Legislature(2023 - 2024)SENATE FINANCE 532
01/24/2024 01:30 PM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB127 | |
| SB88 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 127 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 88 | TELECONFERENCED | |
SENATE BILL NO. 127
"An Act relating to vehicle rental taxes; relating to
the issuance of subpoenas related to tax records; and
providing for an effective date."
1:34:36 PM
SENATOR MATT CLAMAN, SPONSOR, introduced himself. He stated
that the bill was introduced at the request of the
Department of Revenue (DOR). He read from the Sectional
Analysis (copy on file):
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
1:37:42 PM
CARLY DENNIS, STAFF, SENATOR MATT CLAMAN, explained the
Sectional Analysis (copy on file):
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-of-state
subpoenas related to tax records.
Section 2
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 3
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 4
Uncodified law assessment and collection limitation
The Department of Revenue shall have six months from
the effective date of this Act to assess and collect
the 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 six months
after the effective date of this Act, proceedings may
not be instituted in court for the assessment or
collection of the tax.
Section 5
Effective Date
This Act takes effect immediately.
1:39:17 PM
FADIL LIMANI, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
discussed the presentation on SB 127 (copy on file). He
looked at slide 3, "SB 127 Objective":
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 paid to
the department by the person who provides the leased
or rented vehicle."
Mr. Limani addressed slide 4, "Bottom Line":
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 pointed to slide 5, "SB 127- Background":
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
Mr. Limani discussed slide 6, "SB 127 Legislative History":
2003 The Legislature enacted the vehicle rental
tax on Aug. 20, 2003. The tax became effective Jan. 1,
2004.
2004 The Legislature exempted the rental of
taxicabs by taxicab drivers from the vehicle rental
tax.
2006 The Legislature exempted trucks rented by
individuals for moving personal property and for
vehicles provided to customers by automobile dealers
as replacement transportation during warranty, recall,
or service contract repairs.
2013 The Legislature excluded motorcycles and
motor-driven cycles as defined by AS 28.90.990 from
the tax.
2020 - The municipality of Anchorage passed
ordinance AO No. 2020-55 to establish the duties and
responsibilities of a rental vehicle hosting platform;
and to establish the rules and responsibilities of
rental agencies who use a hosting platform to conduct
motor vehicle rental transactions.
Mr. Limani pointed to slide 7, "SB 127 - Legal Framework":
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 displayed slide 8, "SB 127 - New IRS Regulation
on 1099-K":
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.
1:44:58 PM
Senator Wilson asked for a definition of "third party
transactions."
Mr. Limani replied that if anyone participated in a
transaction that was in excess of $600, prior to 2012, the
IRS required that there was an issuance of a 1099-Misc
form. He stated that after 2012, the IRS imposed a new
regulation that required a 1099-K form submission if there
was participation in sales for a consumption of goods in a
network transaction for more than 200 transactions or
$20,000. He explained that, recently, the IRS reverted to
the $600 provision with a phased implementation. He
remarked that currently the IRS does not have the ability
to access data on the network. He shared that once the
regulations were enacted, DOR would have access to the
platform participants, so taxes would need to be assessed
and collected.
Senator Bishop queried the estimates of the uncollected
revenues, and the reason for the proposal.
Mr. Limani replied that there were no exact numbers related
to the fiscal impact, but felt that it would have a
positive revenue impact to the state.
Senator Merrick wondered whether there was a concern about
the network host companies passing on the tax obligation to
those renting out the vehicles.
Mr. Limani replied that the tax was not new, so the tax
responsibility would be collected by the platform.
Senator Merrick asked whether a rideshare company would
halt business in Alaska due to the tax enforcement.
Mr. Limani replied that he did not know.
1:50:23 PM
Senator Wilson felt that there would be an impact, because
of the add-in rate.
Co-Chair Olson felt that the question was better suited for
the sponsor of the bill.
Mr. Limani deferred to the sponsor.
Mr. Limani pointed to slide 9, "SB 127 - Fiscal Impacts":
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 an estimative revenue impact.
Currently the Department of Revenue has
approximately $470K in delinquent accounts spread
across 25 taxpayers.
Senator Wilson queried the department's current efforts to
taxpayers.
Mr. Limani replied that DOR had not taken any active
action.
Senator Wilson wondered whether the department had intended
to forgive the tax.
Mr. Limani replied that DOR had the statutory obligation to
collect the tax.
Senator Kiehl wondered whether the bill was a more cost-
efficient way to collect the tax.
Mr. Limani replied that it provided more efficiency in DOR.
Senator Kiehl wondered who would have the burden of tax,
and whether a person who rents out a car would have the tax
obligation.
Mr. Limani replied that he believed that the legislation
would make it easier on individual vehicle owners.
1:55:38 PM
Senator Merrick wondered whether there were other states
that collected tax in the manner outlined in the bill.
Mr. Limani replied in the affirmative.
Co-Chair Hoffman wondered whether there were other states
that had a different tax structure than proposed in the
bill.
Mr. Limani replied that there were different structures in
different states across the country.
Co-Chair Hoffman queried an underlying reason for different
structures or rates.
Mr. Limani replied that that he could not speak for other
states for their reasonings. He stated that the 10 percent
was already in statute, so there was no change to the rate.
1:57:40 PM
GREG JOUBERT, MIDNIGHT SUN VEHICLE RENTAL, ANCHORAGE (via
teleconference), testified in support of the legislation.
2:00:03 PM
BENJAMIN PALMER, ENTERPRISE HOLDINGS, CALIFORNIA (via
teleconference), spoke in support of the bill.
SB 127 was HEARD and HELD in committee for further
consideration.
2:01:12 PM
AT EASE
2:03:39 PM
RECONVENED
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 127 Chamber of Progress AK SB 127_ Oppose Tax Mandate.pdf |
SFIN 1/24/2024 1:30:00 PM |
SB 127 |
| SB 127 Sectional Analysis v. U 1.22.2024.pdf |
SFIN 1/24/2024 1:30:00 PM |
SB 127 |
| SB 127 Testimony - Received as of 1.23.2024.pdf |
SFIN 1/24/2024 1:30:00 PM |
SB 127 |
| SB 127 DOR TAX 011924.pdf |
SFIN 1/24/2024 1:30:00 PM |
SB 127 |
| SB 127 DOR Presentation to SFIN 01.23.24.pdf |
SFIN 1/24/2024 1:30:00 PM |
SB 127 |
| SB 127 Opposition Technet.pdf |
SFIN 1/24/2024 1:30:00 PM |
SB 127 |