04/03/2019 03:15 PM House LABOR & COMMERCE

             HB 102-RENTAL VEHICLE BY PRIVATE OWNER                                                                         
                                                                                                                                
4:12:42 PM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX announced that the  final order of business would                                                               
be  HOUSE BILL  NO. 102,  "An  Act relating  to rental  vehicles;                                                               
relating to  vehicle rental networks;  relating to  liability for                                                               
vehicle rental taxes; and providing for an effective date."                                                                     
                                                                                                                                
4:12:57 PM                                                                                                                    
                                                                                                                                
CO-CHAIR WOOL,  as prime sponsor  of HB 102, introduced  the bill                                                               
and read  the following  sponsor statement  [original punctuation                                                               
provided]:                                                                                                                      
                                                                                                                                
     The ways that  Alaskans procure transportation services                                                                    
     have  changed over  time. In  the past,  getting off  a                                                                    
     commercial  flight and  heading to  the nearest  rental                                                                    
     car  agency was  common  practice.  Now, consumers  are                                                                    
     turning increasingly  to ridesharing, car  pooling, and                                                                    
     rental vehicle  network options to get  around. Vehicle                                                                    
     rental networks are rental  car businesses that arrange                                                                    
     or execute  personal passenger vehicle  rentals through                                                                    
     a  network of  individual private  vehicle owners,  and                                                                    
     are  becoming  a   common  alternative  to  traditional                                                                    
     rental car options.                                                                                                        
                                                                                                                                
     HB  102  adds  a  definition for  the  new  service  of                                                                    
     providing  private vehicle  rental programs,  including                                                                    
     these  services into  existing  statutes that  regulate                                                                    
     car rental  providers to reflect changes  in how people                                                                    
     secure transport  in Alaska.  It also extends  the same                                                                    
     laws  and   regulations  which  apply  to   rental  car                                                                    
     companies   to   private   vehicle   rental   networks,                                                                    
     including  the payment  of the  State's Vehicle  Rental                                                                    
     Tax.  Therefore, HB  102 brings  equity  to the  rental                                                                    
     industry   for  motor   vehicles,  and   will  generate                                                                    
     additional income  for the State's general  fund as the                                                                    
     private  vehicle rental  network industry  continues to                                                                    
     grow and diversify in the Alaskan economy.                                                                                 
                                                                                                                                
     Please join  me in supporting  House Bill 102  to bring                                                                    
     our statutes  up to  date and  to incorporate  this new                                                                    
     industry into  the existing language  governing vehicle                                                                    
     rentals in Alaska.                                                                                                         
                                                                                                                                
4:15:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FIELDS asked if internet-based car rental                                                                        
companies pay taxes.                                                                                                            
                                                                                                                                
CO-CHAIR WOOL said they do not.                                                                                                 
                                                                                                                                
4:16:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STUTES questioned whether any "peer-to-peer                                                                      
groups" have bricks-and-mortar buildings in Alaska.                                                                             
                                                                                                                                
CO-CHAIR WOOL answered no.                                                                                                      
                                                                                                                                
REPRESENTATIVE STUTES said she presumes their headquarters are                                                                  
out of state.                                                                                                                   
                                                                                                                                
CO-CHAIR WOOL confirmed that.                                                                                                   
                                                                                                                                
REPRESENTATIVE STUTES asked where they are headquartered out of.                                                                
                                                                                                                                
4:16:50 PM                                                                                                                    
                                                                                                                                
ASHLEY  STRAUCH, Staff,  Representative Adam  Wool, Alaska  State                                                               
Legislature, on  behalf of Representative Wool,  prime sponsor of                                                               
HB  102, stated  that the  largest [peer-to-peer]  vehicle rental                                                               
network is  Turo, which  is headquartered  out of  San Francisco,                                                               
California.                                                                                                                     
                                                                                                                                
REPRESENTATIVE STUTES said it sounds  like these companies, which                                                               
operate out of state, do the  bookkeeping for the rental of other                                                               
people's vehicles  within the  state while  paying no  revenue to                                                               
the state  of Alaska;  however, the rental  car companies  do pay                                                               
taxes.  She asked if this was correct.                                                                                          
                                                                                                                                
MS. STRAUCH affirmed that.                                                                                                      
                                                                                                                                
REPRESENTATIVE STUTES surmised that  the current bill "levels the                                                               
playing field so everyone is playing the same game."                                                                            
                                                                                                                                
MS. STRAUCH answered that is correct.                                                                                           
                                                                                                                                
4:17:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FIELDS  asked if  the Department of  Revenue (DOR)                                                               
has tried  to collect taxes  from these  [peer-to-peer] digitally                                                               
based car rental companies.                                                                                                     
                                                                                                                                
4:18:35 PM                                                                                                                    
                                                                                                                                
BRANDON  SPANOS, Deputy  Director,  Tax  Division, Department  of                                                               
Revenue,  noted  that  it's difficult  to  talk  about  specifics                                                               
because  of confidentiality  statutes.    Nonetheless, he  stated                                                               
that the statute does make it  clear that the rental of a vehicle                                                               
is taxable.  He added that  the current bill would clarify who is                                                               
taxable.   He  divulged  that  the DOR  has  sent  a request  for                                                               
records to  some of the  peer-to-peer companies to  determine who                                                               
is renting  the vehicles, adding  that one of those  requests has                                                               
turned  into  a  subpoena.   He  explained  that  their  subpoena                                                               
language  is lacking  and doesn't  allow the  enforcement of  tax                                                               
subpoenas outside  of Alaska; therefore,  in order to  enforce it                                                               
they  will have  to take  it to  the other  state's court  unless                                                               
there is  a statute change.   He further noted that  other states                                                               
that  have  bed  taxes  have  dealt with  the  same  issues  with                                                               
companies like Airbnb.                                                                                                          
                                                                                                                                
4:20:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FIELDS  questioned   whether  the  companies  are                                                               
refusing  to share  information and  pay taxes  even though  they                                                               
continue to operate in Alaska.                                                                                                  
                                                                                                                                
MR.  SPANOS clarified  that they  asked for  records, not  taxes,                                                               
because  its clear  that the  person renting  the vehicle  is the                                                               
taxpayer and  does owe  the tax;  however, they  do not  know who                                                               
that person  is.   He added that  peer-to-peer didn't  exist when                                                               
the  statute was  drafted  so it  doesn't  implicitly state  that                                                               
those companies are the taxpayer, which makes it a grey area.                                                                   
                                                                                                                                
REPRESENTATIVE  FIELDS  commented  that  its  extraordinary  that                                                               
these  companies  are operating  here  and  enabling car  rentals                                                               
without paying taxes.  He opined  that it sounds like tax evasion                                                               
and the only remedy for that would be this bill.                                                                                
                                                                                                                                
4:21:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STUTES  said it  appears  that  HB 102  closes  a                                                               
loophole since this  situation didn't exist when  the statute was                                                               
written.  She asked if this is correct.                                                                                         
                                                                                                                                
4:22:01 PM                                                                                                                    
                                                                                                                                
MS. STRAUCH  acknowledged that this  bill clarifies  the language                                                               
in  statute of  what constitutes  a vehicle  rental by  including                                                               
vehicle rental networks in the definition.                                                                                      
                                                                                                                                
CO-CHAIR LEDOUX  sought clarification on whether  it's the entity                                                               
that does the bookkeeping or the  consumer who rents the car that                                                               
owes taxes.                                                                                                                     
                                                                                                                                
4:22:30 PM                                                                                                                    
                                                                                                                                
MR. SPANOS  replied that the  statute currently reads,  "there is                                                               
imposed an excise  tax on the charge for the  lease of the rental                                                               
vehicle," adding that it's assessed  on the person who is renting                                                               
out their vehicle.                                                                                                              
                                                                                                                                
4:23:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HANNAN asked  Mr. Spanos if he worked  for the DOR                                                               
when Alaska established taxes for Airbnb and similar entities.                                                                  
                                                                                                                                
MR. SPANOS said  the state doesn't have a statewide  bed tax.  He                                                               
explained  that there  are  no  state taxes  on  them unless  the                                                               
company is  a corporation and  the corporate income  tax applies.                                                               
He  added  that other  states  have  dealt  with this  issue  and                                                               
created statutes to implicitly state that they are taxable.                                                                     
                                                                                                                                
4:24:16 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  LEDOUX questioned  whether there  is a  statewide hotel                                                               
bed tax in Alaska.                                                                                                              
                                                                                                                                
MR.  SPANOS  stated  that  there  is not  a  statewide  bed  tax;                                                               
however, municipalities do have them.                                                                                           
                                                                                                                                
CO-CHAIR   LEDOUX    sought   clarification   on    whether   the                                                               
municipalities tax Airbnb the same as hotels.                                                                                   
                                                                                                                                
MR. SPANOS offered that he has  been told they are having trouble                                                               
collecting taxes  on those  types of companies.   Some,  he said,                                                               
have  sought to  change their  ordinances to  create an  economic                                                               
nexus for those companies.                                                                                                      
                                                                                                                                
4:25:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TALERICO recounted his  experience with the Denali                                                               
Borough tax structure  and the overnight accommodations  tax.  He                                                               
explained that everyone who provides  nightly rentals is required                                                               
to register  with the  Denali Borough  and provide  the overnight                                                               
accommodations tax on  their rack rate; whether that  be a single                                                               
cabin  or  a  hotel  campus  with 400-500  rooms,  they  are  all                                                               
required to register and fulfill that.                                                                                          
                                                                                                                                
4:26:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FIELDS offered his belief  that Anchorage has a 12                                                               
percent bed tax that applies to Airbnb.                                                                                         
                                                                                                                                
4:26:33 PM                                                                                                                    
                                                                                                                                
CO-CHAIR WOOL  explained that the  intention is to  implement the                                                               
tax into the  [peer-to-peer] app itself, making it  so the person                                                               
renting the  car will pay the  rental fee plus the  tax that will                                                               
go to  Turo, who in  turn, will keep some  of the rental  fee for                                                               
operating costs  plus the tax,  which they  will then pay  to the                                                               
state.   This would simplify  the process for the  state, because                                                               
instead of taxing each individual  renter they would only have to                                                               
go after several companies.                                                                                                     
                                                                                                                                
4:28:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FIELDS noted that the existence of a bed tax has                                                                 
not inhibited Airbnb's growth.                                                                                                  
                                                                                                                                
4:28:35 PM                                                                                                                    
                                                                                                                                
CO-CHAIR WOOL  added that this  "centralized" system would  be no                                                               
different than  Uber.  He  said that, instead of  each individual                                                               
driver  paying tax  to  the city  of Juneau,  it  all gets  payed                                                               
through the company itself.                                                                                                     
                                                                                                                                
4:29:17 PM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX announced that HB 102 was held over.                                                                            
                                                                                                                                
4:29:32 PM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX ADJOURNMENT                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Labor and Commerce Standing Committee meeting was adjourned at                                                                  
4:29 p.m.