Legislature(2023 - 2024)BARNES 124
04/27/2024 01:00 PM House TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| SB127 | |
| HB233 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | SB 127 | TELECONFERENCED | |
| += | HB 233 | TELECONFERENCED | |
SB 127-TAXATION: VEHICLE RENTALS, SUBPOENAS
1:04:16 PM
CHAIR MCCABE announced that the first order of business would be
CS FOR SENATE BILL NO. 127(FIN), "An Act relating to vehicle
rental taxes; relating to the issuance of subpoenas related to
tax records; and providing for an effective date."
1:04:32 PM
SENATOR MATT CLAMAN, Alaska State Legislature, as prime sponsor,
presented CSSB 127(FIN) and paraphrased the sponsor statement
[included in the committee packet], which read as follows
[original punctuation provided]:
Senate Bill 127 requires vehicle rental platform
companies, such as Turo and Getaround, to collect the
existing state vehicle rental tax and remit the tax to
the Department of Revenue on behalf of the vehicle
owners. Additionally, Senate Bill 127 revises the
subpoena provisions that relate to Department of
Revenue tax collections.
Under current law, there is uncertainty about whether
the vehicle rental platform companies owe the existing
excise tax or whether only the vehicle owner owes the
excise tax. At least one prior lawsuit did not resolve
this question. Senate Bill 127 resolves the question
by requiring the vehicle rental platform companies to
collect the excise tax from the vehicle renter and
remit the excise tax to the Department of Revenue on
behalf of the vehicle owner.
Senate Bill 127 was introduced at the request of the
Department of Revenue. The Department informed our
office that vehicle owners owe the vehicle rental
excise tax under existing law, but the law requires a
new section to specify that the vehicle rental
platform companies are responsible for collecting and
remitting the excise tax on behalf of the vehicle
owners.
Senate Bill 127 is not meant to affect Alaskans that
use other means to advertise their rental cars, such
as Craigslist and Facebook Marketplace, because those
websites do not collect any funds from the renter or
coordinate details about the rental. Vehicle owners
who use websites such as Craigslist and Facebook
Marketplace to advertise their vehicles owe the
existing excise tax on such rentals, and websites such
as Craigslist and Facebook Marketplace would not have
a duty to collect the excise tax under the current
structure of those websites.
Under the most current version of this bill, the
vehicle rental tax is lowered to 8% for vehicle rental
platforms such as Turo. The tax remains at 10% for
traditional rental car operations. Version R also
prevents any retroactive tax collection from vehicle
rental platform users.
1:07:25 PM
CARLY DENNIS, Staff, Senator Matt Claman, Alaska State
Legislature, gave the sectional analysis for CSSB 127(FIN) on
behalf of Senator Claman, prime sponsor, which read as follows
[original punctuation provided]:
Section 1
AS 43.05.040. Inspection of records or premises and
issuance of subpoenas. Amends AS 43.05.040(c) by
removing unnecessary language regarding the issuance
of out-ofstate subpoenas related to tax records.
Section 2
AS 43.52.020. Rate of Passenger Vehicle Rental Tax.
Establishes a separate tax rate of 8% for passenger
vehicles rented through a vehicle rental platform. The
tax rate of 10% remains for other rentals.
Section 3
AS 43.52.050. Liability for payment of vehicle rental
taxes. Amends AS 43.52.050(a) by adding language
clarifying that vehicle rental platform companies and
other companies that arrange vehicle rentals and
leases shall collect the existing state vehicle rental
tax and remit the tax to the Department of Revenue.
Adds language requiring vehicle rental platforms
collecting the vehicle rental tax to pay the tax
quarterly.
Section 4
AS 43.52.050. Liability for payment of vehicle rental
taxes. Amends AS 43.52.050 by:
• Creating a new subsection (c) requiring a vehicle
rental platform that arranged or executed more than
200 transactions in the state in the preceding
calendar year to collect and pay to the department the
taxes imposed under AS 43.52.010 43.52.099;
• Creating a new subsection (d) clarifying that a
vehicle rental platform company is not liable for
failing to collect or pay the vehicle rental tax if
they were provided with incorrect or insufficient
information. The company must demonstrate that a
reasonable effort was made to obtain the correct or
sufficient information from the person; and
• Adding a new section (e) defining "motor vehicle,"
"vehicle rental platform," and "vehicle rental
platform company."
Section 5
Uncodified law assessment and collection limitation
The Department of Revenue may not, on or after the
effective date of this Act, assess and collect vehicle
rental taxes that were imposed before the effective
date of this Act on a transaction arranged or executed
through a vehicle rental platform. If the tax is not
assessed and collected before the effective date of
this Act, proceedings may not be instituted in court
for the assessment or collection of the tax.
Section 6
Effective Date This Act takes effect immediately.
1:09:17 PM
CHAIR MCCABE invited questions from committee members.
1:09:30 PM
REPRESENTATIVE C. JOHNSON asked whether providers for private
individuals have paid taxes and, if so, whether they received a
rebate on those taxes.
SENATOR CLAMAN responded that individuals online could best
speak to the question.
1:11:02 PM
BRANDON SPANOS, Deputy Director, Tax Division, Department of
Revenue, answered questions during the hearing on CSSB 127(FIN).
He stated that under current statute, tax is owed as soon as a
vehicle is rented on any platform whether corporate or
individual. He briefly spoke to outstanding assessments in the
system for certain of those taxpayers. He said that the way he
read the bill, it did not allow relief. He noted that he would
check into it.
1:13:00 PM
REPRESENTATIVE STUTES brought up the possibility of an
accommodation for a credit going forward if consumers had paid
previously.
MR. SPANOS said he would prefer that to be in statute and that
he would not want to overstep his authority.
1:13:35 PM
FADIL LIMANI, Deputy Commissioner, Department of Revenue, added
that the way that the law reads, the tax is due and on the
books; therefore, those who fail to submit their tax returns and
file are the ones who are noncompliant. He requested that the
Department of Law (DOL) weigh in.
1:14:34 PM
REPRESENTATIVE SUMNER commented that he read it as having no
provisions for rebates. Those who owe the tax would still owe,
but the department could not take action and collect, he opined.
1:15:05 PM
REPRESENTATIVE STUTES expressed that it made her uncomfortable
treating people differently and maybe the legislation needed to
be amended.
1:15:27 PM
CHAIR MCCABE said he was interested in Section 5 because it
protected Alaskans. He asked how many have followed the law and
done their due diligence. He noted forgiving a group of people
who did not pay their taxes versus those who figured out a way
to pay them and asked, "How much money are we talking about?"
MR. SPANOS replied that an analysis had been done and he would
get back to the committee with the number.
1:18:21 PM
REPRESENTATIVE SUMNER asked whether the department garnished
bank accounts for owed tax.
MR. SPANOS offered his belief that was last year or the year
before when bank accounts were levied.
1:19:07 PM
REPRESENTATIVE VANCE opined that the basic structure of the Turo
platform is that "regular people" make their vehicle available
for rental. She asked about the number of rentals it takes to
have it be referred to as a business enterprise.
MR. LIMANI replied that there would be a slide that would
address the Internal Revenue Service (IRS) requirements.
1:21:44 PM
MR. LIMANI began a PowerPoint, titled "SB 127" [hard copy
included in the committee packet]. He proceeded to slide 3,
titled "SB 127 Objective," where he drew attention to the two
provisions on the bottom of the slide. Slide 3 read as follows
[original punctuation provided]:
• The intent of this legislation is to move the
responsibility for collecting and remitting tax from
the individual owners to the vehicle rental platform
company if the lease or rental was arranged or
executed through a platform.
• The proposed legislation does not impose a new tax.
• The legislation provides for a streamlined process
for the Department of Revenue in collecting the peer-
to-peer rental tax.
AS 43.52.010: "There is imposed an excise tax on the
charge for the lease or rental of a passenger vehicle
in this state if the lease or rental of the passenger
vehicle does not exceed a period of 90 consecutive
days."
AS 43.52.050: taxes "shall be collected and p
MR. LIMANI briefly showed slide 4, titled "SB 127 Bottom
Line," which read as follows [original punctuation provided]:
• The tax burden already exists AS 43.52.010
• This bill compels the vehicle rental platforms to
collect and remit the tax on behalf of vehicle owners
MR. LIMANI expounded on the points on slide 5, titled "SB 127 -
Background," which read as follows [original punctuation
provided]:
• Alaska levies an excise tax on fees and costs
charged for the lease or rental of a passenger or
recreational vehicle if the lease or rental does not
exceed a period of 90 consecutive days.
• The person working for the rental/lease agency that
provides the leased or rental vehicle collects the tax
from the individual renting or leasing the vehicle.
The rental/lease agency in turn remits the tax to the
Department of Revenue's Tax Division.
For passenger vehicles, the rate is 10% of the total
fees and costs for renting or leasing. For
recreational vehicles, the rate is 3% of the total
fees and costs for renting or leasing.
• Vehicle rental/lease agencies file tax returns and
remit taxes quarterly.
1:24:39 PM
MR. LIMANI went over the provisions on slide 6, titled "SB 127 -
Senate Finance Committee Substitute Changes," which read as
follows [original punctuation provided]:
The CS in Senate Finance made two changes to the bill:
• Establishes a separate tax rate of 8% (in place of
the current 10%) for passenger vehicles rented through
a vehicle rental platform.
• Does not allow retroactive assessment and collection
of tax on transactions arranged through a vehicle
rental platform prior to the effective date of the
bill. The prior version of the bill allowed for a six-
month assessment and collection window.
MR. LIMANI continued to slide 7, titled "SB 127 - Legislative
History," which highlighted the history of the vehicle rental
tax from 2003 to 2020.
1:26:49 PM
MR. LIMANI moved to slide 8, titled "SB 127 - Legal Framework,"
which read as follows [original punctuation provided]:
AS 43.52.010: "There is imposed an excise tax on the
charge for the lease or rental of a passenger vehicle
in this state if the lease or rental of the passenger
vehicle does not exceed a period of 90 consecutive
days."
AS 43.52.050: taxes "shall be collected and paid to
the department by the person who provides the leased
or rented vehicle."
AS 44.23.020(b)(2): "The attorney general shall?(2)
bring, prosecute, and defend all necessary and proper
actions in the name of the state for the collection of
revenue."
AS 44.25.020(1) & (2): "The Department of Revenue
shall (1) enforce the tax laws of the state; (2)
collect, account for, have custody of, invest, and
manage all state funds and all revenues of the state
[with certain exceptions like the permanent fund]."
• Dick Fischer Development No. 2 Inc. v. DOA, superior
court case: Neither a commissioner nor any other state
official has the authority to deprive the state
treasury of public monies unless authorized by law.
MR. LIMANI proceeded to slide 9, titled "SB 127 - New IRS
Regulation on 1099-K," which read as follows [original
punctuation provided]:
• As part of the American Rescue Plan Act of 2021, the
threshold for reporting on third party network
transaction (Form 1099-K) was reduced to $600,
regardless of the number of transactions.
• On November 2023, the IRS announced delay in form
1099-K reporting threshold for third party transaction
platforms.
• Phase-in to implementation
• For Tax Year 2024, threshold of $5,000
• For Tax Year 2025, threshold of $600
• In recent years including Tax Year 2023, the
threshold for reporting on third party network
transactions (Form 1099-K) when payments totaled more
than $20,000 and more than 200 transactions.
1:29:46 PM
MR. LIMANI concluded on slide 10, titled "SB 127 - Fiscal
Impacts," which read as follows [original punctuation provided]:
• The Department of Revenue has collected an average
of $10.7 million per year in vehicle rental taxes over
the past four years.
• The proposed legislation would capture unreported
vehicle rentals that are arranged or executed through
a vehicle rental platform and, therefore, would have a
positive effect on revenue.
• The Department of Revenue currently does not have
enough data on peer-to-peer rental information in
Alaska to provide for an estimative revenue impact.
• Currently the Department of Revenue has
approximately $470K in delinquent accounts spread
across 25 taxpayers.
1:31:19 PM
REPRESENTATIVE VANCE inquired how the department reaches
compliance and collects taxes if it does not have an idea of how
many people use these platforms.
MR. LIMANI opined that would be with the passage of the bill.
REPRESENTATIVE VANCE asked whether the platform itself
automatically collects a tax on behalf of the rental owner.
MR. LIMANI replied that with the passage of the bill, yes, the
host would be able to identify and gather that information and
report it to the Department of Revenue (DOR).
1:32:57 PM
SENATOR CLAMAN added that Turo does not own vehicles and, for
example, if someone rented a car in Anchorage there would be a
line for the Anchorage tax but not the state tax. The proposed
law would require Turo to add this to the "invoice" at the time
of rental.
1:34:20 PM
REPRESENTATIVE MCKAY said he supported the bill and opined it
was a good solution; however, if he had paid taxes and someone
else did not, he would be upset. In the name of fairness and
credibility that part of the situation must be addressed.
SENATOR CLAMAN inserted that he felt it was acceptable to hold
the bill for amendment language instead of moving it forward
today.
1:36:29 PM
REPRESENTATIVE SUMNER expressed his uncertainty and that there
may be a horizontal equity issue.
MR. LIMANI explained certain legal implications and that the
state and department would be exposed not only from this program
but from others.
1:38:41 PM
CHAIR MCCABE asked for the committee's indulgence in moving the
bill forward.
REPRESENTATIVE MCKAY said he supported moving the bill forward.
REPRESENTATIVE STUTES commented that the maker of the bill could
help the committee through it and "fine tune" it if it were
moved.
REPRESENTATIVE MINA expressed curiosity about other states'
discrepancies and Turo owners regarding rebates.
1:41:01 PM
SENATOR CLAMAN replied that his staff had not looked into the
question.
1:41:10 PM
REPRESENTATIVE SUMNER offered his belief that another thing to
consider was retroactive rebate language.
CHAIR MCCABE said that he was concerned with secondary effects
and consequences across the board, and perhaps it was best to
find a path forward that protects Alaskans.
1:42:48 PM
SENATOR CLAMAN noted there was a finance referral on the bill.
1:43:08 PM
CHAIR MCCABE addressed Mr. Limani in requesting a "tightly
defined paragraph" on how he thought trying to fix the issue
would affect DOR and the Tax Division in the long term.
MR. LIMANI said he could provide the information to the
committee.
1:43:48 PM
CHAIR MCCABE noted that there are other testifiers.
1:44:08 PM
KYNDELL GAGLIO, Government Relations, Turo, gave invited
testimony in support of CSSB 127(FIN) and stated that Turo's
mission was to put cars to better use and clarified that Turo
owns no vehicles. The "hosts" earn extra income by sharing
vehicles with visitors and locals, and she gave examples of the
communities that participate. She noted 20 percent of Alaska
community members using car shares are military members. She
expressed her encouragement toward the most recent version of
the bill that removed the threat of retroactivity and
established a tax. She thanked the committee for its effort on
a reasonable and fair solution.
1:46:54 PM
CARRIGAN GRIGSBY, Executive Vice President, Avis Alaska, gave
invited testimony in support of CSSB 127(FIN). He gave a
history of Avis Alaska, its current employees and fleet, and
noted it was partially employee-owned. He spoke to the
percentage of tax for car sharing versus rental and that he was
in support of that; however, he wished to address earlier
comments about rebating. He stressed that it would cause a huge
problem and an "administrative nightmare." He thanked Senator
Claman and his staff and said he looked forward to the passage
of CSSB 127(FIN).
1:50:43 PM
CHAIR MCCABE thanked invited testifiers and noted that there may
be room for a separate bill. He opened public testimony on CSSB
127(FIN).
1:51:56 PM
CLAIRE HOLLAND, representing self, noted that she was a member
of the Chugach State Park Citizen Advisory Board, which
previously sent a letter to the House Transportation Standing
Committee outlining its support for SB 127 and wish to increase
the state's vehicle rental tax and thereby increase the
available funding for maintenance and operation of Alaska's
state park system. She opined that SB 127 would make sure that
the state collects all tourism tax dollars to help maintain
Alaska's state park system. Additionally, adequately staffing
state parks and providing funding for basic needs is necessary
for the continued enjoyment of the parks and to grow the state's
tourism.
1:53:56 PM
REPRESENTATIVE VANCE clarified that the use of funds is
traditional because the state cannot have dedicated funds. It
is not a hard and fast law due to this, she said.
1:54:28 PM
CHAIR MCCABE, after ascertaining no one else wished to testify,
closed public testimony on CSSB 127(FIN).
1:54:58 PM
SENATOR CLAMAN gave final comments. He said in light of
comments made, the issue of taxes owed should be addressed with
great caution and as suggested, should be looked at in the
future but not as part of the current bill.
1:56:46 PM
CHAIR MCCABE commented that it was about time to fix the
problem.
1:57:06 PM
REPRESENTATIVE VANCE noted the presence of an attorney, and she
expressed that it gave her more comfort that the bill would go
to the House Finance Committee, which could put some of the
issues to rest.
SENTATOR CLAMAN commented that the discussion about the
challenge of collecting taxes is not easy, nor is finding
someone who wants to take such a case.
1:59:05 PM
REPRESENTATIVE SUMNER pointed out that it was the renter who
paid the tax, and he was opposed to "rebating back."
MR. LIMANI expressed to the committee that the cautionary
measures on being able to put anything in statute could expose
the state to other liabilities and create an opportunity for
rental car companies to sue the state. He advised the committee
to tread lightly on the area of tax liability.
2:00:56 PM
REPRESENTATIVE VANCE stated she wanted the conversation to be
well established such that it was clear the committee did not
want to put the state in any position of liability but to do
what's best for Alaskans and all parties involved.
REPRESENTATIVE MCKAY spoke of his constituents and said that if
the state were put in a precarious situation, it would be a
concern for him.
2:01:36 PM
REPRESENTATIVE VANCE moved to report CSSB 127(FIN) out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSSB 127(FIN) was
reported out of the House Transportation Standing Committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 127 Version R 3.13.2024.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 127 |
| SB 127 Sponsor Statement Version R 3.14.2024.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 127 |
| SB 127 Sectional Analysis Version R 3.14.2024.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 127 |
| SB 127 Supporting Document - Frequently Asked Questions 3.21.2024.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 127 |
| SB 127 Explanation of Changes Version U to R 3.12.2024.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 127 |
| SB127. Ver R Fiscal Note DOR. 4.25.24.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 127 |
| SB 127 Testimony - Received as of 3.14.2024.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 127 |
| SB 124 DOR Presentation to H.TRA - Vehicle Rental Platform 4.27.24.pdf |
HTRA 4/27/2024 1:00:00 PM |
SB 124 |