02/28/2013 01:30 PM House FINANCE

HOUSE BILL NO. 56                                                                                                             
                                                                                                                                
     "An Act excluding motorcycles and motor-driven cycles                                                                      
     from the passenger vehicle rental tax; and providing                                                                       
     for an effective date."                                                                                                    
                                                                                                                                
Representative Holmes  related that the bill  was an attempt                                                                    
to help a  fledgling industry in Alaska. She  stated that in                                                                    
2003, the legislature  had passed a Vehicle  Rental Tax that                                                                    
put a 10 percent rental  tax on passenger vehicles. She said                                                                    
that  soon   after,  the   legislature  realized   that  the                                                                    
definition  of a  passenger vehicle  also  included RV's  so                                                                    
during the course  of deliberations the bill  was amended to                                                                    
charge a  lower rate for  RV's because they were  bigger and                                                                    
more costly to  rent. She stated that at the  time there had                                                                    
been no discussion  of a motorcycle as  a passenger vehicle.                                                                    
She offered  that the  Tax Division  had not  recognized the                                                                    
absence of a tax on  motorcycles until recently. She relayed                                                                    
that  like RV's,  motorcycles were  more  expensive to  rent                                                                    
than  cars.  She  concluded  that   the  bill  would  exempt                                                                    
motorcycles from the definition  of passenger vehicle, which                                                                    
would  eliminate the  tax on  the rental  of motorcycles  in                                                                    
Alaska.                                                                                                                         
                                                                                                                                
2:43:41 PM                                                                                                                    
                                                                                                                                
Co-Chair   Stoltze  inquired   how  municipalities   treated                                                                    
motorcycles for the purposes of rental taxes.                                                                                   
                                                                                                                                
JAMES   WALDO,   STAFF,   REPRESENTATIVE   LINDSEY   HOLMES,                                                                    
responded that he did not have an answer to the question.                                                                       
                                                                                                                                
2:44:29 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze inquired  if  the sponsor  had talked  Tax                                                                    
Division regarding  the elimination of the  $12,000 per-year                                                                    
tax.                                                                                                                            
                                                                                                                                
Representative   Holmes   replied   that  there   had   been                                                                    
discussion regarding the proposed  reduction of $12,000 per-                                                                    
year. She  said that  there had been  talks of  lowering the                                                                    
tax amount,  but then  the per-year amount  would be  so low                                                                    
that it  would cost more  to collect  the tax than  could be                                                                    
recovered.                                                                                                                      
                                                                                                                                
Representative  Thompson  wondered  how   much  it  cost  to                                                                    
collect the  $12,000 annually. He  agreed that  the economic                                                                    
impact of  motorcycle rentals could  be significant  for the                                                                    
state.                                                                                                                          
                                                                                                                                
2:46:16 PM                                                                                                                    
                                                                                                                                
Representative  Costello  stated  queried   the  cost  of  a                                                                    
motorcycle rental in the state.                                                                                                 
                                                                                                                                
Mr.  Waldo responded  that  motorcycle  rentals ranged  from                                                                    
$100 to $250 per day.                                                                                                           
                                                                                                                                
2:47:23 PM                                                                                                                    
                                                                                                                                
NANCY  HULL,   ALASKA  MOTORCYCLE  ADVENTURE,   PALMER  (via                                                                    
teleconference),  testified   in  support  of  HB   56.  She                                                                    
supported the  exclusion of motorcycles from  the 10 percent                                                                    
Vehicle Rental  Tax because  of the  unintended consequences                                                                    
of the tax.  She stated that her customers  were choosing to                                                                    
rent fewer  days or to  not rent at all  as a result  of the                                                                    
high tax.  She relayed  that in  a 90  day season  the rates                                                                    
were  high;  customers  paid  an average  of  $200  per  day                                                                    
resulting in  a $20 per day  tax. She said that  the tax hit                                                                    
spouses and  families traveling together  particularly hard.                                                                    
She  relayed an  example of  a  father and  three sons  that                                                                    
incurred a tax  of over $700 for a six-day  ride. She opined                                                                    
the lack of  a tax cap. She listed the  areas in Alaska that                                                                    
were difficult to reach but  by motorcycle, which meant that                                                                    
tourists gained  better access  to all  areas of  the state,                                                                    
while spending  money doing it. She  urged committee support                                                                    
for the legislation.                                                                                                            
                                                                                                                                
2:51:33 PM                                                                                                                    
Co-Chair Stoltze inquired how  the municipalities dealt with                                                                    
motorcycles.                                                                                                                    
                                                                                                                                
Ms. Hull  responded that the  Municipality of  Anchorage did                                                                    
not   consider  motorcycles   as   passenger  vehicles   and                                                                    
therefore had no motorcycle tax.                                                                                                
                                                                                                                                
2:52:56 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze   noted  that  the  $12,000   of  the  tax                                                                    
collected annually  reflected less  than a thousand  days in                                                                    
motorcycle rentals for the entire industry.                                                                                     
                                                                                                                                
Ms. Hull  replied that  the season was  limited to  90 days.                                                                    
She added that most  of the motorcycle rental establishments                                                                    
were predominately small family businesses.                                                                                     
                                                                                                                                
2:53:58 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze  inquired  an  estimate of  how  much  her                                                                    
business  spent on  bookkeeping  and accounting  to keep  in                                                                    
compliance with the tax.                                                                                                        
                                                                                                                                
Ms. Hull replied that she did  all of the accounting for her                                                                    
business  and spent  a lot  of  time explaining  the tax  to                                                                    
customers.  She added  the  tax to  every  invoice and  then                                                                    
forwarded the  invoices to the Department  of Revenue (DOR).                                                                    
She said that  DOR required businesses to  report four times                                                                    
per  year,  including  the off-season  when  there  were  no                                                                    
rentals.                                                                                                                        
                                                                                                                                
2:55:56 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze inquired  if there was an  estimate of what                                                                    
it cost to administer the tax.                                                                                                  
                                                                                                                                
MATT FONDER, TAX DIVISION,  DEPARTMENT OF REVENUE, ANCHORAGE                                                                    
(via teleconference), replied that that  he did not know. He                                                                    
explained  that the  department had  one person  that worked                                                                    
with  all of  the Vehicle  Rental Taxes  in the  state which                                                                    
made it difficult  to break down how much time  was spent on                                                                    
motorcycles alone.                                                                                                              
                                                                                                                                
2:56:52 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze CLOSED Public TESTMONY                                                                                         
                                                                                                                                
2:57:38 PM                                                                                                                    
                                                                                                                                
Representative Munoz MOVED to REPORT HB 56 out of committee                                                                     
with individual recommendations and the accompanying fiscal                                                                     
note. There being NO OBJECTION, it was so ordered.                                                                              
                                                                                                                                
HB 56 was REPORTED out of committee with a "do pass"                                                                            
recommendation and with a previously published fiscal                                                                           
impact note: FN1(REV).                                                                                                          
2:58:09 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:00:47 PM                                                                                                                    
RECONVENED