SENATE BILL NO. 127 "An Act relating to vehicle rental taxes; relating to the issuance of subpoenas related to tax records; and providing for an effective date." 9:02:40 AM Co-Chair Olson recounted that the bill had been heard in committee the previous week. He noted that there would be two additional invited testifiers, after which the committee would hear public testimony. 9:03:16 AM SEAN VINCK, ASSOCIATE GENERAL COUNSEL, TURO INC., TELECONFERENCE (via teleconference), commented that the legislation had been considered before, and wanted to offer two observations. He addressed the tax rate, and believed that the rate that should apply to peer-to-peer (P2P) car rentals should be different than the rate applied to commercial car rentals. He thought there were additional advantages that car rentals enjoyed in the state, such as vehicle license fees, which were not available to peer-to- peer car sharing hosts. He pointed out that the rental car industry was allowed to purchase rental vehicles without having to pay sales tax in jurisdictions in Alaska. He proposed that there should be a preferential lower tax rate for P2P car sharing, in recognition of the advantages available to car rentals and not P2P car sharing. Mr. Vinck addressed the provision of the bill that allowed for retroactive application of a tax, which if enacted, imposed a new duty of peer-to-peer car sharing platforms. The tax would be collected to remit to the state on transactions. He asserted that basic principles of fairness and law suggested that the provision should apply on a prospective rather than retroactive basis. Co-Chair Hoffman recounted that the previous week he had queried the Department of Law about any differentials that might exist in other states. The department had indicated that there were minimal, if any. He referenced a rate sheet. He asked if Mr. Vinck could address differing rates. 9:06:18 AM AT EASE 9:09:36 AM RECONVENED Co-Chair Olson noted that the document referred to by Co- Chair Hoffman was entitled "Rental Car & P2P Car Sharing Tax Comparison" (copy on file) and had been distributed to members. Co-Chair Hoffman reiterated that he asked Mr. Vinck to address the issue of if there were differences in tax rates between rental car companies and car sharing entities. Mr. Vinck looked at the chart on the document, and explained that jurisdictions in the country that had begun to regulate P2P car sharing differentiated the tax rate between it and typical car rental businesses. He used the example of the state of Oklahoma, where rental cars enjoyed the benefit f no tax on P2P car sharing transactions. He noted that in Oklahoma, rental car companies had the benefit of purchasing vehicles without paying sales tax. He mentioned the state of Arizona, where rental car taxes were abated for P2P car sharing. Arizona also exempted car rental companies from sales tax on vehicle purchases. He mentioned that Illinois had exempted P2P car sharing from the state automobile rental occupation tax as well as county and municipal auto rental occupation taxes. Mr. Vinck continued to reference examples in other states. He noted that generally P2P car sharing paid sales tax on vehicle purchases while car rentals did not. Generally, the states that had begun to address P2P car sharing had recognized the difference between the two industries and had reflected that difference in a lower tax rate applicable to P2P car sharing. 9:12:46 AM Senator Kiehl asked Mr. Vinck to discuss whether the states he mentioned had the marketplace facilitator collect and remit the tax, or if it was on the oriingal car share owner. Mr. Vinck thought just about every state had imposed a markeplace facilitator. That facilitator used a platform and transferred the obligation from the owner of the car to the platform. Senator Kiehl understood that the bill would address the issue. He noted that Alaska had no state sales tax. He asked Mr. Vinck to discuss the advantage or disadvantage an individual car share business owner would have relative to a traditional car rental owner in Juneau when it came to business personal property tax. Mr. Vinck was not familiar with the Juneau personal property tax. He thought the municipal sales tax in Juneau was not applicable to rental car businesses acquisition of vehicles. Senator Kiehl thought that the City and Borough of Juneau exempted the first $100,000 of business and personal property from paying the property tax. He considered that a traditional rental car company with a sizable fleet paid on almost everything it had while the individual car owner paid next to nothing for the tax. He thought there was a comparable dynamic at the state level with corporate income tax for oil and gas companies. He asked Mr. Vinck if he recalled what the rate traditional car rental companies paid to the state in corporate income tax. Mr. Vinck was not familiar with corporate income tax, and noted that his comments were in relation to the transactional sales tax that the consumer paid. Senator Kiehl thought the amount was higher than 9 percent, and a car share owner would not pay the tax. Senator Wilson wondered how many individual Turo accounts were in the state. Mr. Vinck did not have the number available but agreed to follow up with the committee at a later time. 9:16:06 AM CARRIGAN GRIGSBY, EXECUTIVE VICE PRESIDENT, AVIS ALASKA (via teleconference), explained that Avis was a family employee-owned company with multiple locations in the state. He wanted to clarify that the law clearly required a person that rented a car in Alaska to pay the Car Rental Tax. He posited that the bill as written would require the business owner to pay the tax instead of the renter. He cited that Avis Alaska submitted millions of dollars of tax revenue every year, but remitted the tax from the renter instead of paying it themselves. He thought there was a growing issue of personal car rentals with no tracking mechanism. He emphasized that the renter of the P2P cars would be paying the tax. He assumed a large majority of P2P car renters would not realize they owed the tax. 9:19:42 AM Mr. Grigsby asserted that there was a matter of fairness to consider. He thought there was up to 198 companies listed in the Municipality of Anchorage with mom and pop car rental companies. He thought the companies would be at a disadvantage when Turo companies could offer cheaper rates. He pointed out that most rental companies did not purchase vehicles in Juneau and added that Avis paid a big tax yearly. Co-Chair Hoffman commented that there were obviously flaws in the original bill, which was why the committee was looking at the current bill by Senator Claman. He thought the original bill may not have been small business friendly. He referenced spreadsheets that showed which states that had been small business friendly. He commented that maybe the committee should consider doing what other states had done. Co-Chair Stedman wanted to address a broader concept. He commented on the small road system in the state and the use of the Alaska Marine Highway System in Southeast. He noted that many of his constituents could not bring a car to Juneau when coming to go shopping. He thought the situation was not dissimilar to other areas of the state. He wanted to look into what the state collected from citizens for the rental tax. He considered not collecting rental tax for those that did not have the option of bringing a car. 9:24:18 AM Co-Chair Olson OPENED public testimony. 9:24:27 AM AMY BOS, NET CHOICE, WASHINGTON D.C. (via teleconference), spoke in opposition to the bill. She explained that Net Choice was a Washington, D.C. trade association, which encouraged the committee to oppose the legislation. She discussed support for car-sharing platform companies such as Turo and Get Around, which helped people supplement income. She explained that Net Choice viewed the bill as problematic as it failed to take into account that traditional rental car companies enjoyed discounts and sales tax exemptions on purchases and were also allowed to pass costs on to customers. She contended that P2P car sharing companies did not enjoy the same benefits and would be put at a disadvantage. She thought the bill opened up the door for the Department of Revenue (DOR) to go after back taxes for locals engaged in P2P car sharing. The organization would welcome further clarification to ensure the legislation did not apply retroactively. She urged the committee not to advance the legislation. Senator Kiehl asked if Ms. Bos could point to the statute that would stop a car share owner from including costs such as licensing in the price. Ms. Bos was not aware of anything in Alaska law that would stop the owner from doing so. 9:27:02 AM ROBERT SINGLETON, CHAMBER OF PROGRESS, SANTA CRUZ, CA (via teleconference), testified in opposition to the bill. He explained that Chamber of Progress was a technology industry coalition that promoted technologys progressive future. He asserted that the bill would hinder competition and limit consumer choice when it came to rental car options. He encouraged the committee to consider an alternative regulatory framework that gained support from the incumbent rental car industry and P2P car sharing companies. He mentioned proven environmental and economic benefits, encouraging more efficient use of personal vehicles to result in less need for ownership, garages, and storage. He pointed out that P2P would help individuals earn more funds to assist with the rising cost of living. He summarized that P2P car sharing options could help users with access to important services. Mr. Singleton continued his remarks. He opposed the retroactive taxation provision. He thought the bill would result in a disproportionate burden on P2P companies, which would be treated similarly to traditional car rental companies with regard to taxation but without the additional benefits. He urged the committee to adopt a compromise regulatory framework that the stakeholders had agreed on through a consensus model. Senator Kiehl considered the Version U Committee Substitute passed from the Senate Transportation Committee. He did not see a retroactivity clause for the duty to collect and remit for marketplace facilitators. Mr. Singleton was not certain of an answer. He was generally opposed to having retroactive taxes. Senator Kiehl noted that it was possible to do retroactive taxes, but it must be done explicitly, and he did not see it in the bill. Co-Chair Hoffman believed the testifier had indicated that the current situation was that taxes were due but had not been collected, so DOR was retroactively seeking to collect the taxes. He thought the matter needed to be clarified and that the committee should amend the bill to prevent the department from collecting the taxes retroactively. Senator Kiehl noted that there was some limitation on seeking retroactive taxes from the vehicle owner. He thought that there was nothing in the bill that would allow the department to retroactively seek taxes from the marketplace facilitator. Chair Olson asked if Senator Kiehl indicated that he wanted to hear from the Department of Law. Senator Kiehl thought it would be great to hear a perspective from the Department of Law. 9:31:51 AM AT EASE 9:32:03 AM RECONVENED TREVOR CONSOLIVER, ASSISTANT ATTORNEY GENERAL, OIL AND GAS SECTION, DEPARTMENT OF LAW (via teleconference), introduced himself and asked Senator Kiehl to repeat the question. Senator Kiehl understood that the current bill placed a limit on retroactively collecting tax from a vehicle owner but thought there was nothing to allow DOR to retroactively collect tax from a marketplace facilitator such as Turo or Get Around. He asked if Mr. Consoliver interpreted the bill to allow DOR to retroactively collect tax from a marketplace facilitator. Mr. Consoliver believed Senator Kiehl's analysis was correct. He thought Section 4 of the bill only allowed the Department of Law to go back and collect the existing taxes from vehicle owners and did not retroactively apply to the vehicle rental platforms. 9:33:46 AM TYNDALL ELLIS, CHUGACH STATE PARK CITIZEN ADVISORY BOARD, ANCHORAGE (via teleconference), spoke in support of the bill. He relayed that the Chugach State Park Citizen Advisory Board was a 15-member board, and members all lived in the Anchorage area. He understood that vehicle owners already owed the tax, however the state was unable to identify the owners. He asserted that the Vehicle Rental Tax was very important to state parks and made up almost half of the Alaska State Parks operating budget and had been close to $5 million the previous year. He recounted that Vehicle Rental Tax dollars that were left over were often appropriated by the legislature to Alaska State Parks to deal with deferred maintenance, which was about $90 million and growing. He thought a tax from vehicle rental platforms was a step in the right direction. 9:36:12 AM DENNIS HULL, AMERICANS FOR TAX REFORM, ANCHORAGE (via teleconference), testified in opposition to the bill. He relayed that Americans for Tax Reform was a national taxpayer advocacy group. He shared concern about retroactive tax collection. He recommended that the bill include clear language that indicated to DOR or any other agency from collecting taxes for years prior to the enacting of the bill. He urged the committee to tailor the legislation around the differences between traditional car rental business and car sharing models, which he believed should be treated differently under state law. He referenced HB 90 [legislation from 2021 related to vehicle rental taxes and fees], which provided for a lower tax rate of 5 percent for car sharing individuals. Mr. Hull seconded Co-Chair Stedman's suggestion that the state eliminate the car rental tax outright. He thought DOR had only collected $10 million on average for rental taxes over the previous four years. He supported slashing taxes for all participants. He spoke of the importance of the car sharing industry. 9:38:35 AM NICOLE STEWART, SELF, FAIRBANKS (via teleconference), spoke in opposition to the bill. She relayed that she was a Turo owner. She referenced earlier comments and supported the comments of the Avis representative and the general counsel of Turo. She pondered that any collection of retroactive taxes would be extremely problematic. She thought there should be collaboration to contribute to the state and state parks. Ms. Stewart pointed out the importance of Turo in the state. She referenced recent minus temperatures and noted that many people with rental vehicles had been stuck around town due to lack of winterization. She noted that Turo owners were familiar with the climate and had vehicles with snow tires. She mentioned heavy snowfalls in Anchorage and the need for safer vehicles. 9:41:41 AM BRANDON SPANOS, ACTING DIRECTOR, TAX DIVISION, DEPARTMENT OF REVENUE (via teleconference), conveyed that he was available for questions. Co-Chair Stedman asked if Mr. Spanos could assist the committee with bifurcating the tax and determine how much tax was paid by the residents and non-residents when renting cars. Mr. Spanos suggested that the Department of Law address Co- Chair Stedman's question. He shared concern about the commerce clause issue. He noted that taxes could not apply differently to residents and non-residents. He did not have the information requested. He noted that car rental companies collected the tax directly from customers and could have more information, while the department received the funding and number of rentals only. Mr. Consoliver thought that the commerce clause could be a potential concern. He requested to follow up with the committee at a later time. 9:44:00 AM Co-Chair Hoffman thought there were several examples of disparity of taxes. He mentioned exemptions for senior citizens, and a disparity for many types of licenses. He used the example of fishing licenses, for which residents paid less. He asserted that it was not uncommon for the state to have a differential for different classes of people. He did not support the argument. Senator Wilson thought the purpose of the bill was to go after small car rental companies or companies with a used car fleet using Turo to avoid state taxes. He asked if there was a way to separate the bill in order to go after larger businesses rather than individual Alaskans. Mr. Spanos could not speak to the purpose of going after any group, and did not think the administration held any position to do so. He noted that the departments position was that tax was due, and it had an obligation to collect the tax from the vehicle owners, whether it be a business or an individual. He thought as the bill was written, it would limit the department's ability to do so. Under current statute, if an individual did not file a tax return, there was no statute of limitations and the collection could go back ten years. Senator Wilson relayed that he would follow up with the bill sponsor and perhaps the department. 9:46:48 AM Co-Chair Olson CLOSED public testimony. Co-Chair Olson set an amendment deadline for the following Thursday at 5 oclock. SB 127 was heard and HELD in Committee for further consideration. 9:47:03 AM AT EASE 9:49:34 AM RECONVENED