Legislature(2013 - 2014)BUTROVICH 205
03/13/2014 01:30 PM Senate TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| SB178 | |
| SB94 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 94 | TELECONFERENCED | |
| *+ | SB 197 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 178 | TELECONFERENCED | |
SB 178-PASSENGER VEHICLE RENTAL TAX
1:31:58 PM
CHAIR EGAN announced SB 178 to be up for consideration.
1:32:06 PM
BRITTANY HUTCHISON, staff to Senator Click Bishop, explained the
draft committee substitute (CS) to SB 178(), version 28-
LS1406\C. Language in section 1 on page 1, line 4, consolidates
two sections regarding the terms "recreational" and "passenger"
for better organization of the statute and except for the tax
rates, the factors are the same for both types of vehicles.
Section 2 on page 1, line 10, reduces the rental term from 90
days to 30 days for which a vehicle is exempt. An extension of
the contract is also exempt as long as the extension is agreed
upon before the expiration of the initial 30-day period. There
is no break between the initial period and the period of
extension.
1:33:25 PM
Section 3 on page 2, line 6, consolidates the terms "passenger"
and "recreational." It states that passenger vehicles are taxed
at a total of 10 percent of all fees and costs and recreational
vehicles are taxed at 30 percent. That has not changed from the
original statute.
1:34:43 PM
Section 4 on page 2, line 13, amends the term "passenger
vehicle" to specify that it is for the primary purpose of
transporting passengers. This is done to help clarify that the
tax applies only to passenger vehicles and not to vehicles that
have another purpose. Section 4(f) on page 2, line 28, reduces
the gross vehicle weight from 8,500 lbs. to 6,500 lbs. in order
to better define what size of trucks the legislature intends to
be taxed.
Section 5 on page 3, line 7, repeals AS 43.52.030 and .040,
because they are no longer needed since they have already been
consolidated in sections 1 and 3. The original version of SB 178
had a section regarding retroactivity, and the CS does not have
that. But to address that issue they drafted a letter of intent
which says the passenger vehicle rental tax should not be
applied to Alaskan businesses doing business with other Alaskan
businesses and that tax should not be applied retroactively.
However, if DOR is able to determine that 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.
She explained that 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 publically-maintained
roads.
1:35:05 PM
SENATOR FAIRCLOUGH joined the committee.
1:35:15 PM
MS. HUTCHISON continue to explain that 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.
1:35:55 PM
SENATOR DYSON moved to adopt CSSB 178(), version\C.
CHAIR EGAN objected for discussion purposes.
MS. HUTCHISON said 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.
SENATOR DYSON asked if there is a fiscal note.
MS. HUTCHISON answered not yet for the CS.
1:37:44 PM
DOUG JOHNSON, CFO, Tyler Rental, Inc., Ketchikan, Alaska,
supported SB 178. He said they have been in business for 25
years and operates from five different locations in Southeast
Alaska with 58 Alaskan employees. Tyler never received notice of
this tax from the state. Their core business is rental of large
equipment to the construction, timber and mining, industries.
They rent half-ton and large pickups to support contractor needs
such as at the Kensington Mine and Greens Creek Mine that are
not on the state highway system.
MR. JOHNSON said Tyler just became aware of the rental vehicle
tax from another Alaska-based equipment rental company and have
filed their fourth quarter 2013 return to the DOR and paid this
tax under protest on the basis that they were never informed of
this tax requirement. This general lack of notice to equipment
rental companies and their inability to bill customers for this
tax from prior periods is why they support SB 178.
1:40:50 PM
RUDI VONIMHOF, Delta Leasing, Anchorage, Alaska, supported SB
178. He said they are based out of Prudhoe Bay with a small
office in Anchorage and a big chunk of their business is
equipment leasing similar to Tyler Rentals.
MR. VONIMHOF became involved with Delta Leasing in 2007; they
have 28 Alaska employees. Their primary office and 95 percent of
their business is in Prudhoe Bay with oil field service
contractors. They lease half-ton and three-quarter ton vehicles
to the customers who request them. Their insurance limits them
to doing business with business entities, so they can't do any
business with consumers.
1:42:11 PM
SENATOR FRENCH joined the committee.
MR. VONIMHOF said they first became aware of the rental car tax
in 2010 when they received a notification from the DOR. They
then exchanged two letters with the department; the last one
asked to see a copy of several of their leases, which they sent
along with an offer to answer any questions. An earlier letter
to the department said they did not feel this tax was applicable
to their operations, because they are in the heavy industrial
rental business in Prudhoe Bay to business entities.
Going forward three years, Mr. Vonimhof said, on November 6,
2013 a criminal search warrant was served on them by a DOR
criminal investigator who had tried to rent a three-quarter ton
truck from them and was refused rental. Then he obtained a
fictitious business license posing as a construction entity, and
after showing them his business license, he was granted credit
with the company. Apparently that transaction enabled him to
obtain a search warrant. The truck had a gross vehicle weight
(GVW) rating in excess of 8,500 lbs., which is an exempt vehicle
class under existing statute, so he didn't know how that enabled
his business to be searched.
Nevertheless, DOR agents simultaneously showed up at their
Anchorage office and at their Prudhoe Bay office. At least four
armed DOR agents were in their Prudhoe Bay office for the
majority of the day and between the two offices the department
confiscated approximately 70 banker's boxes consisting of all of
their accounting hard files as well as their asset files and
computers. That was the first time they had heard from the DOR
since the 2010 correspondence and that was a fairly shocking way
to be notified.
Since that time Mr. Vonimhof said they had put a lot of time
into this issue. He wrote a letter to Commissioner Rodell in
late December asking how they could interpret their company as
falling under the existing law since there are no state
maintained roads in Prudhoe Bay. State maintenance ends at the
end of the Dalton highway and all of their activities occur
beyond that point. Their customers lease vehicles for use on
their oil field exploration sites that are behind guarded
security check points. There is no way that this could by any
means fall within the realm of a public right-of-way, at least
by their legal council's opinion.
He said that basically they have had very little interaction
with the DOR over the past four months and have more or less
written off their confiscated computers and bought new ones,
although keeping their business going for a couple of weeks was
quite a scramble without access to their electronic or paper
records. Just selling a vehicle when you don't have a title for
it is problematic. In summary he said SB 178 clarifies the
intent of the original legislation, and he urged its passage.
SENATOR DYSON asked if the DOR agents had search warrants.
MR. VONIMHOF answered yes.
SENATOR DYSON asked how long it took to get their property back.
MR. VONIMHOF replied that they had not received any of their
files or computers back.
1:50:19 PM
SENATOR DYSON noted that public safety police officers regularly
have equipment that can quickly copy hard drives, and they
passed a bill to get property returned. Also, the law clearly
provides ways for them to copy and establish the chain of
custody and get the property back to citizens. He found this all
very alarming and he was sorry they had to go through it.
1:50:49 PM
MR. VONIMHOF clarified that the department did not take their
server, and they returned the electronic files with credit card
numbers. They had received one or two of their key computers,
but zero on the paper files.
1:51:35 PM
SENATOR FAIRCLOUGH asked if they could go into executive session
to speak with the administration and their attorneys about this.
CHAIR EGAN said he thought that could be arranged.
SENATOR DYSON said he had been around long enough to know there
are always at least two sides to every story and he wanted to
hear the department's take on this case.
1:52:50 PM
JOHN COOK, CFO, Airport Equipment Rentals, Brice Enterprise,
supported CSSB 178. He supported many of the comments of the
previous testifier regarding the tax. But he wanted to point out
that there is a difference in interpretation between businesses
and the department on what the current exemption of 8,500 GVW
means and the CS clears that up. Secondly, the department has
never provided any reason as to why vehicles rented on the North
Slope are defined as passenger vehicles. AS 43.52.099 (2)
defines a passenger vehicle as a motor vehicle that is driven on
a highway or a public right-of-way; clearly activities off the
Dalton Highway are not conducted on either of those types of
roadways. They believe this bill will clarify the original
intent and clear up the disagreement between the private sector
doing business with businesses in Alaska and the department.
1:54:27 PM
SAM BRICE, President, Brice Enterprises, Inc., supported SB 178.
His is a 50-year old Alaskan construction business that was
bought by the Chulista Corporation four years back. They have up
to 60 full-time employees and 200 seasonal employees. Brice
Equipment Rental is a subsidiary of their company, and it is a
small equipment rental company based on the North Slope. A small
part of heavy equipment rental business is pickup rental for the
North Slope producers and service companies as well as their own
construction company, mainly in rural Alaska.
He related that they received a letter making them aware of the
tax in November 2013; the letter invited them to file quarterly
tax returns for all quarters back to 2004 in which they had
vehicle rental income. They questioned the applicability of the
tax on their use of pickups on surface roads on the North Slope
and with other Alaska businesses. Their liability goes back to
2010, their first year of light vehicle rental, and is
approximately $31,000; they wrote the check so as not to incur
further penalties. They feel this bill clarifies the intent of
law.
SENATOR FRENCH asked Johanna Bales to explain how the department
settled the problem of back taxes several years ago with the
motorcycle rentals bill.
JOHANNA BALES, Deputy Director, Tax Division, Alaska Department
of Revenue (DOR), explained that they worked with the individual
companies and most of them did pay. Capturing back taxes was
limited through an agreement with the Department of Law, but
they were required to pay taxes that were due prior to the
change.
SENATOR FRENCH asked what the time was limited to.
MS. BALES explained that they had done this type of limiting
back taxes with taxpayers who come forward and cooperated with
them, and their general timeframe is three to five years.
1:58:41 PM
SENATOR FAIRCLOUGH asked if there is a requirement for the
department to notify taxpayers when taxes are going to be placed
against a business.
MS. BALES answered no. In fact, they do not tell corporations
coming to Alaska that they are subject to corporate income tax.
But whenever a new tax or statute is implemented they try to
reach out to all affected companies that they believe could be
subject it, but they also rely on those companies to try and
look out for themselves and reach out to the taxing authority or
business licensing agent to try to get information about any
regulations, taxes, fees, that they might be subject to.
2:00:16 PM
At ease from 2:00 to 2:02 p.m.
2:02:51 PM
CHAIR EGAN called the meeting back to order.
SENATOR DYSON moved to hold SB 178 until next Tuesday and to ask
DOR and DOL to attend an executive session on the bill. There
were no objections and it was so ordered.
SENATOR FAIRCLOUGH said Delta Leasing was the second constituent
that said the DOR seized their property; the other was Ryan
Peterkin with Maytech Alaska.
CHAIR EGAN held SB 178 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 94 Sponsor Statement.pdf |
STRA 3/13/2014 1:30:00 PM |
SB 94 |
| SSSB 94.pdf |
STRA 3/13/2014 1:30:00 PM |
SB 94 |
| SSSB 94 - Sectional Analysis.pdf |
STRA 3/13/2014 1:30:00 PM |
SB 94 |
| SB094SS-DOT-NDAES-3-8-14.pdf |
STRA 3/13/2014 1:30:00 PM |
SB 94 |
| SB094SS-DNR-MLW-3-8-14.pdf |
STRA 3/13/2014 1:30:00 PM |
SB 94 |
| SB 197 - Sponsor Statement.pdf |
STRA 3/13/2014 1:30:00 PM |
SB 197 |
| SB197-DOT-SDES-3-8-14.pdf |
STRA 3/13/2014 1:30:00 PM |
SB 197 |
| CSSB 178 DRAFT Letter of Intent.pdf |
STRA 3/13/2014 1:30:00 PM |
SB 178 |
| CSSB 178 DRAFT Text.pdf |
STRA 3/13/2014 1:30:00 PM |
SB 178 |
| CSSB 178 Sectional Analysis.PDF |
STRA 3/13/2014 1:30:00 PM |
SB 178 |
| CSSB 178 Sponsor Statement.PDF |
STRA 3/13/2014 1:30:00 PM |
SB 178 |
| SB 178 Letters Supporting - Third Batch.PDF |
STRA 3/13/2014 1:30:00 PM |
SB 178 |
| SB 178 Side by Side Analysis with CSSB 178.pdf |
STRA 3/13/2014 1:30:00 PM |
SB 178 |
| CSSB178(TRA)-DOR-TAX-03-18-14.pdf |
STRA 3/13/2014 1:30:00 PM |
SB 178 |
| SB 178 Delta Leasing documents.PDF |
STRA 3/13/2014 1:30:00 PM |
SB 178 |
| SB 94 FINAL_AHTNA_PPT_HANDOUT.pdf |
STRA 3/13/2014 1:30:00 PM |
SB 94 |