Legislature(2025 - 2026)BUTROVICH 205
04/03/2025 01:30 PM Senate TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| SB138 | |
| Presentation: Tribal Transportation Relations: a New Approach | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 138 | TELECONFERENCED | |
SB 138-TAXATION: VEHICLE RENTALS, SUBPOENAS
1:41:13 PM
CHAIR BJORKMAN announced the consideration of SENATE BILL NO.
138 "An Act relating to vehicle rental taxes; relating to the
issuance of subpoenas related to tax records; and providing for
an effective date."
1:41:30 PM
SENATOR MATT CLAMAN, District H, Alaska State Legislature,
Juneau, Alaska, Sponsor of SB 138, read from the following
introductory statement:
[Original punctuation provided.]
SB 138: Matt STRA Opening Remarks
Thank you, Mr. Chair and members of the committee. For
the record this is Senator Matt Claman and I represent
District H. Thank you for hearing Senate Bill 138.
Over the past several years, the use of vehicle rental
platforms, such as Turo and Getaround, has greatly
increased. These companies offer an easy way for
Alaskans to rent out their cars directly, often to
supplement their income. They are already subject to
the 10 percent state vehicle rental tax, but many of
them do not know how to pay the tax, or even that they
owe it. As it stands, there is no easy way for
Alaskans using these platforms to comply with the
existing state vehicle rental tax.
I recently met a couple from West Anchorage. Every
summer, they buy 5 late-model used cars. They rent
their cars on Turo for the entire tourist season, with
90 percent of the days in-use. They sell the cars at
the end of tourist season and do it again the next
year. This couple did not know about the state vehicle
rental tax. They were aware that Turo collects the
Anchorage rental tax. Asking them to separately
collect the state tax from each renter would be
unreasonable. The couple expressed to me that they
would be very pleased if Turo collected the tax on
their behalf.
Senate Bill 138 requires vehicle rental platforms like
Turo to collect the existing state vehicle rental tax
and remit the tax to the Department of Revenue.
1:43:57 PM
SENATOR CLAMAN continued to read from his opening remarks:
[Original punctuation provided.]
Under existing law, Turo is already required to
invoice for this tax. AS 43.52.050(b) states that "the
tax shall be stated as a separate item on the lease or
rental contract or other document invoicing payment."
Because vehicle rental platform companies prepare the
invoices for their renters, they have a duty to
collect and remit the tax to the state. Turo collects
all fees for the rental and the vehicle owner gets
paid last. Last year, we went onto the Turo website
and reviewed rental charges in all 50 states. We
learned that Turo already collects state and local
taxes on behalf of owners in at least 42 other states
and many more cities and counties.
Additionally, Senate Bill 138 lowers the vehicle
rental tax rate from 10 percent to 8 percent for
vehicle rental platforms. The tax remains at 10
percent for traditional rental operations. We
recognize the governor vetoed the same bill in
September.
Of particular importance, the bill eliminates the
window for the Department of Revenue to retroactively
collect taxes. With passage of this bill, vehicle
platform owners who were not previously collecting the
tax will be protected from back taxes.
In 2020, the Municipality of Anchorage adopted similar
legislation requiring vehicle rental platforms to
collect and remit the city's flat 8 percent vehicle
rental tax. Discounting the impacts of Covid-19 on
rentals in 2020, the vehicle tax revenue to the
Municipality of Anchorage has increased substantially
in the years since the adoption of that ordinance. I
will note that we have invited testimony from
Anchorage Municipality that can speak more to that.
1:46:01 PM
SENATOR CLAMAN continued to read from his opening remarks:
[Original punctuation provided.]
Finally, the Department of Revenue deposits these
funds in the vehicle rental tax account in the general
fund. Historically, the legislature has appropriated
the money in the vehicle rental tax account to the
Department of Transportation and to State Parks. AS
43.52.080(c) states: "The Legislature may appropriate
the actual balance of the vehicle rental tax account
for tourism development and marketing. This section is
not intended to create a dedicated fund."
It makes good sense to require collection of this tax
and ensure that the folks who rent cars to drive on
Alaska's roads and enjoy our parks also help maintain
those services.
1:47:39 PM
SENATOR CLAMAN noted the Governor's previous concern that this
change would place a burden on a startup industry. He shared his
belief that Turo is the primary rental company used by younger
generations and pointed out that there are hundreds of Turo
rentals available in a given location (e.g. Anchorage). He
opined that Turo does not qualify as a small business or a
startup industry; rather, it is an important part of the rental
industry in the US.
1:47:52 PM
SENATOR STEDMAN asked whether the state is collecting taxes on
Turo rentals.
1:48:26 PM
SENATOR CLAMAN differed the question to the Department of Law
(DOL) and/or the Department of Revenue (DOR). He shared his
understanding that DOR has the authority to issue regulations to
ensure that taxes are collected.
1:49:26 PM
SENATOR STEDMAN shared his understanding that the Constitution
of the State of Alaska requires DOR to implement and collect
taxes. He questioned how DOR can pick and choose which tax
collection to enforce.
1:49:51 PM
SENATOR CLAMAN replied that he shares this frustration. He said
this is a question for DOL.
1:50:01 PM
SENATOR KIEHL shared a personal anecdote and asked how far back
in time DOR could go to collect taxes owed.
1:50:37 PM
SENATOR CLAMAN shared his understanding that the statute of
limitations would likely be two years.
1:51:04 PM
SENATOR KIEHL asked for clarification.
1:51:11 PM
SENATOR CLAMAN clarified that SB 138 would prohibit the
collection of back taxes.
1:51:28 PM
SENATOR KIEHL said that currently, car rental taxes are ten
percent. He asked why SB 138 introduces a differential rate that
is based on business model.
1:51:51 PM
SENATOR CLAMAN replied that various interests were involved in
crafting SB 138. These interests are no longer fully aligned,
and the differential rate was a compromise. He noted that SB 138
is the same as the legislation that passed in 2024. He said that
there is a similar House bill and explained that the previous
legislation was used as a starting point.
1:52:40 PM
SENATOR KIEHL questioned why Alaska should have different rates
for these business models. He suggested that, with this
structure, one business model would benefit over the other.
1:53:07 PM
SENATOR CLAMAN agreed. He opined that all rental companies
should pay the same tax rate.
1:53:37 PM
SENATOR STEDMAN asked about the administration's stance on SB
138.
1:53:58 PM
SENATOR CLAMAN said that the administration has not taken a
position on SB 138.
1:54:10 PM
CHAIR BJORKMAN returned to the question of DOR's responsibility
to collect taxes. He surmised that any Alaskan could take this
issue to court and demand DOR collect the appropriate tax -
without any legislation to support that action. He asked for
confirmation of this understanding.
1:54:47 PM
SENATOR CLAMAN shared his belief that there is sound basis for
any Alaskan to bring a lawsuit on this issue.
1:55:02 PM
CHAIR BJORKMAN expressed fascination at this possibility.
1:55:09 PM
SENATOR KIEHL asked for more information about how the flat rate
tax is collected in the Municipality of Anchorage.
1:55:44 PM
CHAIR BJORKMAN announced invited testimony on SB 138.
1:56:02 PM
PAULA BIRMINGHAM, Tax Enforcement Officer, Finance, Municipality
of Anchorage, Anchorage, Alaska, stated that the Turo tax
revenue amount is confidential. She said that tax rate is 8
percent. This applies to all rental agencies and includes the
hosting platform. The municipality did not consider a separate
rate for the hosting platforms. The municipality did not pursue
Turo back taxes, as this was found to be too burdensome. She
stated that administering a rental vehicle tax with a hosting
platform is far easier than administering the tax to individual
owners/businesses. In this way, the hosting platform saves the
municipality time and money. Hosting platforms (e.g. Turo) were
added to the municipal code in October 2020. Turo registered
with the municipality in early 2021. The municipality did pursue
taxes for the time between the change in October 2020 and when
Turo registered in 2021. She noted that there were different
interpretations of how to apply the code. The municipality holds
Turo accountable to collect and remit the taxes from all
individuals who rent a vehicle through the platform.
1:59:53 PM
SENATOR KIEHL asked whether the liability for the tax lies with
the provider of the vehicle or the party responsible for
billing.
2:00:16 PM
MS. BIRMINGHAM replied that the liability for the rental vehicle
tax lies with the hosting platform or the rental vehicle agency.
2:00:26 PM
SENATOR KIEHL acknowledged that the tax information is
confidential and asked how many hosting platforms are submitting
reports.
2:00:43 PM
MS. BIRMINGHAM said she did not know.
2:00:48 PM
SENATOR KIEHL noted that, while Turo is the biggest player,
there are many others. He pointed out that Anchorage does not
have a sales tax and asked whether a local business license is
required - or whether only a state business license is required.
2:01:23 PM
SENATOR TOBIN joined the meeting.
MS. BIRMINGHAM said that no municipal or city business license
is required. The only requirement is a current state business
license.
2:01:50 PM
SENATOR KIEHL asked whether Anchorage has differential local
fees added to vehicle registrations for personal versus business
vehicles.
2:02:18 PM
MS. BIRMINGHAM expressed uncertainty and asked to hear the
question again.
SENATOR KIEHL explained that many municipalities add local fees
to the state's vehicle registration fees. He noted that in some
municipalities, the fee is more. He asked if this is the case in
Anchorage.
MS. BIRMINGHAM said she is unsure about businesses; however, she
said the municipality does collect some of the vehicle
registration fees. She said that this information is listed on
the renewal notice.
SENATOR KIEHL said that many municipalities provide an exemption
for a specified dollar value of business personal property. He
asked if, in the Municipality of Anchorage, there is a threshold
after which a business personal property tax would go into
effect.
MS. BIRMINGHAM replied yes. She said the business personal
property tax goes into effect when the value is $20,000 or more.
2:04:47 PM
At ease.
2:05:19 PM
CHAIR BJORKMAN reconvened the meeting.
2:05:37 PM
CLAIRE HOLLAND LECLAIR, representing self, Anchorage, Alaska,
testified by invitation in support of SB 138. She said she
previously served on the Chugach State Park advisory board and
explained that vehicle rental tax receipts are partially
allocated to the state parks operating budget. (The receipts are
split between DOTPF and the state parks.) She said that in the
current fiscal year, vehicle rental tax receipts make up 50
percent of the state parks operating budget. She pointed out
that the law requires vehicle rental companies to invoice the
tax; however, Turo has not complied. She stated that she does
not support differential (i.e. lower) taxes for platform
companies like Turo. She requested that this be changed to make
the tax payment 10 percent for all rental car companies.
2:07:29 PM
SENATOR TOBIN asked for more information about Ms. LeClair's
Alaska State Parks affiliation.
2:07:44 PM
MS. LE CLAIRE replied that she is representing herself; however,
she was previously employed by Alaska State Parks as a seasonal
ranger and as deputy director.
2:08:29 PM
SENATOR KIEHL asked whether there is an estimate for the
uncollected tax amounts.
2:08:47 PM
SENATOR CLAMAN said Department of Revenue (DOR) has consistently
reported that a reasonable amount would be collected; however,
the exact number is unknown. He added that DOR has attempted to
collect the tax from the Turo hosts (i.e. vehicle owners) but
shared his understanding that DOR is no longer doing this.
2:09:35 PM
SENATOR KIEHL commented that this is not a reasonable
expectation to have of a small business owner. He asked if DOR
is available for questions.
2:10:28 PM
BRANDON SPANOS, Deputy Director, Tax Division, Department of
Revenue (DOR), Anchorage, Alaska, said that DOR does not have a
revenue estimate, and the DOR fiscal note is indeterminate. DOR
does not have specific date on platform collections. He
confirmed that DOR has sent collection letters to vehicle owner.
He stated that those numbers have been very low, as it is
difficult to identify who is using platforms like Turo. He said
that DOR previously subpoenaed Turo for a client list (to send
vehicle owners a notice that tax collection is required) and
TURO refused to comply, and this issue went to court. The court
ruled that DOR did not have authority to enforce the subpoena
language outside of Alaska. He explained that SB 138 contains
language that would allow DOR to enforce the subpoenaed language
outside of the state. He emphasized that it is difficult to
enforce tax collection without the names of those utilizing the
platform service (and while a business license is required, not
everyone complies).
2:12:47 PM
SENATOR KIEHL recalled a change in Internal Revenue Service
(IRS) rules that would enable DOR to access information on those
whose revenue is more than $600 or $700. He asked if this is
correct.
2:13:17 PM
MR. SPANOS replied that this is correct; however, it has not yet
gone into effect. He noted that the threshold was previously
$20,000 and was lowered to $600. He provided a brief overview of
this change and how it would be applied. He stated that, if DOR
has the information identifying individuals who are using
platforms and renting vehicles, DOR is then obligated to collect
those taxes. When DOR receives the 1099K information from IRS,
it will begin to collect the associated taxes. The IRS is behind
on issuing this information to the states due to the Covid-19
pandemic, though it is forthcoming. He briefly described the
process once the data is received by IRS. However, if the
individual renting the vehicle does not know the tax is due (and
therefore doesn't collect it from the renter), they will have to
pay the tax themselves.
2:15:42 PM
SENATOR KIEHL opined that this is an issue worth addressing, as
Alaskans who have potentially not been able to collect the tax
would then be required to pay the state.
2:16:25 PM
SENATOR STEDMAN asked whether the administration supports SB
138.
2:16:38 PM
MR. SPANOS replied that the administration has not taken a
position on SB 138.
2:16:51 PM
SENATOR STEDMAN requested a financial report from DOR to better
understand how much revenue was collected. He opined that this
information would be beneficial for the Senate Finance Committee
as members work to balance the budget.
2:17:22 PM
CHAIR BJORKMAN requested confirmation of his understanding that
the administration vetoed a previous version of this
legislation. This effectively vetoed DOR's ability to collect a
tax (that is already due under state law) from platform
companies like Turo. This means DOR must collect the taxes from
individual Alaskans who use platforms like Turo to rent their
vehicles.
2:18:20 PM
MR. SPANOS said that DOR is not actively seeking collection from
individuals using platforms like Turo; however, the obligation
exists. When DOR is provided with identifying information, it
must take action to collect those taxes. He added that the tax
division seeks to treat all taxpayers the same; therefore, taxes
will not be collected on an individual basis (e.g. when the
division is made aware of one person who is renting their
vehicle out on Turo). Receiving the 1099K data from IRS will
allow DOR to begin collecting taxes from those individuals (and
potentially also collect back taxes).
2:19:37 PM
CHAIR BJORKMAN questioned the reasoning behind DOR's decision to
wait until the information is received from IRS. He pointed out
that, by this logic, one could argue that no laws should be
enforced since law enforcement cannot possibly catch all
individuals who break the law.
2:19:58 PM
MR. SPANOS replied that he does not have a response.
2:20:06 PM
CHAIR BJORKMAN held SB 138 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 138 Version A.pdf |
STRA 4/3/2025 1:30:00 PM |
SB 138 |
| SB 138 Sponsor Statement Version A 3.25.2025.pdf |
STRA 4/3/2025 1:30:00 PM |
SB 138 |
| SB 138 Sectional Analysis Version A 3.25.2025.pdf |
STRA 4/3/2025 1:30:00 PM |
SB 138 |
| SB138-DOR-TAX-3-28-25.pdf |
STRA 4/3/2025 1:30:00 PM |
SB 138 |
| SB 138 Supporting document - SSPCAB Letter.pdf |
STRA 4/3/2025 1:30:00 PM |
SB 138 |
| SB 138 Supporting Document - Anchorage AO 2020-055.pdf |
STRA 4/3/2025 1:30:00 PM |
SB 138 |
| DOTPF Tribal Team 04032025.pdf |
STRA 4/3/2025 1:30:00 PM |
DOT&PF Tribal Coordination |
| Collections of vehicle rental taxes.pdf |
STRA 4/3/2025 1:30:00 PM |
SB 138 |
| 20250417 (S) Tran Committee 4-3-2025.pdf |
STRA 4/3/2025 1:30:00 PM |
DOT&PF Tribal Coordination |