HB 90-VEHICLE RENTALS & VEHICLE RENTAL NETWORKS  8:22:24 AM CO-CHAIR SPOHNHOLZ announced that the next order of business would be HOUSE BILL NO. 90, "An Act relating to rental vehicles; relating to vehicle rental networks; relating to liability for vehicle rental taxes; and providing for an effective date." 8:22:48 AM REPRESENTATIVE ADAM WOOL, Alaska State Legislature, introduced HB 90 as prime sponsor. He described peer-to-peer car rental as a platform through which an individual can rent out their car to someone without using a traditional car rental service. He said Alaska currently has a statewide vehicle rental tax of 10 percent, and the municipality of Anchorage has a car rental tax of 8 percent; therefore, renting a car at the airport in Anchorage carries a total tax of 18 percent. Peer-to-peer rental, he said, is taxed in 29 other states but not in Alaska. He said the municipality of Anchorage recently passed an ordinance to tax transactions on peer-to-peer car rental platforms at the same tax rate as traditional car rental companies. He said that in a typical year, vehicle rental tax revenues total approximately $10 million, and that it's estimated that business conducted through the peer-to-peer platforms could amount to as much as 20 to 30 percent of the rental market. He stated that the tax would be paid by the renter, collected through the application platform, and remitted by the company, in the same manner as practiced by rideshare services such as Uber or Lyft. 8:27:45 AM ASHLEY CARRICK, Staff, Representative Adam Wool, Alaska State Legislature, on behalf of Representative Wool, prime sponsor, presented a PowerPoint titled, "HB 90: Private Vehicle Rental Networks." She presented slide 2, "Definitions," which read as follows [original punctuation provided]: Vehicle Rental Business:  Traditional car rental Examples: Alamo, Enterprise, Thrifty, etc. Vehicle Rental Network (AKA Peer-to-Peer):  Peer-to-Peer and Traditional car rental Examples: Turo, Getaround, Enterprise CarShare MS. CARRICK presented slide 3, "States where DOR have determined Vehicle Rental Networks to be Taxable," which highlighted Alaska, Arizona, Arkansas, Colorado, Florida, Hawaii, Idaho, Illinois, Maryland, Mississippi, Montana, Nebraska, North Dakota, Oklahoma, and Wyoming. The slide read as follows [original punctuation provided]: ? 16 States including Alaska have a Department of Revenue with a position supporting Vehicle Rental Network Taxation ? Anchorage Ordinance 2020-55 has begun to collect tax on P2P car rental: logicalnot 8% tax on BOTH vehicle rentals and P2P logicalnot Adds a new definition for hosting platform MS. CARRICK presented slide 4, "States where Vehicle Rental Networks are Collecting Tax," which read as follows [original punctuation provided]: ? 29 States currently apply rental taxes to vehicle rental networks ? Alaska's current tax rates: logicalnot 10% for motor vehicles logicalnot 3% for recreational vehicles ? Historically, vehicle rental tax revenue has been around $10 million, which could increase 10-30% with the addition of vehicle rental networks MS. CARRICK presented slide 5, "Different Standards for the Same Business mode:," which read as follows [original punctuation provided]: logicalnotTraditional car rental and peer-to-peer networks have the same business model with different tax burdens logicalnotThe business model of P2P aligns with other app-based industries such as AirBnb and Uber logicalnotP2P networks are clearly operating in Alaska, despite having headquarters in other States MS. CARRICK noted that the activities of renting vehicles, providing insurance protection, selling ancillary products such as car seats or ski racks, and offering digital technology and mobile apps are activities that traditional car rental businesses and peer-to-peer vehicle rental networks have in common. She then presented slide 6, "Testimony Supporting HB 90," which read as follows [original punctuation provided]: "If you're Hertz, we know about you. You register with us and pay your taxes. Turo is invisible to us because we don't know the names, let alone contact information, for people renting the cars... We're losing something, but it's hard to tell how much." -State of Alaska Department of Revenue 8:33:21 AM REPRESENTATIVE SCHRAGE said that the objection he's heard is that a person is not a rental company; hosting your car for rental is a different business model, and taxing an individual at the same rate as a rental car company doesn't actually level the playing field. He said that he's also heard the objection that there hasn't been stakeholder engagement in this proposed legislation. He asked Representative Wool whether he's spoken with Turo or others, and whether there has been discussion of compromise or amendments. 8:34:34 AM REPRESENTATIVE WOOL responded that he's spoken with Turo, which obviously doesn't want the tax because it currently has a competitive advantage because anyone using its platform doesn't pay tax, making it cheaper to rent cars. Turo naturally would like to keep that advantage, he said, adding that Turo doesn't have brick and mortar stores or traditional employees. Representative Wool noted that Turo representatives engage in the legislative process, advocating for a lower tax rate than proposed, and he expressed that he doesn't see any logic for allowing Turo a lower tax rate. He stressed that the consumer renting the car would be paying the tax and noted that Airbnb pays the same bed tax as a hotel. He said that the same law affecting peer-to-peer accommodations should apply to peer-to- peer vehicle sharing. 8:37:33 AM REPRESENTATIVE SNYDER asked Representative Wool to elaborate on the competitive differences between peer-to-peer and traditional car rental companies. REPRESENTATIVE WOOL replied that there could be a wider range of vehicles offered in a peer-to-peer car sharing application than by a traditional car rental business, and that prices seem to be similar. 8:40:04 AM REPRESENTATIVE MCCARTY asked whether Turo has a corporate license in Alaska. MS. CARRICK replied that Turo is located in California and does not have a location or business license in Alaska. REPRESENTATIVE MCCARTY summed up his understanding of what Turo is and asked whether Airbnb or Uber have business licenses in Alaska. REPRESENTATIVE WOOL explained that the business model of peer- to-peer sharing applications depends on calling their providers "independent contractors." He said that the business avoids labor obligations and is able to say that only independent contractors operate in Alaska, but the business doesn't. He said that owners sharing their car through Turo, or renting a house through Airbnb, generally don't disclose that they're operating as a business. 8:43:20 AM CO-CHAIR SPOHNHOLZ passed the gavel to Co-Chair Fields. 8:43:31 AM REPRESENTATIVE MCCARTY stated his support for HB 90. 8:44:32 AM REPRESENTATIVE KAUFMAN asked whether the names of people renting cars is typically reported to the Department of Revenue (DOR). MS. CARRICK responded that the quote on the slide referred to people who are making their vehicle available for rent, otherwise known as "hosting." She said the state has asked Turo for information on how many are hosting, who they are, and who DOR could pursue to collect vehicle rental tax; the companies, she said, declined to provide the information. REPRESENTATIVE KAUFMAN agreed that the people paying to rent a car would be paying the tax and asked whether the service is "more biased towards individuals who live near each other, renting cars." He said that he is trying to "play devil's advocate" and find some way in which a peer-to-peer car rental is different from a traditional car rental. 8:47:10 AM REPRESENTATIVE WOOL, in his response, surmised that Representative Kaufman's question was whether there is something demographically different about a peer-to-peer car rental. He said that fewer people rent from Turo than traditional car rental outlets, but that the trend is changing nationwide, especially due to many people having more than one car. He added that he knows individuals who have bought new cars specifically to host them through an app such as Turo. He noted that the law currently says that an individual providing a car for another to rent is required to pay car rental tax; however, there is no way to learn who those individuals are. Under HB 90, he said, application platforms like Turo would be required to collect and remit sales tax to the state. 8:49:52 AM CO-CHAIR FIELDS noted that Airbnb pays bed taxes and said, "It's totally insulting that we would let a Silicon Valley-based company pay a lower tax burden than local companies. It makes no sense. They're an international car rental company that aggregates products from multiple people." He characterized companies engaging in this practice as engaging in a form of tax evasion. 8:50:28 AM REPRESENTATIVE KAUFMAN noted that Amazon doesn't have a physical presence, but is doing business, in Alaska. He mused about every business that provides a virtual interface owing a tax. REPRESENTATIVE WOOL pointed out that Amazon pays local and state sales taxes in states where there is no physical store. He suggested that one could argue that companies not physically operating in the state should pay more taxes because they're not paying property taxes, rent, or local employees. He noted that there is no statewide sales tax in Alaska, so certain companies have a competitive advantage. 8:53:15 AM MS. CARRICK recalled South Dakota v. Wayfair, Inc., No. 17-494 (U.S. Jun. 21, 2018), which set the precedent that internet companies are liable for state and local taxes. 8:53:40 AM CO-CHAIR FIELDS explained to committee members that South Dakota v. Wayfair, Inc. was a U.S. Supreme Court decision in 2018 that affirmed the right of states to collect sales tax for online transactions. 8:53:50 AM REPRESENTATIVE SCHRAGE asked whether Turo provides an IRS Form 1099 to individuals who host their cars. REPRESENTATIVE WOOL replied that the company does not provide such tax forms, which goes to the heart of the problem. He said he doesn't know whether an individual claims associated rental income, comparing the situation to a restaurant server claiming tips. 8:54:51 AM REPRESENTATIVE NELSON introduced a hypothetical situation in which an individual allowed another person to rent their car while the individual was out of state. He asked whether HB 90 would apply in that situation. REPRESENTATIVE WOOL replied, "This bill deals with transportation network companies." He said that, technically, those who rent their vehicles out are liable for vehicle rental tax. The helpfulness of HB 90, he said, would be due to the fact that most people who rent vehicles do so through a more centralized organization such as a car rental company or a platform such as Turo. REPRESENTATIVE NELSON expressed understanding that several online car sharing platforms such as Turo are being used within Alaska; the platforms are not paying car rental taxes; and someone who privately rents a car to a friend would be in violation of the law requiring payments of car rental tax. REPRESENTATIVE WOOL responded: This law does not create the vehicle rental tax. This just says that if you're a transportation - a peer-to- peer rental company then you're responsible to remit the tax. If you rent a car to someone else you already owe that tax, and if you don't pay it, you already are in violation, regardless of if this bill passes. It's already in state law: there is a vehicle rental tax. REPRESENTATIVE WOOL said that the state would not pursue tax remittance from an individual periodically renting out their car privately, but peer-to-peer businesses such as Turo are doing a high value of business. He stressed that HB 90 would require Turo to collect and remit car rental taxes. 8:58:23 AM CO-CHAIR SPOHNHOLZ asked Representative Wool to confirm that HB 90 would not be creating a new tax, but a mechanism for ensuring existing law would be enforced. REPRESENTATIVE WOOL confirmed that the proposed legislation would not be creating a new tax, but would mandate that the business operating the peer-to-peer platform would be required to collect the car rental tax and remit it to the state. 8:59:05 AM REPRESENTATIVE NELSON asked whether the quote on slide 6 in the PowerPoint presentation is due to Turo not having an Alaska business license. MS. CARRICK replied that the proposed legislation would add clarity to the statute. She said that according to DOR, Turo and other peer-to-peer applications are liable for taxes, which the department has tried to collect. She explained that the quote referred to the state's previous attempts to collect car rental tax. 9:00:41 AM REPRESENTATIVE KAUFMAN expressed interest in hearing testimony from TechNet. 9:01:32 AM CO-CHAIR FIELDS noted that the committee would hear public testimony and said, "I think that's a great idea. Let's reach out to TechNet and let them explain why they shouldn't pay taxes, but Alaskans should." He then opined that it "seems pretty straightforward" that companies such as Turo are engaging in tax evasion, and he asked Ms. Reynolds to what extent the Department of Revenue has engaged with the Office of the Attorney General to enforce tax payment. 9:01:54 AM NICOLE REYNOLDS, Deputy Director, Tax Division, Department of Revenue, responded that there was a case in Alaska Superior Court several years ago during which the State of Alaska had tried to subpoena Turo's records; however, the case was dismissed. 9:02:45 AM CO-CHAIR FIELDS announced that HB 90 was held over.