Legislature(2011 - 2012)BUTROVICH 205
02/17/2011 01:00 PM Senate TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| SB19 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 19 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 19-PASSENGER VEHICLE RENTAL TAX
CHAIR KOOKESH announced the consideration of
12:59:31 PM
ANDY MODEROW, staff to Senator French, sponsor of SB 19, read
the sponsor statement into the record as follows:
SB 19 will remove the 10 percent tax on motorcycle
rentals. With our short summer and the economic
benefits of independent tourism, the legislature
should support this emerging industry.
Motorcycle tourism brings independent travelers to our
small businesses and restaurants. While cruise ships
ensure that large hotels are full, motorcycle
travelers go off the beaten path, traveling to remote
bed and breakfasts or staying in smaller hotels. In
contrast to RV renters (who pay a smaller 3 percent
rental tax), motorcycle riders are more likely to eat
at restaurants, since it is difficult to cook a meal
in one's motorcycle.
With a short rental season, plenty of challenges exist
for Alaskan businesses that rent motorcycles. On top
of the seven or eight winter months where rental
income isn't earned, fleet storage adds to the cost of
doing business in Alaska. These factors increase the
price of rentals, making it difficult to draw in
customers. Adding a 10 percent state tax makes renting
motorcycles even more challenging for rental
businesses.
Passing this legislation corrects the accidental
inclusion of motorcycles to our existing rental
vehicle tax. In 2003, the legislature passed a motor
vehicle rental tax for rental cars. No talk of
motorcycles was placed on the record after that time.
Also illustrating that point, the Department of
Revenue didn't even collect the tax until several
years after the law became effective.
MR. MODEROW pointed out that Section 1 adjusts the definition of
passenger vehicle in the transportation tax statute, not in the
motor vehicle title. Page 2, lines 11-12, effectively adds
motorcycles and motor-driven cycles to the exemption that's
currently in the taxation law.
1:01:54 PM
REPRESENTATIVE THOMAS asked if car rental agencies wouldn't
express some of the same concerns.
MR. MODEROW agreed that many the arguments would be similar, but
one difference is that motorcycles cannot travel on icy roads so
the window during which they can be leased out is much shorter.
SENATOR MENARD asked where the opposition is coming from.
MR. MODEROW replied he isn't aware of any opposition. For
perspective, he noted that the vehicle rental tax brings in
about $7.3 million.
1:03:48 PM
SENATOR THOMAS commented that it probably costs more than
$12,000 to collect the tax.
MR. MODEROW replied that's a good observation.
SENATOR EGAN reported that the City and Borough of Juneau (CBJ)
does not oppose the bill since it relates to a state tax and
wouldn't affect CBJ finances.
SENATOR MENARD mentioned the possibility of offsetting the
revenue drop using something similar to the vanity plate
program, but making it available only to motorcycles.
MR. MODEROW replied they're happy to consider any options the
committee would like to pursue.
1:05:32 PM
JOHANNA BALES, Deputy Director, Tax Division, Department of
Revenue (DOR), said DOR has had concerns with the handful of
companies that rent motorcycles. She agreed that it's difficult
to identify the rental portion of the motorcycle when the tax is
levied because most of companies offer package deals that
include things like a guide, for example. The tax is intended to
apply only to the rental portion, not the tourism portion. She
noted that the Municipality of Anchorage also has a vehicle
rental tax and motorcycles are exempt.
SENATOR THOMAS said if it's difficult to identify what the tax
is applicable to, how will you know if there's a savings to the
customer.
MS. BALES explained that the vehicle tax is an add-on tax so
there would be 10 percent tax added to whatever the renal
company charges. When DOR contacted these motorcycle rental
companies, many weren't aware that they were subject to the tax
and hadn't collected it. They're set up where they're not
collecting the tax even though it's a line item on their
invoice.
SENATOR THOMAS commented that it was really hard to identify
when it wasn't collected.
MS. BALES agreed.
SENATOR MENARD asked if a similar bill was introduced last year.
MS. BALES replied this isn't a new concept.
1:09:07 PM
NANCY HULL, Alaska Motorcycle Adventures, said she is testifying
in strong support of SB 19 because the current law allows for a
very open interpretation. In 2003, when HB 271 became law,
motorcycles weren't discussed. Small businesses like hers have a
very high rate structure to cover insurance in a very short
season. She said she generally charges $150-$240 per day, which
means that a customer on the high end could pay $24 tax per day.
If someone rents a motorcycle for 5 days, the tax would be about
$125. She noted that last summer a couple rented 2 motorcycles
for 11 days and their tax was $386. This is opposed to $115 in
tax if they had rented an RV.
She also pointed out that motor home rentals qualify for a
number of exemptions for things like dishware, car seats, and
GPS devices, but motorcycle rentals don't qualify for similar
exemptions because they weren't specifically listed in the law.
She noted that her customers travel to remote areas of the state
and they support small local businesses that see few tourists.
MS. HULL asked the committee to address motorcycles with
specific language so that her customers are treated fairly.
SENATOR THOMAS calculated that 800 rental days at $15 would be
$12,000. He asked if the business is really that small.
MS. HULL agreed it's not a lot of money, but it is a lot when
it's spread across just 125 customers.
1:15:52 PM
PHILIP FREEMAN, Motoquest, said we have the shortest rental
season in the world and it's difficult to make a living. Adding
a 10 percent tax to the rates they must charge is abysmal. He
asked the committee to consider the motorcycle in the
transportation bill.
1:17:02 PM
BARRY MADISON, House of Harley Davidson, said they weren't aware
of the tax when they started their business. When they read the
law it became clear that motorcycles weren't considered when it
was written, but they weren't excluded either. Their rental rate
is $200-$250 a day and if they had to add the tax they'd
probably lose customers. They employ one person part time year
around and two people during the summer, but they couldn't
afford it if they had to pay the tax.
CHAIR KOOKESH closed public testimony and stated that he
intended to move the bill. He asked the will of the committee.
SENATOR THOMAS commented that the tax is a minor source of
revenue predominantly because it's not collected.
1:20:01 PM
SENATOR THOMAS moved to report SB 19 from committee with
individual recommendations and attached fiscal note(s).
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