Legislature(2023 - 2024)BUTROVICH 205
04/20/2023 01:30 PM Senate TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| SB127 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 127 | TELECONFERENCED | |
| + | HB 8 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE TRANSPORTATION STANDING COMMITTEE
April 20, 2023
1:46 p.m.
MEMBERS PRESENT
Senator James Kaufman, Chair
Senator Löki Tobin
Senator Jesse Kiehl
MEMBERS ABSENT
Senator David Wilson, Vice Chair
Senator Robert Myers
COMMITTEE CALENDAR
SENATE BILL NO. 127
"An Act relating to vehicle rental taxes; relating to the
issuance of subpoenas related to tax records; and providing for
an effective date."
- HEARD & HELD
HOUSE BILL NO. 8
"An Act relating to electric-assisted bicycles."
- BILL HEARING CANCELED
PREVIOUS COMMITTEE ACTION
BILL: SB 127
SHORT TITLE: TAXATION: VEHICLE RENTALS
SPONSOR(s): SENATOR(s) CLAMAN
04/12/23 (S) READ THE FIRST TIME - REFERRALS
04/12/23 (S) TRA, FIN
04/20/23 (S) TRA AT 1:30 PM BUTROVICH 205
WITNESS REGISTER
SENATOR MATT CLAMAN, District H
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 127.
LIZZIE KUBITZ, Staff
Senator Matt Claman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided a sectional analysis for SB 127 on
behalf of the sponsor.
FADIL LIMANI, Deputy Commissioner
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Presented a departmental overview of SB 127.
BRANDON SPANOS, Deputy Director
Tax Division
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Answered questions on SB 127.
CARRIGAN GRIGSBY, Executive Vice President
AVIS Alaska
Anchorage, Alaska
POSITION STATEMENT: Testified by invitation on SB 127.
SEAN VINCK, Associate General Counsel
Turo Incorporated
San Francisco, California
POSITION STATEMENT: Testified by invitation on SB 127.
ACTION NARRATIVE
1:46:11 PM
CHAIR JAMES KAUFMAN called the Senate Transportation Standing
Committee meeting to order at 1:46 p.m. Present at the call to
order were Senators Tobin, Kiehl and Chair Kaufman.
SB 127-TAXATION: VEHICLE RENTALS
1:47:03 PM
CHAIR KAUFMAN announced the consideration of SENATE BILL NO. 127
"An Act relating to vehicle rental taxes; relating to the
issuance of subpoenas related to tax records; and providing for
an effective date."
This is the first hearing and the intention is to hear the
introduction, take invited testimony, and hold the bill for
future consideration.
1:47:39 PM
SENATOR MATT CLAMAN, District H, Alaska State Legislature,
Juneau, Alaska, sponsor of SB 127, introduced the legislation by
speaking to the following sponsor statement:
[Original punctuation provided.]
Senate Bill 127 requires vehicle rental platform
companies, such as Turo and Getaround, to collect the
existing state vehicle rental tax and remit the tax to
the Department of Revenue. Additionally, Senate Bill
127 revises the subpoena provisions that relate to
Department of Revenue tax collections.
Senate Bill 127 was introduced at the request of the
Department of Revenue. The department informed our
office that vehicle rental platform companies,
specifically peer-to-peer, car-sharing networks, owe
the vehicle rental tax under existing law, but the law
requires a new section to specify that the vehicle
rental platform companies are responsible for
collecting and remitting the tax.
1:49:25 PM
LIZZIE KUBITZ, Staff, Senator Matt Claman, Alaska State
Legislature, Juneau, Alaska, provided the following sectional
analysis for SB 127:
[Original punctuation provided.]
Section 1 AS 43.05.040. Inspection of records or
premises and issuance of subpoenas. Amends AS
43.05.040(c) by removing unnecessary language
regarding the issuance of out-of-state subpoenas
related to tax records.
Section 2 AS 43.52.050. Liability for payment of
vehicle rental taxes. Amends AS 43.52.050(a) by adding
language clarifying that vehicle rental platform
companies and other companies that arrange vehicle
rentals and leases shall collect the existing state
vehicle rental tax and remit the tax to the Department
of Revenue.
Section 3
AS 43.52.050. Liability for payment of vehicle rental
taxes.
Amends AS 43.52.050 by adding a new section (c)
defining "motor vehicle" and "vehicle rental
platform."
Section 4
Uncodified law assessment and collection limitation.
The Department of Revenue shall have one year from the
effective date of this Act to assess and collect the
vehicle rental taxes that were imposed before the
effective date of this Act on a transaction arranged
or executed through a vehicle rental platform. If the
tax is not assessed and collected before one year
after the effective date of this Act, proceedings may
not be instituted in court for the assessment or
collection of the tax.
Section 5
Effective Date
This Act takes effect immediately.
1:51:26 PM
FADIL LIMANI, Deputy Commissioner, Department of Revenue (DOR),
Anchorage, Alaska, presented a departmental overview of SB 127.
MR. LIMANI began with slide 3, "SB 127 Objective."
• The intent of this legislation is to move the
responsibility for collecting and remitting tax from
the individual owners to the vehicle rental platform
company if the lease or rental was arranged or
executed through a platform.
• The proposed legislation does not impose a new
tax.
• The legislation provides for a streamlined
process for the Department of Revenue in
collecting the peer-to-peer rental tax.
• AS 43.52.010: "There is imposed an excise tax on
the charge for the lease or rental of a passenger
vehicle in this state if the lease or rental of
the passenger vehicle does not exceed a period of
90 consecutive days."
• AS 43.52.050: taxes "shall be collected and paid
to the department by the person who provides the
leased or rented vehicle."
1:54:09 PM
MR. LIMANI moved to slide 4, "SB 127 Bottom Line."
• The tax burden already exists AS 43.52.010
• This bill compels the vehicle rental platforms to
collect and remit the tax on behalf of vehicle
owners
1:54:40 PM
MR. LIMANI continued with slide 5, "SB 127 Background."
• Alaska levies an excise tax on fees and costs charged
for the lease or rental of a passenger or recreational
vehicle if the lease or rental does not exceed a
period of 90 consecutive days.
• The person working for the rental/lease agency that
provides the leased or rental vehicle collects the tax
from the individual renting or leasing the vehicle.
The rental/lease agency in turn remits the tax to the
Department of Revenue's Tax Division.
• For passenger vehicles, the rate is 10% of the total
fees and costs for renting or leasing. For
recreational vehicles, the rate is 3% of the total
fees and costs for renting or leasing.
• Vehicle rental/lease agencies file tax returns and
remit taxes quarterly.
1:55:49 PM
MR. LIMANI moved to slide 6, "SB 127 Legislative History."
• 2003 The Legislature enacted the vehicle rental
tax on Aug. 20, 2003. The tax became effective
January 1, 2004.
• 2004 The Legislature exempted the rental of
taxicabs by taxicab drivers from the vehicle rental
tax.
• 2006 The Legislature exempted trucks rented by
individuals for moving personal property and for
vehicles provided to customers by automobile dealers
as replacement transportation during warranty,
recall, or service contract repairs.
• 2013 The Legislature excluded motorcycles and
motor-driven cycles as defined by AS 28.90.990 from
the tax.
• 2020 The municipality of Anchorage passed
ordinance AO No. 2020-55 to establish the duties and
responsibilities of a rental vehicle hosting
platform; and to establish the rules and
responsibilities of rental agencies who use a
hosting platform to conduct motor vehicle rental
transactions.
1:56:47 PM
SENATOR TOBIN asked if peer-to-peer vehicle rental companies
collect local tax per the Anchorage ordinance.
1:57:02 PM
MR. LIMANI replied yes, the tax is collected through the posting
platform and transferred to the municipality.
SENATOR TOBIN asked if SB 127 extends the tax collection to the
state.
MR. LIMANI affirmed that the legislation facilitates tax
remittance to the state.
1:57:28 PM
MR. LIMANI turned to slide 7, "Legal Framework."
• AS 43.52.010: "There is imposed an excise tax on the
charge for the lease or rental of a passenger
vehicle in this state if the lease or rental of the
passenger vehicle does not exceed a period of 90
consecutive days."
• AS 43.52.050: taxes "shall be collected and paid to
the department by the person who provides the leased
or rented vehicle."
• AS 44.23.020(b)(2): "The attorney general shall?(2)
bring, prosecute, and defend all necessary and
proper actions in the name of the state for the
collection of revenue."
• AS 44.25.020(1) & (2): "The Department of Revenue
shall (1) enforce the tax laws of the state; (2)
collect, account for, have custody of, invest, and
manage all state funds and all revenues of the state
[with certain exceptions like the permanent fund]."
• Dick Fischer Development No. 2 Inc. v. DOA, superior
court case: Neither a commissioner nor any other
state official has the authority to deprive the
state treasury of public monies unless authorized by
law.
MR. LIMANI stated that without SB 127 the department would
collect the tax from each vehicle owner rather than the
vehicle rental platform.
1:58:32 PM
CHAIR KAUFMAN surmised that the tax liability exists, and the
proposed legislation addresses the methods and means of
collecting state taxes.
MR. LIMANI responded that is correct.
CHAIR KAUFMAN asked about the final bullet point on slide 7:
• Dick Fischer Development No. 2 Inc. v. DOA, superior court
case: Neither a commissioner nor any other state official
has the authority to deprive the state treasury of public
monies unless authorized by law.
1:58:58 PM
MR. LIMANI informed the committee about a Superior Court case
that said that neither a commissioner nor any other state
official has the authority to deprive the treasury of public
monies unless authorized by law.
1:59:23 PM
MR. LIMANI moved to slide 8, "Fiscal Impacts."
• The Department of Revenue has collected an average
of $10.7 million per year in vehicle rental taxes
over the past four years.
• The proposed legislation would capture unreported
vehicle rentals that are arranged or executed
through a vehicle rental platform and, therefore,
would have a positive effect on revenue.
• The Department of Revenue currently does not have
enough data on peer-to-peer rental information in
Alaska to provide for an estimative revenue
impact.
• Currently the Department of Revenue has
approximately $470K in delinquent accounts spread
across 25 taxpayers.
2:00:15 PM
CHAIR KAUFMAN asked if the department had a breakdown of the
delinquent accounts.
2:00:29 PM
MR. LIMANI replied that the department had a breakdown, but
taxpayer confidentiality limits the data accessible via the
peer-to-peer platform network.
2:00:57 PM
SENATOR KIEHL surmised that more than 25 people rented vehicles
through the car-share platforms. He wondered if the remaining
vendors collect and remit the required tax.
MR. LIMANI replied that some taxpayers voluntarily report. He
noted that DOR seized the collection process to introduce SB
127. He noted that the additional taxpayer population is thus
far undetermined.
2:02:09 PM
SENATOR KIEHL asked for an estimate of platform users who
collect and remit taxes to the state.
MR. LIMANI offered to provide the estimate to the committee
shortly.
2:02:32 PM
CHAIR KAUFMAN surmised that the vendors must pay the required
tax from the net charge collected during the transaction if tax
was not levied at the point of sale. He asked if the tax burden
falls on the owners of the rented vehicles. He wondered if the
peer-to-peer platform would also incur responsibility.
2:03:03 PM
MR. LIMANI deferred the question to Mr. Spanos.
2:03:17 PM
BRANDON SPANOS, Deputy Director, Tax Division, Department of
Revenue (DOR), Anchorage, Alaska, responded that the vehicle
owner is the legal taxpayer.
2:04:11 PM
CHAIR KAUFMAN asked about the presence of an intermediary. He
wondered if a facilitator of the sale was liable for the tax.
2:04:20 PM
MR. SPANOS queried whether Senator Kaufman referred to Alaska's
current statute.
CHAIR KAUFMAN expressed his interest in both the current and
proposed statutes.
MR. SPANOS responded that the current statute was unclear. The
department's interpretation was that the platform and vehicle
owner were each liable for the tax. The department had not
assessed a tax against the platform to date.
2:05:04 PM
MR. LIMANI informed the committee that the proposed legislation
is not comprehensive. The legislation mimics other states'
municipal codes and state statutes related to peer-to-peer, car-
sharing platforms. He stated that the legislation intended to
address tax components and DOR was committed to working with the
Department of Transportation and Public Facilities to address
additional elements.
2:06:18 PM
CHAIR KAUFMAN moved to invited testimony on SB 127.
2:06:34 PM
CARRIGAN GRIGSBY, Executive Vice President, AVIS Alaska,
Anchorage, Alaska, testified by invitation on SB 127. He stated
that AVIS Alaska is the largest brick-and-mortar rental car
company in Alaska. He stressed that AVIS took pride in meeting
its ethical and legal obligations as a corporate citizen. He
stated that taxes contribute to roads, snow removal, parks,
pull-offs and airport facilities. He stated that SB 127 is not a
tax bill because it adds no new tax liability, makes no changes
to current tax and does not expand or constrict any tax. He
explained that SB 127 provides a tax policy adopted by the
legislature for Alaskans using peer-to-peer car share networks.
MR. GRIGSBY referenced an earlier piece of legislation that
addressed tax obligations for UBER. He informed the committee
that Turo refuses to collect state or local taxes on behalf of
their host, leaving the state to collect taxes separate from the
car rental payment. He noted that AVIS Alaska does not pay the
rental car tax and Turo would not pay the car rental tax. The
person who pays the tax is the person who rents the vehicle. The
question is whether Turo should collect state taxes via their
app when the renter pays or should Turo place the burden on
Alaskan businesses utilizing the app to independently collect
from the renter.
MR. GRIGSBY remarked that Turo now collects the local Anchorage
rental car tax via their app following the passage of a
municipality ordinance similar to SB 127. The state determined
that vehicle rental creates an obligation to collect rental car
tax from the person renting the car. If the company fails to
collect taxes from the renter, they create personal liability.
He opined that Turo looks out for its interests without
considering Alaskan businesses. He added that AVIS Alaska
supports state law requiring that all vehicle owners renting
vehicles for less than 90 days' pay the 10 percent car rental
tax. He supported competition from Turo but sought an even
playing field and fairness. He added that SB 127 will ensure
that the person renting the car is charged the appropriate tax,
the state receives the tax, and the car owner is protected from
the liability of unpaid taxes.
2:12:44 PM
CHAIR KAUFMAN asked Mr. Grigsby to stand by for additional
questions.
2:13:07 PM
SEAN VINCK, Associate General Counsel, Turo Incorporated, San
Francisco, California, testified by invitation on SB 127. He
offered suggestions to further refine and strengthen the bill's
structure. He understood that the proposed legislation ensures
that tax collection is transferred from the vehicle owner onto
car-share platforms. He remarked that many other states adopted
similar legislation with similar intent. He mentioned a Supreme
Court case, Wayfair versus South Dakota in 2018, where the
ruling was that states could apply collection and remittance
obligations to out-of-state businesses with certain safeguards
and standards in place. Before 2018, the Supreme Court
prohibited any tax collection obligations from being imposed on
businesses not physically present. Currently, physical presence
is not required. Businesses may be required to collect taxes
provided they have substantial nexus.
MR. VINCK offered suggestions for strengthening and refining the
bill. The first was to include a standard for substantial nexus,
the euphemism utilized by the Supreme Court in the Wayfair case.
He added that most states drafting similar legislation create a
substantial nexus standard tied to a specific economic factor.
He suggested including a clear numerical standard that creates a
clear basis for the constitution of substantial nexus. The
second suggestion related to clarification of the legislation to
avoid any retroactive application of the tax collection
obligations due for out-of-state businesses. His suggestion
related to the Wayfair case where South Dakota law avoided
retroactive application of tax collection obligations. The
decision led the Supreme Court to conclude that the approach was
constitutional. He opined that the Alaska Legislature would
benefit from considering a similar bar to retroactive
application of the tax as another mechanism to ensure the
constitutionality of the proposed legislation.
2:18:32 PM
CHAIR KAUFMAN asked about the substantial nexus factor. He
wondered if it would address a hypothetical car rental via
Craigslist. He asked if the substantial nexus factor would
capture incidental vehicle rentals.
MR. VINCK replied yes, the Supreme Court sought to communicate
the permissibility for a state to impose the obligations on
businesses with a large linkage and volume of business.
2:20:10 PM
CHAIR KAUFMAN expressed appreciation for the response.
2:20:22 PM
MR. VINCK suggested further clarification about tax collection.
He noted that other states adopted provisions allowing platforms
to utilize vehicle owner information. He stated that the
information provided by the person renting the car facilitated
an avenue for tax collection. He furthered that the platform
should not be held liable for inaccurate renter information. He
added his concern about collecting taxes due in the past. He
pointed to the bill's collection of back taxes without a
proposed time period. He opined that the ambiguity might raise
questions about the legality of the bill. He reminded the
committee that before 2018, tax collection obligations did not
exist for businesses not physically present. He clarified that
the Supreme Court was clear that the nonretroactivity provision
was a key factor in determining whether a bill met
constitutional obligations. He therefore raised the concern
about the impact of retroactivity.
2:23:37 PM
SENATOR TOBIN asked how many states require Turo to collect
taxes from an individual and remit them to the state.
MR. VINCK replied that 40 states enacted marketplace facilitator
laws. He added that approximately 24 jurisdictions collect and
remit tax for car-sharing transactions. In those states,
marketplace facilitator bills require Turo to collect and remit
sales taxes. He mentioned the separate addition of rental excise
taxes applied by states. He noted that jurisdictions do not
apply the same aggregate tax to peer-to-peer, car-sharing as to
car rental businesses. He added that Turo collects some
transactional tax, whether sales or excise, in more than 24
jurisdictions.
2:25:51 PM
SENATOR TOBIN commented that the standard for a substantial
nexus centers on $100,000 or 200 separate transactions.
2:26:36 PM
MR. VINCK agreed with Senator Tobin's comment.
SENATOR TOBIN asked if Turo's transaction information was
privileged.
2:26:56 PM
MR. VINCK responded that Turo's volume of business far exceeds
the substantial nexus standard.
MR. LIMANI addressed the question related to the number of
states utilizing peer-to-peer, car-sharing services. He cited a
letter from Douglas Shinkle and Mia Geoly of the National
Conference of State Legislatures confirming that 24 states
enacted legislation facilitating tax collection from peer-to-
peer, car-sharing platforms.
2:27:39 PM
SENATOR KIEHL referred to Mr. Vinck's suggestion to exclude the
retroactive tax collection requirement. He assumed that Alaska
required an explicit retroactive obligation requiring the
platforms to collect and remit back taxes.
2:28:23 PM
MR. LIMANI responded that further legal interpretation from the
Department of Law was necessary.
2:28:47 PM
SENATOR KIEHL suggested that the legislature sometimes places
explicit retroactive application clauses into proposed
legislation.
2:29:11 PM
SENATOR CLAMAN opined that excluding the retroactive tax
provision might be problematic because the legislature is not
imposing a new tax, but instead, Alaska is attempting to collect
an existing tax.
2:30:49 PM
SENATOR KIEHL appreciated Senator Claman's legal opinion. He
surmised that SB 127 did not create a retroactive burden via its
requirement about who collects and remits the tax.
2:31:06 PM
CHAIR KAUFMAN asked the invited testifiers for final comments.
2:31:48 PM
MR. LIMANI stated that he would follow up with the committee
with responses to the questions posed in the hearing.
MR. VINCK offered further commentary about the retroactivity
provision in the bill. He appreciated Senator Claman's point
about the established tax. The platforms do not have a mechanism
to collect past taxes from prior customers. If the collection
obligation is applied retroactively to the platforms, the
platforms are liable for the tax payments.
2:33:06 PM
MR. GRIGSBY appreciated the opportunity to speak for AVIS. He
stated that the company's intention is not to look backward or
to penalize, but simply to level the playing field.
2:33:55 PM
SENATOR CLAMAN replied that he was willing to learn more about
Mr. Vinck's suggestions.
2:34:17 PM
CHAIR KAUFMAN stated his intention to provide a fair hearing for
the bill. He held SB 127 in committee.
2:35:06 PM
There being no further business to come before the committee,
Chair Kaufman adjourned the Senate Transportation Standing
Committee meeting at 2:35 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 127 Sponsor Statement v. B 4.12.23.pdf |
STRA 4/20/2023 1:30:00 PM |
SB 127 |
| SB 127 Sectional Analysis v. B 4.12.23.pdf |
STRA 4/20/2023 1:30:00 PM |
SB 127 |
| SB 127 v. B.PDF |
STRA 4/20/2023 1:30:00 PM |
SB 127 |
| SB 127 Fiscal Note DOR 4.14.23.pdf |
STRA 4/20/2023 1:30:00 PM |
SB 127 |
| SB 127 Supporting Document - DOR Memo Turo Carsharing Platform 4.14.2023.pdf |
STRA 4/20/2023 1:30:00 PM |
SB 127 |
| SB 127 Supporting Document - Vehicle Rental Tax Statutes 4.19.2023.pdf |
STRA 4/20/2023 1:30:00 PM |
SB 127 |
| SB 127 Supporting Document - Frequently Asked Questions 4.19.2023.pdf |
STRA 4/20/2023 1:30:00 PM |
SB 127 |
| SB 127 Supporting Document - NCSL P2P Carsharing Laws 3.13.2023.pdf |
STRA 4/20/2023 1:30:00 PM |
SB 127 |
| SB 127 DOR Presentation on Vehicle Rental Platform 04.20.23.pdf |
STRA 4/20/2023 1:30:00 PM |
SB 127 |