03/21/2013 01:30 PM Senate TRANSPORTATION

               HB 56-PASSENGER VEHICLE RENTAL TAX                                                                           
                                                                                                                                
1:33:38 PM                                                                                                                    
CHAIR EGAN  announced that the  first order of business  would be                                                               
HB 56.                                                                                                                          
                                                                                                                                
REPRESENTATIVE LINDSAY  HOLMES, sponsor  of HB  56, gave  a brief                                                               
overview  of the  bill  that  tries to  help  some  of the  small                                                               
businesses in the  state that rent motorcycles  who are currently                                                               
subject to  a 10 percent rental  tax. She explained that  back in                                                               
2003 when  the tax was  passed there  was no discussion  about it                                                               
and it  wasn't clear whether  motorcycles fell into  the category                                                               
of  "passenger vehicle."  The Department  of Revenue  didn't even                                                               
realize until  2008 that there  even were companies in  the state                                                               
that were  renting motorcycles and  when they did  subjected them                                                               
to the 10 percent tax.                                                                                                          
                                                                                                                                
Because  of the  climate in  Alaska motorcycles  are only  rented                                                               
about 90 days out  of the year and need to be  stored the rest of                                                               
the  time.  The  average  cost  to rent  one  is  $180-$210  day.                                                               
Packages are sold  to bring people up to  ride motorcycles around                                                               
the  state  and  when  they  do, they  stay  in  hotels,  eat  in                                                               
restaurants and  spend money. This bill  would exempt motorcycles                                                               
from  the definition  of "passenger  vehicles" thereby  exempting                                                               
them from the tax.                                                                                                              
                                                                                                                                
CHAIR EGAN  noted a letter  from Alaska Motorcycle  Adventures in                                                               
their packets.                                                                                                                  
                                                                                                                                
NANCY HULL,  Alaska Motorcycle Adventures,  said they  rent their                                                               
motorcycles from the Anchorage area,  and 2013 will be their 20th                                                               
season  there.  She  supported  HB 56,  because  the  rental  tax                                                               
affects both  motorcycle rentals  and Alaska tourism  in general.                                                               
To offset  the high vehicle  rental tax, her customers  choose to                                                               
rent  for fewer  days  or  choose to  go  somewhere  else on  the                                                               
planet. The season  of 90 days is very limited,  and their rental                                                               
rates are extremely  high. She urged them to get  these people to                                                               
Alaska and  send them  to McCarthy and  Chicken where  they spend                                                               
their tourist dollars in locally owned businesses.                                                                              
                                                                                                                                
She  added that  she heard  someone  in Whitehorse  was going  to                                                               
start  renting   motorcycles  again,  and  with   the  number  of                                                               
Europeans coming  over from Frankfurt  it would be real  easy for                                                               
them  to get  off  in  Whitehorse rather  than  continuing on  to                                                               
Anchorage. As  soon as  there is a  rental company  in Whitehorse                                                               
they  will definitely  go for  the  best motorcycle  rate or  the                                                               
lowest  cost they  can  get,  and that  would  mean  a lot  fewer                                                               
dollars for  the Alaska  tourist economy.  She would  rather that                                                               
they land  here first and  then go to  the Yukon, so  the dollars                                                               
stay here.                                                                                                                      
                                                                                                                                
1:40:44 PM                                                                                                                    
SENATOR  DYSON asked  if Canadian  businesses face  any different                                                               
rules for renting motorcycles.                                                                                                  
                                                                                                                                
MS.  HULL said  yes  and  explained that  Canadians  can rent  in                                                               
Alaska  but they  are not  allowed to  take rented  vehicles back                                                               
into Canada.                                                                                                                    
                                                                                                                                
SENATOR DYSON  said people  will get off  the boat  in Anchorage,                                                               
fly to Whitehorse and  rent an RV and come back  and get the rest                                                               
of their family.                                                                                                                
                                                                                                                                
MS. HULL said law applies to any rented vehicle of any type.                                                                    
                                                                                                                                
MS.  HULL said  that some  customers have  asked her  for a  non-                                                               
logoed motorcycle  that they  take to the  boarder and  just hope                                                               
they  will  be  able  to  go   through  as  if  it's  a  friend's                                                               
motorcycle.                                                                                                                     
                                                                                                                                
SENATOR  FRENCH asked  Ms.  Bales to  comment  on the  relatively                                                               
modest fiscal note.                                                                                                             
                                                                                                                                
1:44:32 PM                                                                                                                    
JOHANNA BALES,  Deputy Director, Tax Division,  Alaska Department                                                               
of  Revenue,  said  when  the original  vehicle  rental  tax  was                                                               
passed,  motorcycle rentals  weren't  recognized;  once that  was                                                               
discovered they  spoke with the  Department of Law who  said that                                                               
motorcycles  do  fall  under  the   definition  of  a  "passenger                                                               
vehicle." So they  reached out to the companies  and brought them                                                               
into compliance. Based  on most other taxes the  state brings in,                                                               
this  is fairly  insignificant and  is  a bit  difficult for  the                                                               
rental car companies. They have  no official opinion on the bill,                                                               
but at the same time they  want to provide as much information as                                                               
they can and believe it is an "immaterial amount of revenue."                                                                   
                                                                                                                                
SENATOR BISHOP joined the committee.                                                                                            
                                                                                                                                
SENATOR  DYSON  moved  to  report   HB  56  from  committee  with                                                               
individual  recommendations and  attached  fiscal note(s).  There                                                               
being no objection, the motion carried.