Legislature(2003 - 2004)

01/21/2004 02:26 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 347                                                                                                            
     An Act exempting taxicabs from the passenger vehicle                                                                       
     rental tax; and providing for an effective date.                                                                           
SUE  STANCLIFF, STAFF,  REPRESENTATIVE  PETE KOTT,  testified                                                                   
that HB 347 was introduced specifically  to exclude a taxicab                                                                   
from  the  definition  of  "passenger  vehicle"  in  statute,                                                                   
exempting taxicab rentals from the Vehicle Rental Tax.                                                                          
Ms. Stancliff  noted that last  year, HB 271 was  passed with                                                                   
the intent  to levy excise taxes  on the rental  of passenger                                                                   
and recreational  vehicles usable  on highways and  vehicular                                                                   
ways.   That imposed  a substantial  and confusing  burden on                                                                   
owner-leasers of  taxicabs who  would be required  to collect                                                                   
from  the  taxicab  drivers.     That  was  a  technical  and                                                                   
unintended  application   of  the   Vehicle  Rental   Tax  to                                                                   
commercial taxicab lease transactions.                                                                                          
Co-Chair Harris  asked if the taxicabs were  mostly privately                                                                   
owned and then leased to a company.   Ms. Stancliff explained                                                                   
that the taxicab  vehicles are owned by operators,  of which,                                                                   
each purchases  and maintains  the taxicab,  secures  all the                                                                   
insurance coverage  including the liability insurance  to the                                                                   
drivers, and  also arranges to  obtain the rights  to operate                                                                   
under  one  of the  taxicab  permits  currently held  in  the                                                                   
municipality.   She noted that  there are testifiers  on line                                                                   
to address technical questions.                                                                                                 
JAMES  BRENNAN,  (TESTIFIED  VIA  TELECONFERENCE),  ATTORNEY,                                                                   
HEDLAND BRENNAN, HEIDEMAN AND  COOKE, ANCHORAGE, responded to                                                                   
the  query  made  by Co-Chair  Harris.    In  Anchorage,  the                                                                   
taxicab  owners  rent or  lease  the  cabs to  the  so-called                                                                   
"chauffeurs"  or   drivers,  who  are  independent   business                                                                   
people.    The  drivers' operate  as  their  own  independent                                                                   
businessperson.  They are not  employees of either the owners                                                                   
or the cab.                                                                                                                     
The  impact of  the  Vehicle Rental  Tax  imposed on  taxicab                                                                   
drivers would be  over and above requirement of  paying a tax                                                                   
on the amount  that they rent the cab for,  ordinarily around                                                                   
$90 dollars per  day shift.  They make their  living based on                                                                   
making a profit  after paying rental and other  expenses.  He                                                                   
emphasized it  is a close margin  to operate on and  that the                                                                   
tax would be felt exclusively  by the taxi cab drivers.  They                                                                   
would  not be  able to  pass that  tax on  to the  passengers                                                                   
after the change is made to the regulation.                                                                                     
Mr.  Brennan understood  that  the tax  was  not intended  to                                                                   
affect the local  economy.  He emphasized that  the tax would                                                                   
fall exclusively  on the Anchorage taxicab drivers,  having a                                                                   
huge and unintended effect.                                                                                                     
Representative  Croft  asked  if  any of  those  clients  had                                                                   
assessed  it  or if  this  would  be  a risk.    Mr.  Brennan                                                                   
responded  that some of  the operators  did receive  a notice                                                                   
because they  operate under a  business name.  Some  of these                                                                   
people came to  the law office because of the  impending tax.                                                                   
It  was   apparent  that  the   tax  created   an  unintended                                                                   
situation.  Most  people do not have a good  understanding of                                                                   
how the  industry is  structured.  Big  cab companies  do not                                                                   
own the  taxicabs but rather  they tend  to be leased  out to                                                                   
cab  drivers.   He reiterated  that  it was  not an  intended                                                                   
Co-Chair Harris asked  about the definition of  a taxicab and                                                                   
if it  would include  chauffeurs.   Mr. Brennan advised  that                                                                   
under an Anchorage ordinance,  there is a distinction between                                                                   
a  taxicab,  a  limousine  and   the  catchall  group  called                                                                   
"vehicles for  hire".  Taxicabs  are a specific group  of "on                                                                   
demand" vehicles  to move a person  from a specific  point to                                                                   
another specific  point.  He did  not believe that  there are                                                                   
other  groups  left out.    In  the limousine  industry,  the                                                                   
structure  is  different and  there  are companies  that  own                                                                   
their own  limousines  and hire their  drivers as  employees.                                                                   
They would  not be under this  tax as there is no  rental fee                                                                   
unless the transaction between  the customer and limousine is                                                                   
a rental.   The tax is only on  the rental of a  vehicle.  He                                                                   
reiterated  that as the  law is  currently written,  it would                                                                   
not apply to them.   The reason that it applies  to a taxicab                                                                   
is because there is a lease agreement.                                                                                          
Co-Chair Harris  questioned if  any limousine companies  were                                                                   
being  charged the  tax.   Ms. Stancliff  responded that  the                                                                   
only thing  that "governs" that  group are the  licensing and                                                                   
smoking regulations.                                                                                                            
JANIS HALES,  (TESTIFIED VIA TELECONFERENCE),  REVENUE AUDIT,                                                                   
TAX DIVISION,  DEPARTMENT OF  REVENUE, ANCHORAGE,  offered to                                                                   
answer any technical questions the Committee might have.                                                                        
JOHN LYNCH, (TESTIFIED VIA TELECONFERENCE),  PRESIDENT, TRUCK                                                                   
RENTING   &  LEASING   ASSOCIATION,   ALEXANDRIA,   VIRGINIA,                                                                   
recommended  that HB  347 be  amended to  exclude all  trucks                                                                   
that transport  property over 10,000-pounds.   The rental tax                                                                   
is directed toward rental cars  and not trucks that transport                                                                   
property.  The tax is intended  for out of state tourists and                                                                   
not in State  residents.  Under the definition  of "passenger                                                                   
vehicle" contained in the Alaska  Code, it would apply to all                                                                   
vehicles under 26,000-pounds including rental trucks.                                                                           
It is  a significant tax  on Alaska residents  and businesses                                                                   
as trucks  less than  26,000-pounds are  generally rented  to                                                                   
small  businesses and  local residents  for household  moves.                                                                   
Mr. Lynch  urged that  the Committee  amend that language  to                                                                   
remove trucks  over 10,000-pounds.   He offered to  work with                                                                   
the Committee on structuring that language.                                                                                     
Co-Chair  Harris inquired  if the  tax would  apply to  firms                                                                   
that rent equipment.   Mr. Lynch responded that  it would not                                                                   
and that  the Department  of Revenue  has indicated  it would                                                                   
apply  to all  vehicles  under 26,000-pounds  including  that                                                                   
type of truck.                                                                                                                  
MICHAEL  BELL,  (TESTIFIED  VIA   TELECONFERENCE),  DIRECTOR,                                                                   
ALASKA TRUCKING ASSOCIATION, ANCHORAGE,  spoke to HB 347.  He                                                                   
noted  that the  definition  of  a commercial  motor  vehicle                                                                   
contained in  HB 241, indicates  that in Alaskan  statutes, a                                                                   
motor vehicle  is around  26,000 pounds.   He asked  that the                                                                   
Committee consider  adopting the  definition of  a commercial                                                                   
motor vehicle listed in Alaska  Statute (AS) 19.10.399, which                                                                   
includes  vehicles   in  the  26,000-pound  range   used  for                                                                   
CHRIS FISCHER,  (TESTIFIED VIA TELECONFERENCE),  KACHECAB/CAB                                                                   
DRIVERS, HOMER,  commented on how  difficult the tax  will be                                                                   
for the taxicab  drivers in Homer, Alaska.   He believed that                                                                   
the tax  would cause the  little cab  companies to go  out of                                                                   
business.   He urged passage of  the bill with  corrected and                                                                   
amended language.                                                                                                               
Representative Croft referenced  Page 1, Lines 5-6, and asked                                                                   
if  the  definition  of "passenger  vehicle"  be  changed  to                                                                   
"motor vehicle"  as defined in  AS 28.40.100 and  then change                                                                   
the language  to what is contained  in AS 19.10.399  (1), the                                                                   
definition of  commercial motor vehicles that  uses a 10,000-                                                                   
pounds rather than 26,000-pounds.                                                                                               
Mr.  Lynch  responded  that it  could  solve  the  commercial                                                                   
trucking aspect,  however, a consumer  rental truck  called a                                                                   
"u-haul" would continue to be included.                                                                                         
Representative  Croft asked  how to solve  the u-haul  issue.                                                                   
Mr.  Lynch  offered  to provide  that  language  which  could                                                                   
address  the   10,000-pound  weight  threshold   transporting                                                                   
property.   Representative  Croft  offered to  work with  Mr.                                                                   
Lynch  to determine  language that  would adequately  address                                                                   
these concerns.                                                                                                                 
Co-Chair  Williams  noted that  the  bill  would be  HELD  in                                                                   
Committee in order to work out the language.                                                                                    
HB 347 was HELD in Committee for further consideration.                                                                         

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