HB 90-VEHICLE RENTALS & VEHICLE RENTAL NETWORKS  4:14:57 PM CO-CHAIR SPOHNHOLZ announced that the final order of business would be HOUSE BILL NO. 90, "An Act relating to rental vehicles; relating to vehicle rental networks; relating to liability for vehicle rental taxes; and providing for an effective date." 4:15:20 PM REPRESENTATIVE ADAM WOOL, Alaska State Legislature, as prime sponsor, thanked the committee and said he would be open to any questions. 4:15:37 PM REPRESENTATIVE NELSON asked Representative Wool to comment on the letter from the Department of Revenue (DOR) [included in the committee packet]. REPRESENTATIVE WOOL responded that DOR has taken a neutral position on the bill. He said the statement presented in the PowerPoint presentation given during the House Labor and Commerce Standing Committee meeting on April 9, 2021, was from a DOR employee under the previous administration. He pointed out that the letter stated DOR would continue to follow the law regarding vehicle rental tax. He said it was established in the same committee meeting that anyone renting a car to someone else owes a vehicle rental tax, although there is no way to track down individuals, which is the reason for the proposed legislation. REPRESENTATIVE NELSON opined that the quote gave the impression that the current DOR supports HB 90. 4:17:39 PM CO-CHAIR FIELDS said that as recently as last year DOR was actively supporting the proposed legislation. 4:18:09 PM MIKE BARNHILL, Deputy Commissioner, Department of Revenue, confirmed that the current administration does not have a position on HB 90. 4:18:26 PM REPRESENTATIVE MCCARTY shared that he "likes" the proposed legislation and noted that Turo doesn't even have an Alaska business license. He wondered whether enforcing a vehicle rental tax would cost more money than would be collected. REPRESENTATIVE WOOL stressed Representative McCarty's point that Turo has not applied for a business license in Alaska but is receiving revenue through its operations within the state. Uber does have a business license in Alaska, he said, and pays corporate income taxes. He said Turo has indicated an initial public offering (IPO) in 2021, making it a C Corp, which would mandate corporate state income taxes; with that change, he said, there may be more transparency in their revenue. REPRESENTATIVE MCCARTY mentioned Turo and business licenses in Alaska. REPRESENTATIVE WOOL replied that it's already law that a business must have an Alaska business license in order to operate, and said that he doesn't think he needs the proposed legislation to repeat the statute. 4:23:48 PM REPRESENTATIVE NELSON asked Mr. Barnhill about the stance of DOR on the previous iteration of the proposed legislation. MR. BARNHILL said that while he believes the previous administration supported an earlier version of the proposed legislation, he's not aware of any position taken under the current administration. 4:24:56 PM REPRESENTATIVE KAUFMAN noted that the effective date of HB 90 would be immediate. He asked whether there would be a grace period for implementation, and whether people hosting their cars would owe back taxes. REPRESENTATIVE WOOL responded that people renting out cars are currently liable for the car rental tax. He said that this proposed legislation would, in practice, add a line item for tax on the payment page of the app. He said that the state would not have the names of the hosts, so there would be no mechanism for retroactive enforcement. He emphasized that car rental tax is not a liability incurred by the car owner, but is passed on to the buyer. 4:27:20 PM CO-CHAIR SPOHNHOLZ noted that Section 8 of HB 90 states that the act would take effect immediately and would not be retroactive. 4:27:47 PM MR. BARNHILL said DOR would implement enforcement should HB 90 pass. 4:28:07 PM REPRESENTATIVE KAUFMAN asked whether DOR anticipates litigation to enforce the participation of the companies running the peer- to-peer applications. MR. BARNHILL replied that litigation seems possible but said he is hesitant to speculate. He clarified that DOR would implement any passed legislation in good faith and actively look for efficient methods of enforcement. 4:30:07 PM CO-CHAIR FIELDS stated his agreement that companies need to follow the law, which should apply equally whether a company does business through an app or a storefront. He said that with the increasingly virtual environment facilitating the transfer of goods and services, the law will need to adapt. He added: The absence of a level playing field, conversely, encourages companies to engage in what economists call 'rent-seeking activities' ... you don't want to encourage rent-seeking activities. They're inefficient, they tend to exist in an environment of political corruption. It's incumbent on us to ensure companies follow the law. CO-CHAIR FIELDS opined that it seems obvious that using digital transactions to facilitate services or the use of property can be taxed equitably, noting that owners hosting properties through Airbnb pay lodging tax. He expressed that the middle class has experienced stagnant wages and rising costs and governments have experienced growing fiscal constraints due in part to some companies exploiting anachronisms existing in the law regarding selling a good or service through an online portal. He referred to Representative McCarty's earlier comment that laws need to be current. He wondered how to maximize public benefit as more goods and services migrate to digital platforms, expressing that consumers should be able to see the benefits and convenience of using digital platforms without the concerns of sacrificing the state's fiscal position, the wages of workers, or the public good. 4:33:09 PM CO-CHAIR SPOHNHOLZ opened public testimony on HB 90. 4:33:22 PM SEAN VINCK, Senior Counsel, Turo, testified in opposition to HB 90. He opined that the "basic thrust" of the proposed legislation is to equate individual vehicle owners with traditional multinational rental car corporations, imposing on them the same obligations and burdens. He said that contrary to what has been discussed, HB 90 would not transfer obligations onto the vehicle sharing platforms, but impose collection obligations on individuals who share vehicles through said platforms. He said that, if the objective is to impose certain obligations on out-of-state platforms facilitating digital transactions in order to level the playing field, that's a reasonable goal. The problem, he said, is that HB 90 would impose those obligations on the individuals within Alaska. He said HB 90 would have no effect on the bottom line of corporations and suggested that other items to consider are consumer protection, public safety, and insurance, and that there exists a model for car sharing legislation on the national level. 4:37:27 PM CO-CHAIR FIELDS asked, "Do you think if General Motors had to pay taxes and Ford did not, that would have an impact on their competitiveness, vis--vis each other?" MR. VINCK replied, "I assume that the answer is yes. I don't represent either of those companies and don't know what their financial situation is." CO-CHAIR FIELDS stated, "Then, obviously, it would have an impact on your competitiveness vis--vis bona fide local businesses in Alaska that rent cars." 4:37:54 PM REPRESENTATIVE KAUFMAN asked Mr. Vinck whether he was referring to the subparagraph beginning on page 1, line 12, which read as follows: (B) vehicle rental business that arranged or executed  the rental through the vehicle rental network if the  rental was arranged or executed through a vehicle  rental network; and REPRESENTATIVE KAUFMAN asked whether Mr. Vinck was discussing his interpretation that the "rental business" terminology referred to the individual hosting the car, rather than the online broker arranging the rental. MR. VINCK responded that Representative Kaufman highlighted the section in question. He said that his interpretation is that the objective is to impose tax collection obligations on both the person who provides the vehicle and also on the vehicle rental business as defined later in the text of the proposed legislation. He said that, in his interpretation, the vehicle rental business is the person or entity that owns the vehicle. The network, he said, is the platform through which the owner of the vehicle connects with the person who wants to share the vehicle. The vehicle network as defined in the text, he said, is not the same thing as the rental business. He said that the proposed legislation would not put the obligation for tax collection on the network, but on the business, which is defined as the owner of the vehicle. He said that the issue of ambiguity in the structure of the proposed legislation should require broader discussion. 4:40:15 PM CO-CHAIR SPOHNHOLZ asked whether Turo collects taxes on rentals that take place in other states. MR. VINCK replied that some states have been authorized to deploy tax collection and remittance obligations to out of state platforms, transferring the tax collection obligation from vendors to platforms under certain circumstances. To that end, he said, the law requires businesses to collect and remit sales taxes on many transactions in approximately 24 states. CO-CHAIR SPOHNHOLZ referred to Mr. Vinck's earlier assertion that HB 90 "seeks to equate individuals who seeks to rent their vehicles with multinational corporations." She asked whether Turo operates outside of the United States. MR. VINCK replied that Turo is a technology company and does not own any vehicles, but that it provides the technology platform to those who do own vehicles. He said, "My comment earlier was to point out that this is trying to equate shared vehicle owners with multinational corporations." 4:42:05 PM REPRESENTATIVE MCCARTY asked whether individual car owners collect payment and remit to Turo, or whether Turo collects payment and remits to the car owners. MR. VINCK asked whether Representative McCarty was referring to taxes. REPRESENTATIVE MCCARTY clarified his question. MR. VINCK responded that the person who is renting the car provides the payment through the digital platform, which then remits compensation to the vehicle owner. REPRESENTATIVE MCCARTY surmised that an individual pays Turo for the service, and Turo subcontracts with entities within Alaska. MR. VINCK replied that an individual pays Turo the total price, and Turo remits to the vehicle owner the agreed amount. REPRESENTATIVE MCCARTY concluded, "So that means Turo is really doing business in Alaska." MR. VINCK suggested that defined terms in statute mean that Turo is not actually doing business in Alaska. 4:44:22 PM CARL SZABO, Vice President and General Counsel, NetChoice, testified in opposition to HB 90. He said that Alaska doesn't have a statewide sales tax, which is what is affected by established law. He said that saying the U.S. Supreme Court decision in South Dakota v. Wayfair, Inc., No. 17-494 (U.S. Jun. 21, 2018), applies to car rental tax is a misrepresentation. He mentioned Representative Kaufman's discussion of the effective date and whether the tax obligation would be retroactive. He said that no state treats peer-to-peer car sharing the same as large rental car companies when it comes to taxes. He said that Hertz and "Big Rental" own thousands of cars in Alaska, but Turo doesn't own a single vehicle; likewise, those companies enjoy a tax carve-out of approximately $4 billion nationwide, with $1.9 million in Alaska, for which Turo and individual car owners are not eligible. Mr. Szabo suggested that digital platforms facilitating car sharing are exactly the same as using the classified page in the Anchorage Daily News, which has an app, provides other services, and facilitates rentals. Therefore, he opined, the Anchorage Daily News would be one of the "tax scofflaws" addressed under HB 90. Either the proposed legislation is way too overinclusive as a new tax, he said, or it's a retroactive tax already in statute, in which case HB 90 is irrelevant and, if enacted, would face the same constitutional issues as did North Dakota. 4:48:04 PM CO-CHAIR FIELDS commented that it's ironic that NetChoice's representative was inveighing against companies operating within the state of Alaska while it's funded by Google, Alibaba, Amazon.com, and some of the other largest multinational companies on earth. 4:48:40 PM BENJAMIN PALMER, Director of Government and Public Affairs, Enterprise Holdings, Inc, testified in support of HB 90, stating that it would clarify that peer-to-peer car rental platforms are required to collect car rental taxes for transactions on their platforms. He said that the tax would be paid by the consumer, and that everyone renting a car in Alaska should expect to pay the tax. As stated before, he said, the proposed legislation would create a level playing field and ensure the state's general fund doesn't lose out on revenue. 4:49:56 PM REPRESENTATIVE MCCARTY asked whether Enterprise Holdings, Inc, engages in peer-to-peer services. MR. PALMER replied that Enterprise CarShare exists in some locations, but that the corporation does not engage in traditional peer-to-peer services. 4:50:29 PM CO-CHAIR SPOHNHOLZ, after ascertaining that no one else wished to testify, closed public testimony on HB 90. 4:50:37 PM CO-CHAIR FIELDS moved to report HB 90 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 90 was reported out of the House Labor and Commerce Standing Committee.