Legislature(2011 - 2012)CAPITOL 17
03/29/2011 01:00 PM House TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| HB57 | |
| HB62 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 62 | TELECONFERENCED | |
| += | HB 57 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 62-PASSENGER VEHICLE RENTAL TAX
1:51:42 PM
CHAIR P. WILSON announced that the final order of business would
be HOUSE BILL NO. 62, "An Act relating to excluding motorcycles
and motor-driven cycles from the passenger vehicle rental tax."
1:52:01 PM
REPRESENTATIVE LINDSEY HOLMES, thanked members and asked her
staff, Mike Coumbe, to walk members through the bill.
1:52:29 PM
MIKE COUMBE, Staff, Representative Lindsey Holmes, on behalf of
one of the joint prime sponsors of the bill, explained that HB
62 would exempt motorcycles from the passenger vehicle rental
tax. He clarified that this bill only refers to motorcycle
rental taxes and not to sales, import registration or anything
else. This bill would help support long-range economic benefits
of small businesses catering to independent travelers. The
people who rent motorcycles tend to visit remote areas of
Alaska. They stay at smaller hotels and eat at local
restaurants, which is good for Alaska's economy. Making an
exception for seasonal rental businesses is not new, he said.
When the original law was passed, motor home or recreational
vehicle rentals were given the lower rate of three percent
vehicle rental tax due to the seasonal nature of the rentals.
With a short rental season, businesses offering motorcycle
rentals face similar challenges. The businesses must pay to
keep their motorcycle fleet in storage during the long winter
months. These costs are passed on to tourists and others who
rent motorcycles. Adding a 10 percent passenger vehicle rental
tax to the total rental makes the motorcycle rental rate very
high compared to other states. In 2003, when the passenger
vehicle rental tax was under discussion, motorcycle rentals were
not even considered. Four years later the Department of Revenue
(DOR) noticed motorcycle rental businesses were active and
notified the handful of businesses that they must also collect
the passenger vehicle rental tax. Since the motor vehicle
rental tax was enacted, the legislature has exempted other
vehicle rentals that inadvertently fell under the definition of
passenger vehicles, including taxicabs, rental trucks, and
warranty work performed by auto dealers. The seasonal nature of
the motorcycle rental business, along with the high cost
associated with these businesses, and the low number of
businesses are reasons to exempt motorcycle rentals from this
tax.
1:55:32 PM
REPRESENTATIVE GRUENBERG commented that the sponsor statement
reads, "It is difficult to cook a meal in ones motorcycle." He
found this amusing but informative.
REPRESENTATIVE HOLMES commented on the sense of humor.
CHAIR P. WILSON referred to the fiscal note and pointed out the
total tax collected is $12,000 for motorcycle rentals.
1:57:06 PM
REPRESENTATIVE PRUITT expressed surprise that recreational
vehicle rental tax rate is set at three percent for recreational
vehicles (RVs). He asked for the vehicle rental tax rate for
motor vehicles.
MR. COUMBE answered that motor vehicles are taxed 10 percent.
1:57:54 PM
NANCY HULL, Owner, Alaska Motorcycle Adventures, stated that
this is her 18th summer renting motorcycles to tourists. She
explained that her customers typically have a big "bucket list"
of places in the world they want to ride their motorcycles. In
2003, when House Bill 271 was passed relating to vehicle rental
taxes, the legislature did not hold any discussion on motorcycle
rental businesses and tourism in Alaska. Her business was not
aware of the vehicle rental tax so she did not collect initially
it. In 2008, a DOR employee contacted her business to advise
her that she was required to collect the 10 percent vehicle
rental tax. She explained motorcycle rental rates, which are
$125 to $240 per day. Thus, the tax on a motorcycle with the
rate of $200 per day would be $20 per day or $140 for a one week
rental. However, the tax for an RV rental of $200 per day would
only be $34.50 per week.
2:00:30 PM
MS. HULL pointed out that cruise ship passengers only pay about
$34.50 in taxes for seven days. The taxes on motorcycle rentals
have been significantly higher. She recalled one customer
rented two motorcycles and paid $386 in vehicle rental tax. She
highlighted that many motorcycle customers travel to remote
areas on the road system, such as Paxson. Communities that
rarely have seen RV tourists receive tourist business from
motorcycle travelers. She asked members to consider eliminating
the tax so potential customers could afford to come to Alaska.
In response to Chair P. Wilson, she restated that the average
motorcycle rental fee is $180 to $200 per day.
2:03:46 PM
REPRESENTATIVE PETERSEN asked whether the $200 also would
include insurance costs.
MS. HULL stated the rental fee includes insurance. She
explained that exemptions from the tax are not specified in the
law so insurance is also taxed. She related that RVs have
exemptions on a wide range of item, but exemptions for
motorcycles are not currently allowed. In response to Chair P.
Wilson, she stated that most of her customers bring their own
helmets.
2:05:42 PM
PHILLIP FREEMAN, Alaska Rider Tours, stated that his company
provides motorcycle rentals in Spenard. He related that he had
been asked to repay back taxes. He has been in business for 12
years, has ten employees, and a fleet of 40 motorcycles. He
pointed out that he competes with motorcycle rentals in the
Lower 48. He said if owners had been notified of the tax, they
could have collectively asked the legislature to consider an
exemption. His customers want to travel to Manley Hot Springs,
Central, and Prudhoe Bay, he said. The ten percent tax has been
tough on his business due to the short rental season, which is
about 12 weeks long. In response to Chair P. Wilson, he advised
that the average motorcycle rental fees per day range from $150
to $200.
2:08:36 PM
REPRESENTATIVE FEIGE related he has a specific number of days
rental in the twelve week season. He asked whether this bill
would increase his motorcycle rentals.
MR. FREEMAN responded while he did not believe that the length
of the rental period would increase due to the constraints due
to weather, the price point would make him more competitive. He
agreed that many people have a bucket list of places to go. If
his prices are higher than competitors in other places, it
stands to reason that his business will have fewer customers.
In further response to Representative Feige, he agreed HB 62
would make motorcycle rentals more appealing.
2:09:57 PM
CHAIR P. WILSON asked whether he was required to repay back
taxes for motorcycle vehicle rentals.
MR. FREEMAN answered he visited the tax office and was granted
the option to collect the vehicle rental tax from that point
forward. The DOR explained that the lawyers never considered
motorcycles when the initial bill passed the legislature.
2:10:36 PM
REPRESENTATIVE JOHNSON asked whether people boycott travel to
Alaska since the motorcycle rental rates are higher.
MR. FREEMAN responded absolutely. He related a common question
people ask him is why they should pay twice as much to come to
Alaska. Additionally, he related that more people are comparing
prices due to the downturn in the economy. Customers may decide
go to New Zealand instead, he said.
REPRESENTATIVE JOHNSON asked whether this tax break would cause
more people to come to Alaska and if he has any commitment from
people.
MR. FREEMAN offered his belief that more people would travel to
Alaska. He offered to track this with his customers. In
further response to Representative Johnson he said he has
specifically been turned down due to the tax rate.
REPRESENTATIVE JOHNSON offered his belief that cutting taxes
would increase motorcycle rental businesses. He said that if HB
62 is good for motorcycle rentals it is also good for business
in Alaska.
2:12:30 PM
REPRESENTATIVE PETERSEN recalled during the Dalton Highway trip
the committee took last summer that they encountered several
groups of motorcycle riders on the Dalton Highway. He offered
his belief chances are good that some motorcycle travelers had
rented motorcycles. He suggested advertising could be
attractive and might include traveling to "the end of the road,"
which would be the Arctic Ocean. He thought HB 62 may encourage
more people to come to Alaska.
2:13:23 PM
BARRY MATTESON, Owner, House of Harley, stated that his company
just started in the motorcycle renting business. He stated
that the base rate $250 a day. He offered that the Lower 48
rate ranges from $95 to $125 per day. He offered his belief
that he loses potential rental business due to the prices. He
related that the passenger rental tax just makes it more
expensive for his customers In 2010 the House of Harley rented
motorcycles to approximately 200 rental customers, largely
traveling from the Lower 48. As previous testimony indicated,
these travelers are more likely to eat in restaurants and stay
in hotels. His business employs an additional two seasonal
employees, incurs training, plus his core employees work an
additional 10 to 20 hours to maintain the fleet during the
offseason. He characterized his effort as labor intensive to
maintain 15 motorcycles. The average cost of a Harley-Davidson
motorcycle ranges from $17,000 to $20,000. The motorcycles are
turned around at 18,000 miles, he added. The motorcycle rental
business has been an expensive endeavor and the additional 10
percent tax creates a burden such that rentals may not continue
to work for the House of Harley. In response to Chair P.
Wilson, he indicated his rental fleet size ranges from 12 to 15
motorcycles.
2:16:28 PM
REPRESENTATIVE JOHNSON observed this seems to be a capital
intensive business with a short time period to recover the
business investment.
MR. MATTESON answered yes. He responded that the House of
Harley does 90 percent of its rental business in three months.
REPRESENTATIVE JOHNSON asked whether Mr. Matteson was convinced
this bill would increase his business.
MR. MATTESON responded he was unsure whether it would increase
his business but without HB 62 that he may not have his
motorcycle rental business.
2:17:06 PM
REPRESENTATIVE GRUENBERG asked whether vehicles such as snow
machines are rented in the winter encounter the same issues.
MR. MATTESON answered that the House of Harley does not rent
snow machines.
MS. HULL answered that Alaska Motorcycle Adventures does not
rent snow machines but only rents motorcycles.
MR. FREEMAN responded that Alaska Rider Tours only rents
motorcycles.
2:17:54 PM
CHAIR P. WILSON, after first determining no one else wished to
testify, closed public testimony on HB 62.
2:18:38 PM
REPRESENTATIVE PRUITT made a motion to adopt Amendment 1, A.1,
labeled 27-LS0323\A.1, Luckhaupt, 3/17/11, which read, as
follows:
Page 1, line 2, following "tax":
Insert "; and providing for an effective date"
Page 2, following line 12:
Insert a new bill section to read:
"* Sec. 2. This Act takes effect immediately under
AS 01.10.070(c)."
There being no objection, Amendment 1 was adopted.
REPRESENTATIVE JOHNSON asked whether HB 62 could be retroactive.
REPRESENTATIVE FEIGE asked whether the effective date could be
dated January 1, 2010.
CHAIR P. WILSON did not think it would make much difference.
REPRESENTATIVE JOHNSON stated that if retroactivity would help
provide relief he would support it to help small businesses.
2:19:58 PM
REPRESENTATIVE GRUENBERG moved to report the HB 62, as amended,
from the committee with individual recommendations and the
accompanying fiscal note. There being no objection, CSHB
62(TRA) was reported from the House Transportation Standing
Committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| House Trans Committee 3-31-Denali Commision-final for posting part 1.pdf |
HTRA 3/29/2011 1:00:00 PM |
|
| House Trans Committee 3-31-Denali Commision-final for posting part 2.pdf |
HTRA 3/29/2011 1:00:00 PM |