LeDoux, explained that people with
non-business degrees generally return to college to take the
requisite hours in accounting courses prior to taking the
qualifying examination. He opined it would be very difficult to
pass the CPA exam without a foundation in accounting. The board
supported phasing out the three year experience option in order
to ensure that the person taking the exam holds a baccalaureate
degree in accounting.
3:26:34 PM
MR. MERTZ, in response to Representative Gatto, offered that
certification is valid, subject to biennial renewal which
includes continuing education for CPAs. Once the CPA
examination is taken, it does not have to be taken again.
However, a licensee can elect to place their license into
inactive status. When the licensee decides to reactivate
his/her license, they would be required to pay back registration
fees and meet continuing education requirements of 120 hours.
In further response to Representative Neuman, Mr. Mertz
explained the baccalaureate equivalency relates largely to
foreign candidates. Since many countries do not have
baccalaureate degrees, candidates submit their foreign degree to
one of several organizations that evaluate it against the U.S.
baccalaureate degree for equivalency. The organization provides
the candidate with a certificate of equivalency, which is
accepted by the board. In further response to Representative
Neuman, Mr. Mertz advised that the foreign candidate must still
pass the national qualifying CPA exam.
3:29:19 PM
CHAIR OLSON, after first determining no one wished to testify,
closed public testimony on HB 379.
3:30:09 PM
REPRESENTATIVE GARDNER moved to report HB 379 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 379 was reported from the
House Labor and Commerce Standing Committee.
3:30:41 PM
The committee took an at-ease from 3:30 p.m. to 3:33 p.m.
HB 350-VEHICLE RENTAL TAX COLLECTION
3:33:32 PM
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 350, "An Act providing for an amount to be
deducted and retained for collecting and submitting the vehicle
rental tax."
3:33:47 PM
PETE FELLMAN, Staff, to Representative John Harris, Alaska State
Legislature, said that HB 350 is an effort to help vehicle
rental businesses with a 3 percent rebate of the ten percent
state vehicle rental tax. He explained that most car rental
businesses use credit cards that charge a fee. The businesses
must fill out paperwork to collect and remit the vehicle rental
tax on behalf of the state. The purpose of HB 350 is to offer a
rebate to all vehicle rental agencies, but in particular, to
assist the "mom and pop" businesses that rent vehicles to
tourists.
MR. FELLMAN pointed out that 110 businesses currently collect
and remit the vehicle rental tax. He posed three scenarios to
explain how many businesses would be affected by HB 350,
depending on the maximum quarterly vehicle rental tax that could
be retained by businesses. He explained if the cap for the
rebate was set at $1,000 per year, 27 businesses would remit the
full tax and 83 would retain 3 percent of the tax collected.
The small businesses would benefit from HB 350. If the cap for
the tax rebate was changed to $2,000 per year, 13 businesses
would remit the full tax and 97 would retain 3 percent of the
tax collected. Finally, if the cap for the rebate was changed
to $5,000 per year, 8 businesses would remit the full tax, and
102 businesses would retain 3 percent of the tax collected. The
original bill did not set a cap on the amount of the tax rebate.
3:37:06 PM
MR. FELLMAN, in response to Representative Gatto, explained that
the proposed committee substitute would cap the tax rebate at
$1,000 per quarter. In that scenario, 10 taxpayers would remit
the full tax collected and 100 would retain 3 percent of the
vehicle tax collected on behalf of the state.
3:39:02 PM
The committee took an at-ease from 3:39 p.m. to 3:41 p.m.
3:41:53 PM
REPRESENTATIVE NEUMAN moved to adopt CSHB 350, labeled 25-
LS1363\C, Bullock, 2/22/08, as the working document. There
being no objection, Version C was before the committee.
3:42:14 PM
REPRESENTATIVE LEDOUX asked whether Mr. Fellman could provide a
list of all taxes levied on small businesses by the state. She
noted her interest in which taxes small businesses collect on
behalf of the state. She read a list of taxes from a list
provided by Representative Gardner, such as the bed tax and game
tax. She further inquired as to any other rebates that are
offered on taxes collected by businesses on behalf of the state.
MR. FELLMAN explained that there are two types of taxes that
businesses remit, an excise tax and an income tax. He pointed
out that an excise tax is collected on behalf of the state,
whereas the other is an income tax. He further explained that
there is a "no timely filing credit" and a "timely filing
credit." A no timely filing credit means there is not any tax
[rebate allowed], such as the alcohol tax, or commercial
passenger vessel tax. However, taxes such as the cigarette tax
allow businesses a timely filing credit.
REPRESENTATIVE LEDOUX inquired as to whether a rebate should be
offered on all taxes that businesses collect for the state
instead of attempting to single out the vehicle rental tax.
MR. FELLMAN speculated that some businesses incur more expenses
when collecting some taxes, particularly when credit cards are
used, so the timely filing credit provides relief for the
businesses. In further response to Representative LeDoux, Mr.
Fellman explained that vehicle rental cards require a credit
card, but that other businesses have other options.
3:47:09 PM
REPRESENTATIVE GARDNER inquired as to the total tax rate for
motor fuel taxes and tobacco taxes, since the sponsor statement
lists that 1 percent of the motor fuel taxes can be deducted and
retained.
MR. FELLMAN offered to provide information on the total tax. He
noted that the timely filing fee for the tobacco tax is set at
.4 percent and timely filing fees for the tire tax is set at 5
percent with a $900 cap on the rebate. In further response to
Representative Gardner, Mr. Fellman answered that while motor
fuel taxes are often paid by credit card, the motorist often
remits a check or cash, but credit cards are used for vehicle
rentals.
3:49:11 PM
REPRESENTATIVE GARDNER opined that the actual cost to a merchant
for tax collection is minimal once their collection system is
set up.
REPRESENTATIVE BUCH related his understanding that hunting and
fishing licensing vendors retain a portion, perhaps 3 percent,
of the amount collected to offset the overhead. He inquired as
to whether the fishing and hunting license fees are also
considered an excise tax.
MR. FELLMAN surmised that the dealer remits an excise tax. He
was uncertain of the amount, but offered to provide the
information to the committee.
3:51:33 PM
MR. FELLMAN, in response to Representative Gatto, surmised that
the parking facility tax, airport tax, Anchorage municipal tax,
and the state tax are all part of the 10 percent state tax
assessed.
REPRESENTATIVE GATTO pointed out that some of the taxes
collected are not ones collected on behalf of the state. Thus,
if a rebate were given to the business for all the taxes
collected, the business would receive a rebate on some taxes
collected for other entities.
3:52:31 PM
REPRESENTATIVE LEDOUX asked for clarification on the distinction
between businesses that use credit cards and those that don't
use credit cards.
MR. FELLMAN answered that car rental agencies are not required
to use a credit card by statute. However, most vehicle rental
agencies have a company policy that the person must use a credit
card.
REPRESENTATIVE LEDOUX related her understanding is that while a
credit card is required at the time of rental, that upon
returning the car, the person could remit cash. She surmised
that the process is similar to one used by hotels such that the
hotel requires a credit card during the check in process, but
when a person checks out, the hotel will accept other forms of
payment.
3:55:05 PM
MR. FELLMAN, in response to Representative Neuman, offered to
provide a listing of taxes, rebates, and timely filing credit
amounts for the committee. In further response to
Representative Neuman, Mr. Fellman offered to provide the
committee with the composition of the ten percent tax.
MR. FELLMAN explained that the tourism industry businesses
brought this matter to the prime sponsor's attention. This bill
is intended to aid small businesses involved in tourism and to
help foster tourism. In response to Chair Olson, Mr. Fellman
related his understanding that other states do not offer similar
rebates on vehicle rental taxes.
3:59:43 PM
REPRESENTATIVE NEUMAN inquired as to whether municipalities
offer timely filing credits to businesses.
JOHANNA BALES, Deputy Director, Tax Division, Department of
Revenue (DOR), said is not aware of any municipalities offering
timely filing credits to businesses. She explained that other
states provide timely filing credits for businesses. She
further explained that when a business has the fiduciary
responsibility to collect taxes on behalf of a third party and
remit it to the state, that it is not an uncommon practice to
offer a credit. She responded to earlier questions raised,
including that the vehicle rental tax was effective on January
1, 2004. The tire fee was enacted during the same legislative
session, and was effective in September 2003. A timely filing
credit is a method the division uses to compensate the
businesses for their fiduciary responsibilities. She related
that the department anticipated that vehicle rental agencies
would be eligible for a timely filing credit, but that the
legislature did not offer it. She offered that the trend is to
compensate businesses and offer timely filing credits. The
alcohol tax and other taxes are long standing taxes. She noted
that the tobacco taxes require businesses to spend more time in
the collection process. While she was uncertain whether
municipalities offer credits, she noted that some municipalities
use state law to craft their ordinances. She opined that the
Municipality of Anchorage modeled its cigarette tax credit on
state law.
CHAIR OLSON related his understanding that the Kenai Peninsula
Borough also offers a rebate on sales tax.
4:02:50 PM
REPRESENTATIVE GATTO posed a scenario in which a dealer sells
tires four at a time, and collects a $2.50 state fee per tire,
compared to state fuel set at 8 cents a gallon. He opined that
the rebate should be calculated differently based on the actual
time needed to collect the tax on behalf of the state. The
amount of time taken to collect various taxes varies, and in
some instances may require hand entries on the bill of sale and
other instances the tax is automatically calculated by computer.
Thus, the total amount of time the business spends collecting
the tax varies. He opined that car rental taxes are computed
generated too, based on the type of vehicle the client rents.
MS. BALES answered that the intent of the timely filing credit
is to compensate businesses for processing the tax collection
such as filling out the state's paperwork and tracking the
specific tax. She posed a scenario that a state worker is
exempt from the vehicle rental tax. The car rental tax must
retain paperwork, so there is more recordkeeping for the
business. She opined that the tire tax, vehicle rental tax, and
the motor fuel tax are similar, with respect to the additional
paperwork businesses must complete. She also noted that
businesses receive timely filing credit for collecting motor
fuel taxes. She explained that of 29 taxpayers who remit
alcohol taxes, 6 to 10 large distributors pay 90 percent of the
alcohol taxes. Whereas, the tire and vehicle rental industry is
comprised of 100 to 200 businesses, many of whom are small
businesses who are burdened with the additional work to collect
and remit the vehicle rental taxes.
4:06:28 PM
REPRESENTATIVE GATTO referred to a letter in the committee
packet from Mr. Bennett, Great Alaskan Holidays that states it
keeps 5 percent, up to $900 per quarter as a reward for
remitting fees in a timely manner. He noted the letter also
mentions that MasterCard charges his company a fee of 1.85
percent. He surmised that the amount that businesses retain
varies seems to depend on the commodity.
MS. BALES acknowledged that Representative Gatto points out an
anomaly. She opined that someone should review all the taxes
the state collects and determine what amount to compensate
companies for collecting taxes on behalf of the state. She
pointed out that the timely filing credit only applies to the 10
percent state excise tax and does not apply to a variety of
other fees or taxes assessed for car rentals including the 4
percent facility fee.
4:08:36 PM
REPRESENTATIVE GATTO referred to the title of the CS for HB 350
which read, "An Act providing for an amount to be deducted and
retained for collecting and submitting the vehicle rental tax."
He referred to the bill, which read:
On page 1, line 5,
(c) A person required to collect and pay the tax
to the department under (a) of this section ...
REPRESENTATIVE GATTO noted that there is not any reference to
clarify that HB 350 refers to only the state portion of taxes
collected.
MS. BALES explained that subsection (a) refers to the State of
Alaska vehicle rental tax.
4:09:39 PM
REPRESENTATIVE NEUMAN referred to page 1, line 5, and inquired
as to whether the bill should read "business" instead of
"person."
MR. FELLMAN answered that he could pose that question for the
legal drafter to answer and perhaps clarify.
MS. BALES, in response to a request by Representative Neuman,
offered to provide a list of taxes collected on behalf of the
state and any timely filing credits offered.
4:11:39 PM
REPRESENTATIVE GATTO referred to subsection (a) of AS 43.52.050,
which he noted refers back to AS 43.52.010 which states, "an
excise tax", and inquired as to whether that is limited to a
state tax.
MS. BALES explained there are many excise taxes, but the way the
statute is set up is to only apply to the state's rental car tax
and no other taxes.
4:13:08 PM
GARY ZIMMERMAN, General Manager, Avis Rent A Car (AVIS), stated
that AVIS has businesses that operate throughout Alaska and
employ over 100 employees throughout Alaska. He recalled
testifying several years ago about the financial hardship that
imposing a vehicle rental tax would have on individual
businesses. He urged support for HB 350 for reimbursement for
collecting the vehicle rental tax. Being a tax collector for
the state costs AVIS money, with indirect and direct costs
associated with collecting the vehicle rental tax, he opined.
He noted that direct costs include credit card transaction fees,
which range from 2 to 3 percent. Last year AVIS collected over
$1.2 million in tax revenue from customers which resulted in a
direct cost of $25,000. Thus, AVIS is not in favor of a $1,000
cap. Indirect costs for AVIS include upgrades to computers,
time to process payments, and countless hours to train employees
so they can explain to customers the difference between the
state and municipal fees and taxes and exemptions. Other taxing
authorities provide for similar timely filing credit, he opined.
The City of Kenai and the City of Skagway reimburse AVIS 5
percent of the taxes collected by AVIS. He concluded that
collecting the tax costs businesses money. He urged the
committee to consider and pass legislation to lessen that
burden.
4:15:52 PM
MR. ZIMMERMAN, in response to Representative Gatto, answered
that the rates charged varies by transaction and credit card
company. In further response to Representative Gatto, Mr.
Zimmerman agreed that each rental car agency pays the same rate
to use the credit card services. He pointed out that when a
vehicle rental car agency raises its rates to compensate for the
credit card fee, that the increase is also taxed. Ultimately,
the company absorbs the cost to collect the tax. He posed a
scenario in which the company would raise its rate by $1, and of
that 10 cents would reflect the vehicle rental tax.
4:17:25 PM
REPRESENTATIVE LEDOUX inquired as to whether a customer must use
a credit card at the time they remit payment.
MR. ZIMMERMAN answered that AVIS requires a credit card be used
at the time of the initial transaction unless the customer
prearranged some other type of payment. However, the customer
can remit cash or travelers check at the time the rental car is
returned.
4:18:12 PM
JIM POLYEFKO, General Manager, National and Alamo Car Rental,
agreed with Mr. Zimmerman's testimony. He offered that in 2007,
his company collected approximately $900,000 in vehicle rental
taxes. He offered that credit card fees range between 2 to 3
percent, depending on the company. Additionally, costs are
incurred with annual state audits, when conducted, as well as
for labor costs. He urged the committee to support HB 350
without a cap to allow a 3 percent rebate to companies to offset
expenses. He opined that companies should not be treated
differently due to their size as all companies are in the
business of renting vehicles.
4:19:53 PM
REPRESENTATIVE NEUMAN related his understanding that the bonding
authority on parking garage at the Ted Stevens Anchorage
International Airport benefitted rental car companies since they
can fuel and clean their cars on site. He inquired as to
whether the ten percent tax is applied throughout the state.
MR. POLYEFKO related that he could not answer for other cities,
only on the ten percent state vehicle rental tax as a stand
alone excise tax. In further response to Representative Neuman,
Mr. Polyefko answered that separate fees are assessed on a per
day basis to assist in paying for the facility at the airport.
4:22:25 PM
CRAIG FLOYD, Co-owner, Thrifty Car Rental; Dollar Car Rental,
stated that his business is a family business that has grown
considerably over the years. The additional taxes create a
burden and the companies need relief, he opined. Our costs for
credit card discount fees vary, but the overall average about
2.65 percent, he noted. He estimated that it takes his
accounting office approximately 7.5 hours a week and
approximately $29,000 annually to administer and collect taxes.
He urged committee members to support HB 350 without the $1,000
cap. He agreed with previous car rental testifiers, Mr.
Zimmerman and Mr. Polyefko.
4:23:54 PM
DARYL BENNETT, Owner, Great Alaskan Holidays, stated that his
business is a "mom and pop" operation that started with four
motor homes 23 years ago and it is now the largest motor home
rental in Alaska. Last year he employed 30 people year round
and approximately 75 employees during the peak season. In the
past four years, he has collected in excess of $500,000 in
vehicle rental taxes. He echoed earlier testimony that credit
card discount fees vary. He noted that the fees range from 1.85
percent for a MasterCard with no awards associated with it to
2.3 percent for others. However, he noted that these are
percentages that he has negotiated so there is not consistency
or any correlation between his fees and other car rental
agencies. His accounting department entered 18,000 entries in
the last 4 years, which is quite a bit of effort, he opined. He
supports the rebate to assist his company in offsetting costs it
incurs to collect the vehicle rental tax on behalf of the state.
He opposed capping the rebate to $1,000. He pointed out that in
January through March, and October through December he does not
have any rentals. Thus, he would receive a $2,000 rebate for
the year, which is "a drop in the bucket," he opined.
4:27:04 PM
LEON MCKEAN, General Manager, Great Alaskan Holidays, stated
that as an employee of Great Alaskan, he supports HB 350 without
a cap. Originally, collecting the vehicle rental tax was a way
to assess travelers to Alaska. He echoed and supported Mr.
Bennett's testimony.
4:28:11 PM
LYNN ZEILER, Representative, Budget Rent-A-Car (Budget), echoed
earlier testimony with respect to the cost associated with
credit cards. She noted that Budget requires customers use
credit cards. She noted her staff obtains information and
receives training in order to be able to offer information to
customers who come from all over the world. Their accountant
oversees the audits and reports to ensure compliance. She urged
the committee to support HB 350.
4:29:53 PM
WAYNE MARTIN, Employee, ABC Motor Homes, stated that ABC Motor
Homes has been in business for over 20 years. He related that
he supports HB 350. He urged the committee to move HB 350
forward without a cap, since its intent is to relieve a burden
to businesses. He explained that he does not mind collecting
the vehicle rental tax on behalf of the state, but a small
rebate will help businesses. He echoed earlier testimony that
it is not just a computer function and state auditors monitor
the tax collection.
4:31:22 PM
JOHN COOK, Legislative Director, Alaska Auto Dealers
Association, offered his support for HB 350 without a cap. In
2004, the vehicle rental tax was instituted. Car dealers
installed costly modifications to software. Dealers were
required to pay tax for warranty repairs, but the manufacturer
did not reimburse any taxes paid until the legislature fixed
that problem last year. He echoed earlier testimony on credit
card fees, but noted that modifications to computer software, or
manual calculations needed to account for the vehicle rental tax
is burdensome. He opined that businesses that sell fishing and
hunting licenses receive a 7.5 percent rebate.
4:33:52 PM
MR. COOK, in response to Representative Gatto, explained that
most dealership packages are not specifically designed for
rental vehicles, so modifications are necessary. Additionally,
rentals from the service department are partially covered by
warranty. The system is not designed to break out the portion
that is exempted, which requires cumbersome reconciliations, he
offered.
4:35:13 PM
MR. FELLMAN, in response to Representative Neuman, explained
that without a cap on the rebate, the fiscal note shows that the
state would lose $255,000 in revenue.
CHAIR OLSON, in response to Representative Neuman explained that
the state collects 10 percent of the gross revenues for vehicle
rental taxes, so it is fairly easy for the state to monitor the
tax.
REPRESENTATIVE NEUMAN pointed out the relatively small amount of
the cost of a fishing license, at $25, as compared to a vehicle
rental which often is $500, so that 3 percent is considerably
more.
MR. FELLMAN, in response to Representative LeDoux, explained
that the vehicle rental tax rebate being considered is 3 percent
of the 10 percent tax imposed by the state.
4:38:42 PM
[HB 350 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:38 p.m.
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