05/02/2023 01:30 PM Senate TRANSPORTATION

          SB 127-TAXATION: VEHICLE RENTALS, SUBPOENAS                                                                       
                                                                                                                                
1:39:30 PM                                                                                                                    
CHAIR KAUFMAN announced the consideration of 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."                                                                                                             
                                                                                                                                
SENATOR TOBIN moved to adopt the committee substitute (CS) for                                                                  
SB 127, work order 33-LS0635/S, as the working document.                                                                        
                                                                                                                                
CHAIR KAUFMAN objected for the purpose of discussion.                                                                           
                                                                                                                                
1:39:58 PM                                                                                                                    
EMMA TORKELSON explained the changes between version B and                                                                      
version S.                                                                                                                      
                                                                                                                                
     Section  2. Page  2,  Lines 1-3:  Removes  the original                                                                  
     language  and adds  a reference  to new  subsection (c)                                                                    
     created in Section 3.                                                                                                      
                                                                                                                                
     Section 2.  Page 2, Lines 4-6:  Adds language requiring                                                                  
     vehicle rental  platform collecting  the vehicle rental                                                                    
     tax to pay the tax quarterly.                                                                                              
                                                                                                                                
     Section 3.  Page 2, Lines 8-11:  Creates 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.                                                                                                                 
                                                                                                                                
     Section 3. Page 2,  Lines 12-17: Creates 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.                                                                                                                    
                                                                                                                                
     Section  3.  Page  2,  Lines  26-28:  Defines  "vehicle                                                                  
     rental  platform company"  as a  company  whose primary                                                                    
     business  is  arranging  or  executing  the  rental  of                                                                    
     vehicles through a vehicle rental platform.                                                                                
                                                                                                                                
1:41:43 PM                                                                                                                    
CHAIR  KAUFMAN   removed  his   objection;  finding   no  further                                                               
objection,  CSSB 127,  version  S,  was adopted.  as  the working                                                               
document.                                                                                                                       
                                                                                                                                
1:42:06 PM                                                                                                                    
LIZZIE  KUBITZ,   Staff,  Senator   Matt  Claman,   Alaska  State                                                               
Legislature,  Juneau,  Alaska, informed  the  committee  that the                                                               
first  change   added  a   substantial  nexus   standard  of  200                                                               
transactions. The goal of  the change was to omit the requirement                                                               
to collect and remit taxes  on platforms with minor activity. The                                                               
second  change   involved  the  provision   clarifying  that  the                                                               
platform is  responsible for organizing  and filing documentation                                                               
related  to  taxes.  The  third  change  involved  the  provision                                                               
stating  that platforms  collecting the  tax  are not  liable for                                                               
information provided  to them by  the host or  vehicle owner. She                                                               
noted that all three changes were recommended by Turo.                                                                          
                                                                                                                                
1:43:44 PM                                                                                                                    
SENATOR MYERS asked  about the definition of  a motor vehicle. He                                                               
wondered about electric-assisted bicycle rentals and taxation.                                                                  
                                                                                                                                
SENATOR  CLAMAN  responded  that  the  electric-assisted  bicycle                                                               
legislation  allows  e-bikes to  be  treated like  self-propelled                                                               
bikes.                                                                                                                          
                                                                                                                                
SENATOR  MYERS pointed  to  the  history of  rental  car taxation                                                               
provided in  the bill packet.  He recalled  that motorcycles were                                                               
deleted from  the rental  car tax  legislation in 2016.  He asked                                                               
why motorcycles were not taxed as rental vehicles anymore.                                                                      
                                                                                                                                
1:45:38 PM                                                                                                                    
SENATOR CLAMAN replied that he did not know.                                                                                    
                                                                                                                                
SENATOR MYERS  understood that  the bill allows  for the taxation                                                               
of rental vehicles  through approved platforms.  He asked about a                                                               
hypothetical  vehicle  loan  to a  friend.  He  wondered  about a                                                               
potential  tax liability  if the  friend  supplied gas  money. He                                                               
shared another story about  a military family requiring a vehicle                                                               
and the  possibility of renting  his car to them.  He wondered if                                                               
he would be liable for a vehicle rental tax in that situation.                                                                  
                                                                                                                                
SENATOR  MATT  CLAMAN,  District  H,  Alaska  State  Legislature,                                                               
Juneau,  Alaska,  sponsor  of  SB  127,  replied  that the  first                                                               
scenario involving  gas money was not  a rental agreement, simply                                                               
a  friendly  exchange  that  would  not  be  subject  to  a  tax.                                                               
Concerning the  military family, he stated  that the rental would                                                               
be subject  to a  tax liability  if the  term was ninety  days or                                                               
less.                                                                                                                           
                                                                                                                                
1:48:03 PM                                                                                                                    
SENATOR  MYERS asked  for  a price  comparison  between  Turo and                                                               
conventional rental car companies before taxes.                                                                                 
                                                                                                                                
SENATOR  CLAMAN  responded  with  an anecdotal  experience.  Turo                                                               
rentals  were more  expensive  during the  Covid-19  pandemic. He                                                               
shared  that  his  daughter  opted  for  a Turo  rental  recently                                                               
because even  though the prices were equivalent,  she was certain                                                               
to rent a particular vehicle through the Turo platform.                                                                         
                                                                                                                                
SENATOR  MYERS replied  that  Turo may  provide  opportunities to                                                               
test-drive specific vehicles.                                                                                                   
                                                                                                                                
1:49:29 PM                                                                                                                    
SENATOR MYERS asked what  percentage of rental car business comes                                                               
from out-of-state customers.                                                                                                    
                                                                                                                                
SENATOR CLAMAN  responded that he  did not know.  He deferred the                                                               
question to Mr. Grigsby with AVIS Alaska.                                                                                       
                                                                                                                                
1:50:12 PM                                                                                                                    
CARRIGAN GRIGSBY, Executive  Vice President, AVIS Alaska, Juneau,                                                               
Alaska, responded to Senator  Myers's question. He replied that a                                                               
large  portion of  the AVIS  Alaska business  comes  from out-of-                                                               
state customers in the summer months.                                                                                           
                                                                                                                                
SENATOR  MYERS  wondered   if  the  majority  of  Turo's  Alaskan                                                               
business serves out-of-state travelers.                                                                                         
                                                                                                                                
SENATOR CLAMAN  shared a recent  conversation with  a Turo rental                                                               
car owner relaying  that summer business  yields a greater number                                                               
of out-of-state renters.                                                                                                        
                                                                                                                                
SENATOR  MYERS asked  about Section  1 of  the bill.  He recalled                                                               
hearing that the section removed the extraneous language.                                                                       
                                                                                                                                
1:52:00 PM                                                                                                                    
SENATOR  CLAMAN  replied  that  the  Department  of  Law and  the                                                               
Department of  Revenue asked  to include the  language in Section                                                               
1. He shared  that his experience as a  trial attorney taught him                                                               
that  serving out-of-state  subpoenas  is  more complicated  than                                                               
issuing a state subpoena.  He suggested obtaining the perspective                                                               
of the Department of Law or the Department of Revenue.                                                                          
                                                                                                                                
1:53:17 PM                                                                                                                    
CHAIR  KAUFMAN highlighted  the  bill's  intention  to streamline                                                               
business practices. He reminded  the committee that the bill does                                                               
not propose a new tax,  but instead seeks to align processes with                                                               
an out-of-state supplier.                                                                                                       
                                                                                                                                
SENATOR  MYERS queried  the opinion  of  the Alaska  Court System                                                               
about the change.                                                                                                               
                                                                                                                                
1:53:53 PM                                                                                                                    
SENATOR CLAMAN responded that he had not inquired.                                                                              
                                                                                                                                
1:54:01 PM                                                                                                                    
CHAIR KAUFMAN moved to invited testimony.                                                                                       
                                                                                                                                
1:54:30 PM                                                                                                                    
ADAM   CRUM,   Commissioner-Designee,   Department   of  Revenue,                                                               
Anchorage,  Alaska,  stated   that  the  responsibility  for  tax                                                               
collection falls  on the  department. The bill  protects Alaskans                                                               
by  adding compelling  language  for online  rental  platforms to                                                               
collect  and  remit  vehicle   rental  tax.  He  added  that  the                                                               
department views  the bill  as straightforward  and important for                                                               
the Alaskan tourism industry  and economy. He noted that the bill                                                               
utilizes  technology to  collect and  remit the  tax, which  is a                                                               
statutory obligation.                                                                                                           
                                                                                                                                
1:55:23 PM                                                                                                                    
SENATOR  TOBIN  followed up  on  Senator  Myers's question  about                                                               
motorcycles. She wondered why motorcycles are no longer taxed.                                                                  
                                                                                                                                
COMMISSIONER-DESIGNEE  CRUM responded that  he learned  that HB 8                                                               
defines  e-bikes  as electric-assisted  bicycles.  He  was unsure                                                               
about  the  taxation  of  electric-assisted  bicycles.  He  asked                                                               
Deputy Director Spanos for his opinion.                                                                                         
                                                                                                                                
1:55:56 PM                                                                                                                    
BRANDON  SPANOS,  Deputy  Director  Tax  Division  Department  of                                                               
Revenue,  Anchorage,  Alaska, responded  that  the  term "vehicle                                                               
rental" was a  broad term when the  tax legislation was initially                                                               
introduced. He recalled that  a taxable vehicle included a driver                                                               
plus a  passenger. The  department interpreted  the bill language                                                               
to  include  motorcycles,   but  the  motorcycle  rental  company                                                               
lobbied the legislature  for an amendment  to change the statute.                                                               
It was  the intent of the  legislature not to  tax motorcycles as                                                               
vehicle rentals.                                                                                                                
                                                                                                                                
MR. SPANOS stated  that vehicles are described  as motor vehicles                                                               
in  the  current  statute,   which  eliminates  electric-assisted                                                               
bicycles from the bill.                                                                                                         
                                                                                                                                
1:57:05 PM                                                                                                                    
MR. GRIGSBY stated support for the CS for SB 127, version S.                                                                    
                                                                                                                                
CHAIR   KAUFMAN   noted   that   the   committee   invited   Turo                                                               
representatives to the meeting, but they were unable to attend.                                                                 
                                                                                                                                
1:58:11 PM                                                                                                                    
CHAIR KAUFMAN opened public testimony on SB 127.                                                                                
                                                                                                                                
1:59:03 PM                                                                                                                    
MACKENZIE  CHASE, Expedia  Group, Seattle,  Alaska,  testified in                                                               
support of  vehicle rental tax  collection and  remittance to the                                                               
State of  Alaska. She  expressed concern  that the  current draft                                                               
tasks  online platforms  like the  Expedia Group  with collecting                                                               
and remitting  vehicle rental  taxes. She noted  that traditional                                                               
rental  car companies  excel  at calculating  and  collecting car                                                               
rental taxes.  She stated  that shifting  the taxation  to online                                                               
travel agents  will likely  increase tax  leakage. She  asked the                                                               
committee to amend the  legislation to clarify that online travel                                                               
agents are not subject  to and responsible for the collection and                                                               
remittance  of vehicle  rental taxes.  She  pointed out  that the                                                               
Anchorage municipality exempts  tour companies and travel booking                                                               
agents  to ensure  that taxes  are collected,  but  online travel                                                               
agents are not responsible.                                                                                                     
                                                                                                                                
2:01:50 PM                                                                                                                    
HANNAH  NOBLE, representing  self, Palmer,  Alaska,  testified in                                                               
opposition to SB  127. She informed the committee  that she was a                                                               
co-host with  Turo. She opposed the legislation  because it lacks                                                               
specificity about hosts'  and guests' liability regarding vehicle                                                               
rental tax  collection and remittance. She  opposed the ambiguous                                                               
retroactive collection of taxes proposed in the legislation.                                                                    
                                                                                                                                
2:03:01 PM                                                                                                                    
CHAIR KAUFMAN closed public testimony on SB 127.                                                                                
                                                                                                                                
2:03:34 PM                                                                                                                    
SENATOR  CLAMAN  responded  to  the  question  the Expedia  Group                                                               
raised. He stated  that the testifier's  concern was addressed in                                                               
the CS.  He clarified that  subsection (e)(3) of  AS 43.52.050 in                                                               
bill Section 3 identifies  a vehicle rental company as  a company                                                               
whose primary  business is arranging  or executing  the rental of                                                               
vehicles through a vehicle  rental platform.  The specific effect                                                               
is  to address  a company  like  the Expedia  Group,  which books                                                               
various forms of travel.  Paragraph (3) in subsection (3) on page                                                               
2, lines  26-28 excludes  companies like  the Expedia  Group from                                                               
collecting and remitting taxes for vehicle rentals.                                                                             
                                                                                                                                
2:05:10 PM                                                                                                                    
CHAIR  KAUFMAN referred  to other  organizations  like Craigslist                                                               
that provide similar vehicle  rental services. He understood that                                                               
the CS  eliminates the  risk of an  undue burden  placed on those                                                               
types of platforms.                                                                                                             
                                                                                                                                
2:05:38 PM                                                                                                                    
CHAIR  KAUFMAN  moved  to  adopt  Amendment  1,  work  order  33-                                                               
LS0635\S.3.                                                                                                                     
                                                                                                                                
                                                 33-LS0635\S.3                                                                  
                                                        Nauman                                                                  
                                                        5/2/23                                                                  
                                                                                                                                
                                                                                                                                
                          AMENDMENT 1                                                                                       
                                                                                                                                
                                                                                                                                
     OFFERED IN THE SENATE               BY SENATOR CLAMAN                                                                      
     TO:  CSSB 127(TRA), Draft Version "S"                                                                                      
                                                                                                                                
                                                                                                                                
     Page 3, line 1:                                                                                                            
          Delete "one year"                                                                                                     
          Insert "six months" 3                                                                                                 
                                                                                                                                
     Page 3, line 4:                                                                                                            
          Delete "one year"                                                                                                     
          Insert "six months"                                                                                                   
                                                                                                                                
SENATOR TOBIN objected for the purpose of discussion.                                                                           
                                                                                                                                
CHAIR  KAUFMAN explained  that the  amendment simply  deletes the                                                               
one-year requirement and  inserts  six months  for the resolution                                                               
of back taxes.                                                                                                                  
                                                                                                                                
SENATOR TOBIN removed her objection.                                                                                            
                                                                                                                                
CHAIR  KAUFMAN  found no  further  objection  and announced  that                                                               
Amendment 1 was adopted.                                                                                                        
                                                                                                                                
2:07:18 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
2:07:39 PM                                                                                                                    
CHAIR KAUFMAN reconvened the meeting and solicited a motion.                                                                    
                                                                                                                                
2:07:41 PM                                                                                                                    
SENATOR TOBIN moved  to report the Transportation  CS for SB 127,                                                               
[work  order   33-LS0635\S  as  amended],   from  committee  with                                                               
individual recommendations and attached fiscal note(s).                                                                         
                                                                                                                                
CHAIR KAUFMAN  found no objection and CSSB  127(TRA) was reported                                                               
from the Senate Transportation Standing Committee.