Legislature(2025 - 2026)ADAMS 519
04/29/2025 10:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Overview: Governor's Amendments by the Office of Management and Budget | |
| HB14 | |
| HB123 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 14 | TELECONFERENCED | |
| += | HB 123 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HOUSE BILL NO. 123
"An Act relating to vehicle rental taxes; relating to
the issuance of subpoenas related to tax records; and
providing for an effective date."
10:32:15 AM
Co-Chair Foster invited the bill sponsor to provide an
explanation of the bill.
REPRESENTATIVE KEVIN MCCABE, SPONSOR, introduced the
legislation. He thanked the committee for hearing the bill.
He explained that HB 123 was about "fairness, clarity, and
relief." The bill cut the rental tax for traditional
vehicle rental companies and peer to peer rentals. The bill
cuts the tax from 10 percent to 9 percent for all passenger
vehicle rentals and cuts it even further to 7 percent for
other vehicle rental platform companies such as Turo. He
believed that it leveled the playing field for local
entrepreneurs who rented out their vehicles. The
legislation ended the tax collection by individuals and
shifted it to vehicle rental platforms who must now collect
and remit the tax. It protected vehicle rental platform
company hosts by prohibiting collection of back taxes on
pre-bill rentals, ending collection efforts from a time
when the rules were "unclear." He believed that HB 123
supported small businesses, encouraged competition, lowered
costs and fostered growth without raising new taxes. In
addition, it "cleaned up a legal mess" that existed since
2018 and would replace confusion with clear rules that
aligned with systems that were already working in places
like Anchorage. He concluded that the bill ensured steady
revenue and fairer rates and ended the current tax non-
compliance. He characterized it as a win for all Alaskans.
He thought that the bill provided a practical fix and
welcomed the committee's support.
10:35:21 AM
Co-Chair Foster asked for a review of the two fiscal notes.
BRANDON SPANOS, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT
OF REVENUE (via teleconference), reviewed the published
indeterminate fiscal note for the Department of Revenue
(DOR) (FN1(REV) allocated to the Tax Division. He indicated
that the division lacked the data from platform rentals to
know how much a 7 percent tax would generate. However, the
historic tax for traditional rentals was known and the
revenue loss from 10 percent to 9 percent was displayed on
page 2 of the fiscal note. He deduced that in order for the
tax changes to be revenue neutral, vehicle rental platforms
would need to have a market share of 12.5 percent but if
the share was greater than 12.5 percent, then the total
change would generate revenue. He added that there were no
implementation costs.
Co-Chair Foster alerted the committee that there was only
one fiscal note.
Co-Chair Josephson asked for verification that DOR did not
know how many vehicles were in operation under Turo. Mr.
Spanos confirmed that the department did not know how many
vehicles were rented through an online platform. Co-Chair
Josephson asked if it was because Turo refused to provide
the information. Mr. Spanos answered in the affirmative. He
added that in a prior year DOR subpoenaed Turo for the
information and they did not comply. The judge determined
that DOR had the authority to subpoena the information but
not to enforce it outside of Alaska. The language in the
bill allowed the department to do so.
10:38:23 AM
Representative Stapp assumed that the department had to
have some type of ballpark tracking by business licenses at
the state level. Mr. Spanos replied that the department had
looked at business licenses and had its criminal
investigation unit try to determine who used the platform
and had identified about a handful, but there were more
than a handful of taxpayers renting their vehicles and the
attempt was unsuccessful. Representative Stapp knew there
were municipal governments in the state that had already
implemented a similar tax and had a clear understanding of
their revenues collected. He wondered whether they could
base revenue off of municipal records. Mr. Spanos answered
that the division had contacted the Municipality of
Anchorage, who had testified that the information was
confidential and could not share it. Representative Stapp
clarified that he was asking for an analysis only of the
amount of revenue collected. He thought that information
was accessible and asked whether DOR used it.
10:41:16 AM
Mr. Spanos responded in the affirmative. He relayed that
the department's economic research group had tried to
extrapolate the information but did not feel comfortable
using it, based only on the number and not the number of
vehicles.
Representative Galvin asked if Alaska stood to lose $1.74
million UGF if the bill passed and whether there was no
idea of how much revenue Turo would bring to the state. She
noted that Anchorage had an 8 percent vehicle rental tax.
She asked if the 9 percent tax would apply on top of the
municipal tax or replace the amount. Mr. Spanos asked for
clarification. Representative Galvin believed the bill
changed the 10 percent tax to 9 percent tax for a statewide
vehicle rental. She asked if by adding Anchorage's 8
percent tax it would decrease from 18 percent to 17
percent. Mr. Spanos answered that currently there was an 18
percent rental tax in Anchorage; 10 percent was allocated
to the state and 8 percent to the municipality, and the
bill would decrease the total to 17 percent. Representative
Galvin believed that the uncertainty was real and
established that the state would lose $1.74 million if the
bill passed. They did not know if it would be replaced with
the 7 percent tax on Turo. Mr. Spanos answered in the
affirmative. They did not know how much the online 7
percent tax would generate.
10:44:43 AM
Representative Hannan cited the 12.5 percent market share
estimate that would make the bill revenue neutral. She
inquired whether Representative McCabe had any sense of the
scale of peer to peer rentals in the state. Representative
McCabe answered in the affirmative. He expounded that Turo
was a private company and did not have to report the same
information as a company listed on the stock exchange. The
platforms were different than a regular rental car company.
He shared that Turo informed him that the tax collected on
cars rented in Anchorage would cover the loss of one
percent state tax and everything outside of Anchorage would
increase revenue. His idea with the bill was twofold; he
wanted the subpoena powers provision and the provisions
protecting Alaskans from tax collection on retroactively
renting cars on Turo from the past ten years. The bill
would protect those Alaskans. He felt that the situation
was currently a mess. The bill was his intent to solve
the problem. He relayed that the bill had been vetoed the
past year by the governor because he believed that it
increased taxes on TURO. He clarified that the Turo owners
already owed the tax. He viewed the bill as a revenue
neutral tax cut.
10:48:23 AM
Representative Allard asked if the bill would promote more
individuals wanting to be on the Turo platform because the
state law would be clear. Representative McCabe answered in
the affirmative. He believed that everything being done on
the platform streamlined the process and encouraged more
people to rent through it.
Representative Bynum noted that the bill encompassed any
online rental platform. Representative McCabe responded in
the affirmative. Representative Bynum indicated that
currently the platforms had the ability to collect the tax,
but the bill was necessary to provide the statute in order
for them to collect it. Representative McCabe responded
affirmatively. He stressed that the measure was necessary
to solidify tax collection.
10:51:09 AM
Co-Chair Josephson referenced a statement by the bill
sponsor that there was an agreement between various sectors
of the car rental industry. Representative McCabe answered
in the affirmative and elaborated that the parties had
reached a gentleman's agreement". He added that the major
traditional rental car companies would not sue for equal
protection. He reiterated that his sole purpose for
sponsoring the bill was to protect Alaskans that had been
renting through platforms and would not be subject to 10
years of back taxes. Co-Chair Josephson recalled that the
previous bill was a 10 percent and 8 percent tax, and the
current bill was 9 percent and 7 percent. Representative
McCabe replied in the affirmative.
Representative Stapp thanked the sponsor for bringing the
bill forward. He shared that he had examined the financial
information from Anchorage's vehicle rental tax and
discerned that a one percent reduction in the vehicle
rental tax would be offset by the tax on rental platforms.
He thought if they were going to have a tax structure it
was necessary to think about how to treat different
entities equally and having one similar entity not subject
to a tax created an "artificial structure." He appreciated
the bill.
10:53:38 AM
Representative Johnson had done some similar research. She
strongly supported the bill. She felt it was fair, ending
the confusion regarding taxes, and offered tax forgiveness.
She cited a 2020 newspaper article about a 5 percent
increase in vehicle rentals including platforms in
Anchorage, which brought in $760 thousand. She spoke to
other municipal governments' experience collecting the
vehicle rental tax. She deduced that the bill would create
revenue and thanked the sponsor.
Representative Hannan agreed with Representative Stapp that
the same tax should be equal for all entities in a sector.
She thought perhaps they should extend it to the area of
nicotine. She declared that she had been an advocate for a
vehicle rental platform tax for years. She pointed to page
2 line 16 of the bill:
(c) A vehicle rental platform that arranged or
executed more than 200 transactions in the state
Representative Hannan requested confirmation on the record
that the provision pertained to the platform having 200
transactions and not an individual vehicle.
10:56:41 AM
Representative McCabe answered in the affirmative.
Representative Hannan inquired that the same tax applied to
one or many vehicles being rented on a platform.
Representative McCabe answered in the affirmative.
Representative Hannan appreciated that Representative
McCabe was taking another stab at the bill. She wished
there was not a decrease in the tax and noted that the
prior bill was vetoed. She hoped that HB 123 would pass.
Representative Bynum referenced statements concerning those
not paying the vehicle rental taxes. He thought that there
were some who intentionally did not pay, however, he
believed that many were not aware of the state tax. He
clarified that he did not think all of the individuals
using the platform were trying to cheat the system.
Representative McCabe agreed with Representative Bynum's
deduction. He believed the majority of the people using
Turo called a "host" were unaware they needed to collect a
state tax. The bill tried to protect them and correct the
issue.
Representative Galvin informed the committee that Turo had
a complicated system in terms of how it charged for car
rentals. She elucidated that they charged a trip fee
ranging between 2.5 percent and 100 percent. Other fees
were based on vehicle value, advanced booking time, trip
duration, etc. and were "regionally" specific. Alaska
offered Turo a lot of different ways to twist and turn
fees. She asked whether it was the sponsor's intention to
collect a flat tax and none of the extra levers would be
pulled Representative McCabe responded in the
affirmative.
11:00:37 AM
Representative Galvin asked given the lack of uncertainty
regarding recovering lost tax revenue, whether a sunset
date should be included. She deemed that it would enable a
reevaluation of the tax structure if there was a loss to
the state. Representative McCabe answered that he had
thought about reevaluating the tax in two to three years.
He noted that there were other tax percentage disparities
in the vehicle rental system such as for motor home rentals
that was 3.5 percent. However, he did not believe the bill
needed a sunset to accomplish changes. Representative
Galvin emphasized that it was difficult to change taxes in
the state. She understood Representative McCabe's point of
view but wanted to proceed with caution due to the tight
budget circumstances. She recounted that mining taxes had
not changed in 50 years.
11:03:50 AM
Representative Stapp pointed to the reduction in the
overall tax. He determined that the legislation granted
more flexibility to municipalities. Representative McCabe
answered that the result was an unintended consequence and
not planned.
Co-Chair Foster set an amendment deadline for Friday May 2,
5:00 p.m.
11:06:06 AM
Representative Johnson noted that the bill would become
effective immediately. She guessed that it might take time
for the department to implement the tax. She wondered about
the timing of the current effective dates.
Representative McCabe was unsure about changing dates. He
remarked that the division already collected legacy rental
taxes and Turo was set up for the Anchorage tax. He
believed tax collection was already in place.
Representative Johnson offered that she was referring to
statements in the fiscal note and wanted to bring it to the
sponsor's attention.
Representative Galvin wondered if someone who rented
vehicles on an online platform opened a brick and mortar
business with many vehicles what percent tax would it be
subject to. Representative McCabe could not answer the
question. He thought that the bill was not designed for
that type of business. It was more for individual car
owners who wanted to rent their vehicles on a platform.
Representative Galvin knew there were individuals who
rented five vehicles on platforms and thought it was
unfair. She suggested that the members consider lowering
the number for traditional rentals paying a larger
percentage. She thought it could become more complex, and
definitions were necessary.
11:10:34 AM
Representative Bynum shared that he pondered the same
question as Representative Galvin. He informed the
committee that larger brick and mortar companies had a
different insurance structure than platforms where
insurance was more costly. He noted that there was
different cost models associated with using the platforms.
He cited page 2, line 29 of the bill that stated:
(2) "vehicle rental platform" means an application,
website, offline 30 booking service, or other system,
whether online or offline, offered or used by a 31
vehicle rental platform company that enables the
prearrangement of motor vehicle rentals with motor
vehicle owners that are not related by common
ownership or control with the vehicle rental platform;
Representative Bynum pointed out that the vehicle owner was
separate from the platform owner.
Representative Galvin appreciated the nuance that was
pointed out.
Representative Jimmie requested clarification that Turo
already paid sales tax to Anchorage. Representative McCabe
answered in the affirmative. Representative Jimmie inquired
whether other communities would have to set up a sales tax
collection to receive payment of the tax. Representative
McCabe replied in the affirmative and added that the bill
offered municipalities the flexibility to do so if they had
the tax structure.
Representative McCabe thanked the committee.
Representative Bynum asked several procedural questions.
Co-Chair Foster discussed future meeting agendas.
HB 123 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the schedule for the following
meeting.
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