Legislature(2015 - 2016)BUTROVICH 205
03/26/2015 01:00 PM Senate TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| SB66 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 66 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 66-PASSENGER & REC. VEHICLE RENTAL TAX
1:02:31 PM
CHAIR MICCICHE announced SB 66 to be up for consideration
[version 29-LS0470\E was before the committee].
SENATOR DUNLEAVY moved to adopt committee substitute (CS) SB
66(), version 29-LS0470\I, as the working document.
CHAIR MICCICHE objected for discussion purposes.
1:03:03 PM
FORREST WOLFE, staff to Senator Giessel, Alaska State
Legislature, Juneau, Alaska, said this legislation further
clarifies that a statute passed in 2003 intended to place a tax
on vehicles rented by tourists visiting the state so that they
would share in the cost of wear and tear their driving inflicts
on Alaska's roads. It was quite clear that the tax was intended
to be imposed on the tourism industry and visitors from out of
state. However, this did not prevent unintended consequences
from happening.
He explained that over the years, the statute had been further
clarified by exempting taxi cabs, motorcycles and U-Hauls rental
trucks. And in 2013, a full decade after the original
legislation was passed, the Department of Revenue (DOR) began
attempting to retroactively apply an overzealous and misguided
interpretation of the statute to the rentals or leases of
industry vehicles and equipment for transactions not related to
tourism in any way.
This interpretation affected Alaskan businesses that were doing
business with one another in industries like mining, forestry,
oil and gas, and construction, and whose vehicles operated
primarily on non-state maintained roads and areas.
MR. WOLFE said that Chris Knauss, former legislative staffer who
worked on the original legislation in 2003, states in a letter
in their packets, that the intent was for this tax to be applied
to companies like Avis, Hertz, Alamo, and Dollar rental car
companies.
He explained that SB 66 reduces the length of an exempt rental
for passenger vehicles from 90 to 28 days while maintaining the
90-day period for recreational vehicles such as motor homes. It
also further defines the types of vehicles that will be exempt
from the tax as well as those that will not. Passing SB 66 will
prevent these companies from misguided and overzealous taxation
and more explicitly define the law in accordance with the intent
of the original legislation.
1:05:00 PM
SENATOR BISHOP joined the committee.
1:06:22 PM
CHAIR MICCICHE, finding no questions, opened public testimony.
1:06:32 PM
RANDY JOHNSON, owner, Tyler Rentals, Inc., Ketchikan, Alaska,
supported SB 66. He said Tyler Rental had been in business for
36 years and they operate from five locations in Southeast
Alaska and employ more than 50 Alaskans. Their core business is
focused on renting tools and equipment to the construction,
mining, and timber industries. Although a majority of their home
business consists of construction equipment, they rent pickups
to support contractors' needs throughout Southeast Alaska. A
large percentage of them are for the long term and support
remote mining operations such as Kensington and Greens Creek
mines, which are not on the highway system.
Just last year they became aware of the rental vehicle tax from
another Alaska-based equipment rental company. They did some
investigation and learned that the intent was not to apply this
tax to their type of rental activity. For instance, the majority
of their business is providing equipment and pickup rentals to
construction and resource extraction companies versus tourism.
They believe the CS goes a long way to better defining the
application of this tax.
1:09:12 PM
JOHN COOK, Chief Financial Officer (CFO), Airport Equipment
Rentals, Inc., Fairbanks, Alaska, supported CSSB 66 ( ). He said
they are one of the largest equipment rental and leasing
companies in Alaska, but incidental to that they rent vehicles
to support oil field services and construction on the North
Slope and to construction companies primarily working on civil
projects for the Department of Transportation and Public
Facilities (DOTPF) throughout Alaska. Although it doesn't take
care of everything, this CS takes care of a lot of ambiguities
that exist today.
1:10:55 PM
KATHRYN THOMAS, Director, Community Relations and Business
Development, Alaska Pacific Leasing, Kenai, Alaska, supported SB
66. She said Alaska Pacific Leasing is a family-owned company
that is actively managed by third and fourth generation
Alaskans. For over 30 years it has supplied Alaska's
construction, oil, gas, mining, engineering and resource
development industries with vehicles and equipment.
She said many leasing businesses have operated for years
providing vehicles under a long term lease period of 90 days or
more and not collected the tax. The initial correspondence from
the Department of Revenue (DOR) in 2003/05 specifically
addressed car rental agencies and targeted passenger vehicle
rentals; it simply defined that the vehicle rental tax is not
levied on leased or rentals that exceed 90 days.
As the process of asking for legislation in 2015 was started,
she said there was concern that once again only a small segment
of the vehicle leasing issue was being fixed and perhaps they
should look a little further down the road. With that in mind,
they also looked at defining "commercial, industrial and
resource development" for the tax rules as that is the essence
of Alaska businesses doing business with other Alaska
businesses. She said would also like to see SB 66 more clearly
define "commercial and construction use."
The State of Alaska has an easily accessed licensing process
which can be used and applied for tax purposes and exemptions.
"Commercial and industrial use" can be defined by a simple
requirement to provide verification of a valid Alaska
occupational and professional license, which can be specified to
include which commercial businesses are applicable, such as
engineers, land surveyors, construction contractors or if the
equipment is used on a resource project, the end user must be
licensed for the primary business of mining, which could then
include oil and gas operations on the North Slope and Cook
Inlet.
MS. THOMAS said that vehicle leases and rentals in the state are
layered and varied and that development takes place in remote
areas during short construction seasons and in many cases are on
an as needed basis.
SB 66 still needs to clarify exemption of rentals from tax a
second time even if it has already been collected under an
initial rental agreement. Vehicles may be billed on a daily rate
in commercial construction and industrial work and there should
be clear rules of tax and exemption for it. The tax rules should
also be clear for electrical contractors working for industry,
rural electric associations and telephone utilities that are
billing by day rates. In addition, engineers, geologists and
surveyors bill daily for pickup and crew trucks. Many remote
locations require the need to rent a truck from a support
contractor who has transported vehicles to remote locations. The
statute should be clarified to avoid multiple instances of
taxation or double taxation for the same day.
1:15:43 PM
MS. THOMAS said it would also be helpful to the industry to use
a 20-day monthly billing cycle for tax period increments, as no
month has just 30 days.
She said the original 2003 legislation looked to gross vehicle
weight to define the size vehicles and set parameters for the
tax rules, but manufacturers are constantly redesigning vehicles
and the leasing companies customers respond to the cost of fuel
by looking for more efficiency and lower costs. So, the gross
vehicle weight may not be the most effective definition to use.
She pointed out that there is great concern that companies
contracting with industry will receive no legislative relief by
continuing to ask for a reduction in the gross vehicle weight,
because of the fiscal note analysis for SB 66. The Department of
Revenue (DOR) says they don't have enough detailed information
from vehicle rental contracts to determine how many rentals will
meet the new exemption criteria. In the next line they say,
"However, based on limited vehicle tax data from audits, DOR
estimates that 10-15 percent of total vehicle rental contracts
may meet the new criteria and therefore, vehicle rental tax
revenues are estimated to decrease by $800 thousand to $1.2
million."
1:17:34 PM
What isn't clear is that the referenced tax data is from the
audits the leasing industry has been protesting and is still
reviewing or if it is information from audits of companies that
normally work in the passenger vehicle arena of the airport-type
companies. Either way, it may be an apple to oranges comparison
and not a fair way to ask them to all make a decision on gross
vehicle weight.
MS. THOMAS said it is only fair that this fiscal note
information be clear, because the reduction in gross vehicle
weight was important to companies leasing in Southeast Alaska,
Southcentral and would accommodate the Cook Inlet oil field. At
8,500 gross vehicle weight the North Slope is easily
accommodated.
She said they understand the concern to see large SUVs, cargo
vans, recreational vehicles fairly taxed for passenger use and
tourism and it's difficult to define rules when some of the same
equipment is used for industrial and commercial applications.
That is why they encourage clearly defining "industrial and
commercial use" as it may prove more definitive than gross
vehicle weight.
1:19:20 PM
CHAIR MICCICHE asked her if she communicated with the sponsor
about her issues.
MS. THOMAS answered no, but she would.
CHAIR MICCICHE removed his objection and finding no further
objections, said CSSB 66( ), version I, was adopted. He held SB
66 in committee and kept public testimony open.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 66 (S)TRA CS Ver. I.pdf |
STRA 3/26/2015 1:00:00 PM |
SB 66 |