04/12/2021 03:15 PM House LABOR & COMMERCE

        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
.    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.