Gov. Mike Dunleavy has vetoed a bipartisan bill that would have required peer-to-peer car rental apps to collect state excise taxes on car owners’ behalf. Advocates say Senate Bill 127, which also included a tax break for app-based rentals, would have made it harder for owners of vehicles on Turo and similar platforms to skip out on their tax bills.
A spokesperson for the governor says Dunleavy vetoed the bill on Tuesday because “unnecessary taxation of a new and growing industry is bad public policy.” The spokesperson, Jeff Turner, did not reply to a question seeking to clarify his veto message, since the bill would have in fact reduced the tax on app-based car rentals from 10% to 8%.
Sen. Matt Claman, D-Anchorage, said he worked closely with Dunleavy’s Departments of Law and Revenue to hammer out a deal that satisfied both Turo and traditional rental car companies.
“The challenge was, the existing tax law makes the Turo owner responsible for collecting the tax, and it wasn’t being collected,” Claman said by phone.
Deputy Revenue Commissioner Fadil Limani told the Senate Transportation Committee at the bill’s first hearing in April 2023 that the bill wouldn’t impose a new tax — it would simply clarify who was responsible for sending the payment to the state.
“Absent this legislation, the Department of Revenue would have to go essentially after each individual tax holder in order to be able to collect the tax,” Limani said. “With this legislation, we would be receiving that directly from the sharing platform.”
Limani said some 25 taxpayers, mostly car rental companies that had moved to Turo, were delinquent on roughly $470,000 in rental car taxes — and that’s not counting an unknown number of additional vehicle owners who have failed to keep up with their tax bills. The bill would not have been retroactive, which means existing Turo owners would not have been penalized for missing past tax payments.
The bill is similar to efforts at the local level across Alaska and around the country requiring online merchants like Amazon to collect sales taxes. That followed a 2018 U.S. Supreme Court ruling that allowed states and municipalities to require online vendors without a physical presence to collect sales taxes. Before that, consumers were responsible for paying sales taxes to their states and localities at the end of the year, and many did not.
Eric Stone covers state government, tracking the Alaska Legislature, state policy and its impact on all Alaskans. Reach him at estone@alaskapublic.org and follow him on X at @eriwinsto. Read more about Eric here.
