HOUSE BILL NO. 56 "An Act excluding motorcycles and motor-driven cycles from the passenger vehicle rental tax; and providing for an effective date." Representative Holmes related that the bill was an attempt to help a fledgling industry in Alaska. She stated that in 2003, the legislature had passed a Vehicle Rental Tax that put a 10 percent rental tax on passenger vehicles. She said that soon after, the legislature realized that the definition of a passenger vehicle also included RV's so during the course of deliberations the bill was amended to charge a lower rate for RV's because they were bigger and more costly to rent. She stated that at the time there had been no discussion of a motorcycle as a passenger vehicle. She offered that the Tax Division had not recognized the absence of a tax on motorcycles until recently. She relayed that like RV's, motorcycles were more expensive to rent than cars. She concluded that the bill would exempt motorcycles from the definition of passenger vehicle, which would eliminate the tax on the rental of motorcycles in Alaska. 2:43:41 PM Co-Chair Stoltze inquired how municipalities treated motorcycles for the purposes of rental taxes. JAMES WALDO, STAFF, REPRESENTATIVE LINDSEY HOLMES, responded that he did not have an answer to the question. 2:44:29 PM Co-Chair Stoltze inquired if the sponsor had talked Tax Division regarding the elimination of the $12,000 per-year tax. Representative Holmes replied that there had been discussion regarding the proposed reduction of $12,000 per- year. She said that there had been talks of lowering the tax amount, but then the per-year amount would be so low that it would cost more to collect the tax than could be recovered. Representative Thompson wondered how much it cost to collect the $12,000 annually. He agreed that the economic impact of motorcycle rentals could be significant for the state. 2:46:16 PM Representative Costello stated queried the cost of a motorcycle rental in the state. Mr. Waldo responded that motorcycle rentals ranged from $100 to $250 per day. 2:47:23 PM NANCY HULL, ALASKA MOTORCYCLE ADVENTURE, PALMER (via teleconference), testified in support of HB 56. She supported the exclusion of motorcycles from the 10 percent Vehicle Rental Tax because of the unintended consequences of the tax. She stated that her customers were choosing to rent fewer days or to not rent at all as a result of the high tax. She relayed that in a 90 day season the rates were high; customers paid an average of $200 per day resulting in a $20 per day tax. She said that the tax hit spouses and families traveling together particularly hard. She relayed an example of a father and three sons that incurred a tax of over $700 for a six-day ride. She opined the lack of a tax cap. She listed the areas in Alaska that were difficult to reach but by motorcycle, which meant that tourists gained better access to all areas of the state, while spending money doing it. She urged committee support for the legislation. 2:51:33 PM Co-Chair Stoltze inquired how the municipalities dealt with motorcycles. Ms. Hull responded that the Municipality of Anchorage did not consider motorcycles as passenger vehicles and therefore had no motorcycle tax. 2:52:56 PM Co-Chair Stoltze noted that the $12,000 of the tax collected annually reflected less than a thousand days in motorcycle rentals for the entire industry. Ms. Hull replied that the season was limited to 90 days. She added that most of the motorcycle rental establishments were predominately small family businesses. 2:53:58 PM Co-Chair Stoltze inquired an estimate of how much her business spent on bookkeeping and accounting to keep in compliance with the tax. Ms. Hull replied that she did all of the accounting for her business and spent a lot of time explaining the tax to customers. She added the tax to every invoice and then forwarded the invoices to the Department of Revenue (DOR). She said that DOR required businesses to report four times per year, including the off-season when there were no rentals. 2:55:56 PM Co-Chair Stoltze inquired if there was an estimate of what it cost to administer the tax. MATT FONDER, TAX DIVISION, DEPARTMENT OF REVENUE, ANCHORAGE (via teleconference), replied that that he did not know. He explained that the department had one person that worked with all of the Vehicle Rental Taxes in the state which made it difficult to break down how much time was spent on motorcycles alone. 2:56:52 PM Co-Chair Stoltze CLOSED Public TESTMONY 2:57:38 PM Representative Munoz MOVED to REPORT HB 56 out of committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 56 was REPORTED out of committee with a "do pass" recommendation and with a previously published fiscal impact note: FN1(REV). 2:58:09 PM AT EASE 3:00:47 PM RECONVENED