SB 127-TAXATION: VEHICLE RENTALS, SUBPOENAS  1:39:30 PM CHAIR KAUFMAN announced the consideration of 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." SENATOR TOBIN moved to adopt the committee substitute (CS) for SB 127, work order 33-LS0635/S, as the working document. CHAIR KAUFMAN objected for the purpose of discussion. 1:39:58 PM EMMA TORKELSON explained the changes between version B and version S. Section 2. Page 2, Lines 1-3: Removes the original language and adds a reference to new subsection (c) created in Section 3. Section 2. Page 2, Lines 4-6: Adds language requiring vehicle rental platform collecting the vehicle rental tax to pay the tax quarterly. Section 3. Page 2, Lines 8-11: Creates new subsection (c) requiring a vehicle rental platform that arranged or executed more than 200 transactions in the state in the preceding calendar year to collect and pay to the department the taxes imposed under AS 43.52.010 43.52.099. Section 3. Page 2, Lines 12-17: Creates new subsection (d) clarifying that a vehicle rental platform company is not liable for failing to collect or pay the vehicle rental tax if they were provided with incorrect or insufficient information. The company must demonstrate that a reasonable effort was made to obtain the correct or sufficient information from the person. Section 3. Page 2, Lines 26-28: Defines "vehicle rental platform company" as a company whose primary business is arranging or executing the rental of vehicles through a vehicle rental platform. 1:41:43 PM CHAIR KAUFMAN removed his objection; finding no further objection, CSSB 127, version S, was adopted. as the working document. 1:42:06 PM LIZZIE KUBITZ, Staff, Senator Matt Claman, Alaska State Legislature, Juneau, Alaska, informed the committee that the first change added a substantial nexus standard of 200 transactions. The goal of the change was to omit the requirement to collect and remit taxes on platforms with minor activity. The second change involved the provision clarifying that the platform is responsible for organizing and filing documentation related to taxes. The third change involved the provision stating that platforms collecting the tax are not liable for information provided to them by the host or vehicle owner. She noted that all three changes were recommended by Turo. 1:43:44 PM SENATOR MYERS asked about the definition of a motor vehicle. He wondered about electric-assisted bicycle rentals and taxation. SENATOR CLAMAN responded that the electric-assisted bicycle legislation allows e-bikes to be treated like self-propelled bikes. SENATOR MYERS pointed to the history of rental car taxation provided in the bill packet. He recalled that motorcycles were deleted from the rental car tax legislation in 2016. He asked why motorcycles were not taxed as rental vehicles anymore. 1:45:38 PM SENATOR CLAMAN replied that he did not know. SENATOR MYERS understood that the bill allows for the taxation of rental vehicles through approved platforms. He asked about a hypothetical vehicle loan to a friend. He wondered about a potential tax liability if the friend supplied gas money. He shared another story about a military family requiring a vehicle and the possibility of renting his car to them. He wondered if he would be liable for a vehicle rental tax in that situation. SENATOR MATT CLAMAN, District H, Alaska State Legislature, Juneau, Alaska, sponsor of SB 127, replied that the first scenario involving gas money was not a rental agreement, simply a friendly exchange that would not be subject to a tax. Concerning the military family, he stated that the rental would be subject to a tax liability if the term was ninety days or less. 1:48:03 PM SENATOR MYERS asked for a price comparison between Turo and conventional rental car companies before taxes. SENATOR CLAMAN responded with an anecdotal experience. Turo rentals were more expensive during the Covid-19 pandemic. He shared that his daughter opted for a Turo rental recently because even though the prices were equivalent, she was certain to rent a particular vehicle through the Turo platform. SENATOR MYERS replied that Turo may provide opportunities to test-drive specific vehicles. 1:49:29 PM SENATOR MYERS asked what percentage of rental car business comes from out-of-state customers. SENATOR CLAMAN responded that he did not know. He deferred the question to Mr. Grigsby with AVIS Alaska. 1:50:12 PM CARRIGAN GRIGSBY, Executive Vice President, AVIS Alaska, Juneau, Alaska, responded to Senator Myers's question. He replied that a large portion of the AVIS Alaska business comes from out-of- state customers in the summer months. SENATOR MYERS wondered if the majority of Turo's Alaskan business serves out-of-state travelers. SENATOR CLAMAN shared a recent conversation with a Turo rental car owner relaying that summer business yields a greater number of out-of-state renters. SENATOR MYERS asked about Section 1 of the bill. He recalled hearing that the section removed the extraneous language. 1:52:00 PM SENATOR CLAMAN replied that the Department of Law and the Department of Revenue asked to include the language in Section 1. He shared that his experience as a trial attorney taught him that serving out-of-state subpoenas is more complicated than issuing a state subpoena. He suggested obtaining the perspective of the Department of Law or the Department of Revenue. 1:53:17 PM CHAIR KAUFMAN highlighted the bill's intention to streamline business practices. He reminded the committee that the bill does not propose a new tax, but instead seeks to align processes with an out-of-state supplier. SENATOR MYERS queried the opinion of the Alaska Court System about the change. 1:53:53 PM SENATOR CLAMAN responded that he had not inquired. 1:54:01 PM CHAIR KAUFMAN moved to invited testimony. 1:54:30 PM ADAM CRUM, Commissioner-Designee, Department of Revenue, Anchorage, Alaska, stated that the responsibility for tax collection falls on the department. The bill protects Alaskans by adding compelling language for online rental platforms to collect and remit vehicle rental tax. He added that the department views the bill as straightforward and important for the Alaskan tourism industry and economy. He noted that the bill utilizes technology to collect and remit the tax, which is a statutory obligation. 1:55:23 PM SENATOR TOBIN followed up on Senator Myers's question about motorcycles. She wondered why motorcycles are no longer taxed. COMMISSIONER-DESIGNEE CRUM responded that he learned that HB 8 defines e-bikes as electric-assisted bicycles. He was unsure about the taxation of electric-assisted bicycles. He asked Deputy Director Spanos for his opinion. 1:55:56 PM BRANDON SPANOS, Deputy Director Tax Division Department of Revenue, Anchorage, Alaska, responded that the term "vehicle rental" was a broad term when the tax legislation was initially introduced. He recalled that a taxable vehicle included a driver plus a passenger. The department interpreted the bill language to include motorcycles, but the motorcycle rental company lobbied the legislature for an amendment to change the statute. It was the intent of the legislature not to tax motorcycles as vehicle rentals. MR. SPANOS stated that vehicles are described as motor vehicles in the current statute, which eliminates electric-assisted bicycles from the bill. 1:57:05 PM MR. GRIGSBY stated support for the CS for SB 127, version S. CHAIR KAUFMAN noted that the committee invited Turo representatives to the meeting, but they were unable to attend. 1:58:11 PM CHAIR KAUFMAN opened public testimony on SB 127. 1:59:03 PM MACKENZIE CHASE, Expedia Group, Seattle, Alaska, testified in support of vehicle rental tax collection and remittance to the State of Alaska. She expressed concern that the current draft tasks online platforms like the Expedia Group with collecting and remitting vehicle rental taxes. She noted that traditional rental car companies excel at calculating and collecting car rental taxes. She stated that shifting the taxation to online travel agents will likely increase tax leakage. She asked the committee to amend the legislation to clarify that online travel agents are not subject to and responsible for the collection and remittance of vehicle rental taxes. She pointed out that the Anchorage municipality exempts tour companies and travel booking agents to ensure that taxes are collected, but online travel agents are not responsible. 2:01:50 PM HANNAH NOBLE, representing self, Palmer, Alaska, testified in opposition to SB 127. She informed the committee that she was a co-host with Turo. She opposed the legislation because it lacks specificity about hosts' and guests' liability regarding vehicle rental tax collection and remittance. She opposed the ambiguous retroactive collection of taxes proposed in the legislation. 2:03:01 PM CHAIR KAUFMAN closed public testimony on SB 127. 2:03:34 PM SENATOR CLAMAN responded to the question the Expedia Group raised. He stated that the testifier's concern was addressed in the CS. He clarified that subsection (e)(3) of AS 43.52.050 in bill Section 3 identifies a vehicle rental company as a company whose primary business is arranging or executing the rental of vehicles through a vehicle rental platform. The specific effect is to address a company like the Expedia Group, which books various forms of travel. Paragraph (3) in subsection (3) on page 2, lines 26-28 excludes companies like the Expedia Group from collecting and remitting taxes for vehicle rentals. 2:05:10 PM CHAIR KAUFMAN referred to other organizations like Craigslist that provide similar vehicle rental services. He understood that the CS eliminates the risk of an undue burden placed on those types of platforms. 2:05:38 PM CHAIR KAUFMAN moved to adopt Amendment 1, work order 33- LS0635\S.3. 33-LS0635\S.3 Nauman 5/2/23 AMENDMENT 1 OFFERED IN THE SENATE BY SENATOR CLAMAN TO: CSSB 127(TRA), Draft Version "S" Page 3, line 1: Delete "one year" Insert "six months" 3 Page 3, line 4: Delete "one year" Insert "six months" SENATOR TOBIN objected for the purpose of discussion. CHAIR KAUFMAN explained that the amendment simply deletes the one-year requirement and inserts six months for the resolution of back taxes. SENATOR TOBIN removed her objection. CHAIR KAUFMAN found no further objection and announced that Amendment 1 was adopted. 2:07:18 PM At ease 2:07:39 PM CHAIR KAUFMAN reconvened the meeting and solicited a motion. 2:07:41 PM SENATOR TOBIN moved to report the Transportation CS for SB 127, [work order 33-LS0635\S as amended], from committee with individual recommendations and attached fiscal note(s). CHAIR KAUFMAN found no objection and CSSB 127(TRA) was reported from the Senate Transportation Standing Committee.