Florida Should Reevaluate a Proposal to Extend Rental Car Excise Taxes onto Peer-to-Peer Car Shares

April 1, 2019

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 tax and related taxes and fees. Rather than extend the car rental excise tax 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 tax, which is levied on all vehicles and is a broader and more efficient tax base 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 tax. 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.

Was this page helpful to you?

No

Thank You!

The Tax Foundation works hard to provide insightful tax policy analysis. Our work depends on support from members of the public like you. Would you consider contributing to our work?

Contribute to the Tax Foundation

Related Articles