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Relating to the collection, remittance, and administration of
certain taxes on motor vehicles rented through a marketplace rental
Estimated Two-year Net Impact to General Revenue Related Funds for HB 2872, Committee
Report 1st House, Substituted: a positive impact of $757,000 through the biennium ending August
HB 2872 would apply the gross rental receipts tax to marketplace rental providers (e.g., Turo, Getaround, HyreCar) so that these providers would collect and remit the same rental receipts tax as traditional motor vehicle rental companies. For those not familiar with this industry, peer to peer marketplace vehicle rental providers are essentially the Airbnb of the rental care industry, allowing individual vehicle owners to rent their cars out to consumers as digital age competition for traditional rental car companies.
The tax would be included with the charge of the rental and remitted by the marketplace rental provider unless the owner of the vehicle being rented chooses to pay and report the tax instead, in which case the vehicle owner would have to register as a retailer with the Comptroller in the same manner as required of a retailer under the Limited Sales, Excise, and Use Tax Act.
We oppose HB 2872. Upon first review this bill appears to make the tax system equitable for traditional and peer to peer car rentals. However, unless other taxes are also going to change to be in alignment, it does not make sense to apply the full gross rental receipts tax to marketplace rental providers.
For example, traditional rental car companies do not pay sales tax on their fleet of vehicles. Owners of vehicles rented out on a peer to peer basis pay the full amount of sales tax on their vehicles. Also, rental car companies are able to claim depreciation for their fleet vehicles on their federal taxes, whereas individuals who rent their cars out through marketplace rental providers do not share this tax advantage.
Unless the entire tax structure surrounding these different business models is reformed, marketplace rental transactions shouldn't be taxed at the same rate as traditional vehicle rental transactions. This legislation disproportionately favors entrenched, traditional rental companies at the significant expense of their new competitors. The legislative process should not be used to protect existing businesses against unwanted competition by creating tax schemes that put the competition at a disadvantage.