Recently, the Florida State Senate Committee on Infrastructure and Security approved Senate Bill 1148 by a 5-3 vote. The bill makes peer-to-peer car sharing firms liable for the state’s $2 per day rental car excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. and related taxes and fees. Rather than extend the car rental excise taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. on to peer-to-peer car-sharing arrangements, the Florida legislature should consider the lead taken by states like Oregon and create a separate regulatory and tax structure for peer-to-peer car-sharing firms.
Peer-to-peer car-sharing firms give private car owners the ability to share their vehicles with others, which is an alternative option to a car rental. Florida’s urban sprawl and limited public transportation makes car sharing and peer-to-peer car-sharing arrangements appealing to residents and nonresidents alike. Thousands of Floridians have participated in peer-to-peer car- sharing transactions since the firms became active in the state. Like Florida, states are considering how to incorporate these sharing economy activities into their regulatory and tax codes.
Florida’s $2 per day rental car tax is a flat surcharge, which means that less expensive car rentals or car shares have a higher effective tax rate. For example, if a visitor rents a car for $50 for one day, their effective tax rate is 4 percent; if they decide to rent a higher-priced car for $100, their effective tax rate falls to 2 percent. This penalizes less expensive transactions and is more regressive than ad valorem taxes that are determined as a percentage of the sale price.
Florida’s car rental tax revenue funds infrastructure and road projects, which is a better practice than other states and localities. Rental cars and car shares use state transportation infrastructure, so the tax has a connection to the benefits drivers receive. However, these drivers are also paying Florida’s gas taxA gas tax is commonly used to describe the variety of taxes levied on gasoline at both the federal and state levels, to provide funds for highway repair and maintenance, as well as for other government infrastructure projects. These taxes are levied in a few ways, including per-gallon excise taxes, excise taxes imposed on wholesalers, and general sales taxes that apply to the purchase of gasoline. , which is levied on all vehicles and is a broader and more efficient tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. than targeting one group of road users.
Car rental excise taxes are designed to export part of the tax burden onto nonresidents who disproportionately use rental cars, but they end up harming local economies when prospective visitors change their behavior to avoid the tax. These taxes are levied in concert with layers of other taxes and fees, including Florida’s 6 percent state sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. . For example, someone renting an economy vehicle for one day at Miami’s International Airport will face an effective tax rate of about 39 percent.
Senate Bill 1148 would also require peer-to-peer car-sharing firms to enter agreements with Florida airports on fees they would pay for arranging car-share transactions at an airport. Rental car companies pay airports to use dedicated infrastructure such as rental car facilities and parking lots. These costs are passed along to consumers in the form of airport concession fees. Peer-to-peer car-sharing firms also make use of the airport if parties meet curbside or in a parking lot, but these arrangements use fewer airport resources than rental car companies. To resolve these disputes, airport authorities should work with peer-to-peer car-sharing firms to find a fee structure that reflects the resources used at the airport when car-sharing reservations are picked up.
Floridians would benefit from a defined tax and regulatory system for peer-to-peer car sharing. Extending an economically harmful excise tax onto car shares would not be a step forward or level the playing field between car sharing and car rentals. To begin doing so, policymakers should consider repealing their rental car excise tax and fund transportation infrastructure through equitable, broad-based taxes or tolls based on use.
Stay informed on the tax policies impacting you.
Subscribe to get insights from our trusted experts delivered straight to your inbox.Subscribe