Alaska tax bill sparks criticism over negative impact on car sharing locals

Recently in Alaska there was a notable stir over a legislative move threatening to over-tax participants of peer-to-peer car sharing platforms like Turo. During the January 29th Alaska Senate Finance hearing, focus turned to SB 127, a tax bill supported by the traditional rental car industry. If passed, it grants the state’s Department of Revenue power to levy transaction taxes on Alaskans using peer-to-peer car sharing, mirroring taxes collected by major rental companies, and potentially subjects carsharing Alaskans to years of back taxes.

The measure raised eyebrows for many in the industry and Alaska Senate Finance committee members alike, who see the bill as a way to hinder an affordable and convenient transportation option that has helped many access jobs, grocery stores and health care where there are few transit options 

“Rather than innovate, we've seen big rental car companies run the same playbook that has worked well in the past for them; they get locals to pass laws that benefit their bottom line, at the expense of others,” testified Amy Bos, Director of State and Federal Affairs at Netchoice, a Washington, D.C. based trade association. “Digital newcomers threaten established firms that have spent decades and untold money in forcing out competition and creating barriers, and when they succeed, this behavior results in higher prices.”

Fairbanks Turo host Nicole Stewart testified during public comments, emphasizing the vital role of Turo hosts in Alaska, warning against unfair regulations that could jeopardize financial security and compromise public safety.

“Just this weekend, we had [below] 40 temperatures, you can verify this for yourself. People were stuck all over this town who had rented vehicles from the national agencies, such as Hertz, Enterprise, etc, who did not winterize their car– up here, that is critical. There were cars stuck, frozen batteries, all over the place up here,” Stewart said. “Up here, as a local Turo [host], we know what this climate is like. We install snow tires on our vehicles, which you almost never see with a national rental. But down there in Anchorage, especially, when you can get three feet of snow in a single day, a Turo rental with an owner who knows their condition, is probably going to be a safer vehicle than a typical national rental.”

In light of the important transportation option peer-to-peer car sharing offers Alaskans and its significant differences from the traditional rental car industry, both members of the committee and those testifying at the hearing repeatedly questioned the logic of applying the same rental car tax at the same rate to peer-to-peer car sharing. The rental car industry already enjoys substantial tax advantages, unavailable to car owners who share their vehicles on Turo.

Turo’s legal representative Sean Vinck explained: “The rental car industry is allowed to purchase rental vehicles without having to pay sales tax in jurisdictions in Alaska, such as Juneau and, in consideration of that, we think that the proper resolution of the issue should involve preferential tax rate or lower tax rate for peer-to-peer car sharing.” Vinck cited numerous states, including Arizona and Oklahoma, which have adopted comprehensive car-sharing laws addressing sales tax imbalances for local owners versus rental companies and urged the committee to follow suit.

Similarly, Sen. Hoffman urged bill sponsors to prioritize a "small business-friendly" approach, akin to successful peer-to-peer car sharing measures in other states.

Sen. David Wilson also questioned why the bill's author won't consider amendments protecting Alaskans who don't operate like major rental car companies.

In fact, SB 127 would hurt most of all the car owners who share their vehicles on platforms like Turo by allowing the state’s Department of Revenue to potentially assess and collect taxes on all of their past transactions. Such retroactive collection and assessment would be a substantial burden for Alaska's small Turo businesses and would unfairly disadvantage locals vis a vis national rental car companies.

In written and live testimony, Americans for Tax Reform (ATR) representatives opposed SB 127 for unfairly raising taxes on peer-to-peer car sharing, stifling competition, and imposing retroactive taxes. ATR also stressed the bill's failure to recognize distinctions, jeopardizing Alaska's thriving industry and undermining a fair, business-friendly tax climate.

A representative from tech industry coalition Chamber of Progress (COP) called the proposed tax an unfair burden on peer-to-peer car sharing residents, and a measure that would limit options and hinder competition.

“This bill would hinder competition and limit consumer choices when it comes to rental car options,” said Robert Singleton, of Chamber of Progress. “This bill would also enable the department of revenue to retroactively assess taxes on peer to peer transactions under a tax ordinance that was enacted before the industry even existed.”

SB 127's future is uncertain, awaiting committee amendments to address serious concerns raised during the January 29th hearing.