Legislature(2013 - 2014)SENATE FINANCE 532
04/08/2014 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing: Appointee John Mcclellan of Anchorage, Alaska Mental Health Trust Authority Board of Trustees. | |
| SB178 | |
| SB201 | |
| HB19 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 119 | TELECONFERENCED | |
| + | HB 278 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 201 | ||
| = | HB 19 | ||
| = | HB 263 | ||
| = | SB 178 | ||
SENATE BILL NO. 178
"An Act relating to the application of the passenger
vehicle rental tax; and providing for an effective
date."
9:28:09 AM
ANGELA RODELL, COMMISSIONER, DEPARTMENT OF REVENUE, related
that the work draft before the committee addressed previous
concerns over the implementation of the tax. She believed
that the tax could be easily implemented by the Department
of Revenue (DOR).
9:28:59 AM
Senator Bishop inquired whether Commissioner Rodell had
perused the letter in intent attached to the bill.
Commissioner Rodell replied that she had not.
9:29:22 AM
AT EASE
9:31:07 AM
RECONVENED
9:31:18 AM
Co-Chair Meyer requested Vice-Chair Fairclough to read the
letter intent from the committee, as well as a letter of
intent from DOR signed by Commissioner Rodell (copies on
file).
9:31:34 AM
Vice-Chair Fairclough read the letter of intent for the
committee(copy on file):
It is the intent of the Senate Finance Committee that
the passenger vehicle rental tax described in SB 178,
including the original law and the changes made by the
committee substitute, should not be applied to Alaskan
businesses doing business with other Alaskan
businesses. The Department of Revenue (DOR) should not
apply the tax retroactively to businesses it
determines should be, or should have been, collecting
the tax. However, if DOR is able to determine a
business collected the tax but did not remit the tax
to DOR, then DOR should charge back taxes, penalties
and/or interest on those unpaid taxes.
In 2003, the legislature passed House Bill 271, a
passenger vehicle rental tax intended to raise revenue
from tourists renting passenger vehicles so that they
could help pay for the wear and tear they inflict on
the State's publicly-maintained roads.
Since the passage of HB 271, AS 43.52 has been amended
three times; two of which were to exempt Alaskan
businesses doing business with other Alaskan
businesses. The third time was to exempt motorcycles.
The intent of SB 178 is to clarify, once again, which
rental vehicles are to be covered by the tax and which
are not. It is the committee's intent that only
passenger rental cars, as described in AS 43.52.010,
should be taxed.
9:33:22 AM
Co-Chair Meyer believed that the letter of intent
accurately reflected the wishes of the committee. He
clarified that the intent was that the vehicle rental tax
be applied to short-term users on public roads; he thought
that the bill's change to 28 days, from 90, reflected that
intent.
9:34:05 AM
Senator Olson queried whether the committee was working
with work draft version Y. Co-Chair Meyer replied in
affirmative.
Senator Olson stated that he was unable to find the where
the letter of intent was referenced in Section 4 of the
bill.
9:34:24 AM
Vice-Chair Fairclough noted that Section 4 of version Y
only contained repealing language.
9:34:37 AM
Senator Olson understood that the intent letter read, "as
described in Section 4 of SB 178"; however, Section 4 was
repealed on Page 2, line 13.
9:34:51 AM
BRITTANY HUTCHISON, STAFF, SENATOR BISHOP, related that the
"Section 4 of SB 178" should be taken out of the letter of
intent. The reference to Section 4 was for the previous
version of the bill, in which that section redefined motor
vehicles.
9:35:31 AM
AT EASE
9:37:03 AM
RECONVENED
Co-Chair Meyer noted the letter of intent from the
committee would be revisited shortly. He requested Vice-
Chair Fairclough to read the letter of intent from
Commissioner Rodell for the record.
9:37:35 AM
Vice-Chair Fairclough read the letter of intent from DOR:
The purpose of this letter is to clarify the
Department's position and interpretation of the
definition of "passenger vehicle" in AS 43.52.099(2)
for the purposes of our vehicle rental tax.
Specifically, the Department has been asked how it
interprets the phrase: "a motor vehicle ... that is
driven or moved on a highway or public right-of-way in
the state" contained in the definition.
For vehicle rental tax purposes, the Department's
interpretation of this definition is based on access.
If a member of the general public can freely drive on
the road system without breaking any laws or having
someone stop them and tell them they cannot go any
further, they are on a highway or public right-of-way.
For example, an individual can rent a vehicle in
Anchorage, drive to Deadhorse via the Dalton Highway,
and travel many places around Deadhorse and the North
Slope in general. However, there are areas of the
North Slope that are private or restricted that a
member of the general public would not be able to
drive to. Vehicle rental tax would apply to that
transaction because the individual drove the rented
vehicle on different highways and public rights-of-
way.
If an Alaska business rents to another Alaska business
located in an area of the state that is not accessible
by the general public, and all of the vehicles the
business rents, regardless of rental period, are never
driven on a road that can be accessed by the general
public, then under our interpretation of the current
statutes, those transactions would not be taxable.
However, once that vehicle is driven on a highway or
public right-of-way that is open to and accessible by
the general public, and the rental period is less than
90 days, it becomes a taxable transaction under the
current definition.
I hope that this helps clarify the questions that have
recently arisen on this bill. If you have further
questions do not hesitate to contact me.
Sincerely,
Angela Rodell
Commissioner
9:40:22 AM
Co-Chair Meyer reiterated that the current bill version Y
changed the 90-day period to 28 days. He believed that the
letter clarified issues regarding the tax on private and
public vehicles.
9:41:12 AM
Senator Hoffman believed that the concern was that there
were roads that were not maintained by the state that would
not be taxed. He understood that roads that were privately
maintained would not fall under the tax. Commissioner
Rodell clarified that under existing law if a vehicle was
rented and had access to the public roads in Deadhorse that
were monitored by the North Slope Borough Police or Alaska
State Troopers those transactions were taxable regardless
of who maintained the roads.
Senator Hoffman thought that the sponsor had wanted a
version of the bill that exempted vehicles outside of the
maintained area in the North Slope. He asserted that the
current bill version did not accomplish what Senator Bishop
wanted. Commissioner Rodell replied that she would let
Senator Bishop speak to that issue, but noted that DOR was
struggling with the definition because the state maintained
roads that it did not give public access to; furthermore,
there were many definitions of what "public maintained"
meant, and DOR was looking at access as the defining
factor.
9:43:32 AM
Senator Hoffman asserted that the work draft version needed
to be modified in order to accomplish the intent of the
sponsor.
9:44:12 AM
Co-Chair Meyer thought that part of the issue was with
security check points that would not allow people on
certain roads. Senator Hoffman stated that Commissioner
Rodell's letter had addressed the issue with check points,
but noted that those locations were farther north.
9:44:27 AM
Vice-Chair Fairclough asked whether the tax would be
triggered by the rental of a vehicle in an area patrolled
by law enforcement even if the primary use of the vehicle
would be in a restricted area. Commissioner Rodell replied
in the affirmative. She added that the reduction of the
rental period in the current work draft addressed the
concern.
9:45:31 AM
Vice-Chair Fairclough noted that she had seen different
laws interpreted using different criteria. She furthered
that if a vehicle had traveled in the right-of-way, access
was available and the tax should be paid. She thought that
larger vehicles in Prudhoe Bay that were driven directly
into restricted areas should be considered. Commissioner
Rodell agreed that the tax placed the burden on the rental
companies to track where the vehicle was taken while
rented. She related that the tax was passed through the
rental company and paid by the renter of the vehicle. She
believed that an audit requirement would be need to be put
into place that required rental companies to document
evidence that the vehicle was kept within the restricted
areas. She stated that, to date, the department had been
unable to document that evidence.
9:47:30 AM
Vice-Chair Fairclough offered that the sponsor was
proposing a commercial rental to another licensed
commercial business. She noted that tourists did not carry
commercial business licenses when they came to rent
vehicles, but that the state wanted to collect a tax from
tourists to help pay for maintenance on Alaska roads.
She wondered if the committee could consider taxing on a
wholesale level. She furthered that if the tax was a
qualified business expense for the entity that was renting
the vehicle for work activity that would benefit the state.
She inquired whether language could be drafted that would
place the onus on the vehicle renter, which was where the
actual expense would be generated. Commissioner Rodell
responded that under current law commercial vehicles were
exempt from the tax. She deferred the question to Matt
Fonder.
9:49:01 AM
MATT FONDER, DIRECTOR, TAX DIVISION, DEPARTMENT OF REVENUE,
ANCHORAGE (via teleconference), stated that the commercial
vehicle exemptions in the current statute applied to the
very large busses and vehicles that were over 26,000 lbs.
Other potentially exempt vehicles were moving trucks. He
believed that the commercial wholesale transaction had been
discussed and that the Department of Law had expressed
concern over commerce clause constitutional issues.
9:50:39 AM
Senator Hoffman understood that the department's
interpretation had been that the vehicles rented on the
North Slope, on privately maintained roads, would continue
to be taxed; those beyond the security checkpoints would
not. He reiterated that the Y version of the bill did not
speak to the crux of the sponsors concern.
9:51:35 AM
Senator Bishop stated that the letter from DOR very clearly
stated that the regardless of the rental period, the
vehicles that were driven on a road not accessible by the
general public would not be taxed. He referenced the map in
members' packets and noted that it was a half mile from the
rental agency to the restricted road gate on the North
Slope. He asked whether language could be written to
clarify the intent of DOR as was written in the
department's letter of intent. Commissioner Rodell replied
that she did not have an answer on this issue. She asserted
that she was striving for fairness in administering the
tax.
Senator Bishop that the vehicles could be hauled the
additional half mile on a high-deck trailer to the guard
shack, therefore bypassing the tax. Commissioner Rodell
replied in the affirmative.
Vice-Chair Fairclough MOVED to AMEND the letter of intent
from the Senate Finance Committee:
DELETE
"The intent of SB 178 is to clarify, once again, which
rental vehicles are to be covered by the tax and which
are not. It is the committee's intent that only
passenger rental cars, as described in Section 4 of
CSSB 178 should be taxed under AS 43.52.010."
INSERT
"The intent of SB 178 is to clarify, once again, which
rental vehicles are to be covered by the tax and which
are not. It is the committee's intent that only
passenger rental cars as described in AS 43.52.010
should be taxed."
Senator Hoffman wondered whether the drafters of the bill
could provide language to specify that only vehicles within
the Prudhoe Bay unit boundary that drove on restricted
roads would not be subject to the tax.
Co-Chair Meyer understood that the language pertained to
all North Slope activity, including Kuparak. Commissioner
Rodell replied that the tax applied statewide and that the
concern was how to carve out specific areas that would
create a tax exemption for one regional area and not for
other regional areas.
Co-Chair Meyer noted that the letter stated "private
roads."
Senator Hoffman noted that the carving out regional areas
would be a policy decision that the legislature would made
and not DOR.
9:57:15 AM
AT EASE
9:58:58 AM
RECONVENED
9:59:14 AM
Co-Chair Meyer thought that the letter of intent from the
department was clear.
9:59:26 AM
Vice-Chair Fairclough MOVED to REPORT CSSB 178(FIN) out of
committee with 2 letters of intent, individual
recommendations, and the accompanying fiscal note. There
being NO OBJECTION, it was so ordered.
10:00:30 AM
CSSB 178(FIN) was REPORTED out of committee with a "do
pass" recommendation and with 2 letters of intent,
individual recommendations, and a new indeterminate fiscal
note from the Department of Revenue.
10:00:41 AM
AT EASE
10:02:47 AM
RECONVENED
| Document Name | Date/Time | Subjects |
|---|---|---|
| Mental Health Trust Authority - McClellan #5.pdf |
SFIN 4/8/2014 9:00:00 AM |
Confirmation - McClellan |
| SB178 DOR Letter - Rodell.pdf |
SFIN 4/8/2014 9:00:00 AM |
SB 178 |
| SB178 Updated Letter of Intent 2.doc |
SFIN 4/8/2014 9:00:00 AM |
SB 178 |