Peer-to-peer car-sharing platforms are gearing up to be the next major disrupter, allowing everyday people to earn some extra cash for renting out their cars.
Peer to peer car-sharing platforms such as Turo and Getaround are kind of like an Airbnb for autos — app users can browse for something that fits their needs, whether it’s a pickup truck to help out with an across town move, a convertible to add some extra flair to a beach trip or an SUV so everyone can pile in when family comes to visit.
Once the booking request is in, the car owner brings the vehicle by or sometimes the customer can access the car remotely and it’s in their hands from there.
That’s nearly identical to the process of renting a car. Just like Turo, traditional rental companies such as Enterprise and Hertz allow customers to pick the date and duration of their rental, and most will, for no charge, pick the customer up or deliver the vehicle if they don’t have a way to get to their storefront.
The differences between the two business models are mainly on the back end, out of the customer’s sight. One difference is who owns the car that is rented. Most rental car companies own fleets while peer-to-peer car sharing companies profit by paying Florida car owners to allow their cars to be rented from their site.
Traditional rental companies have some additional rules to follow. First, they must collect and remit sales tax on all rental contracts. Additionally, they must tack on a $2-a-day surcharge which mostly funds road maintenance where the rental occurred, the logic being the cars using the roads should pitch in to keep the roads in good shape. Surcharge collections topped $178 million in the 2018-19 fiscal year and are expected to hit $182 million in the 2019-20 fiscal year.
Despite peer-to-peer car-sharing platforms providing rental cars to the public for profit, they collect neither the sales tax, nor the surcharge, putting traditional rental companies at a competitive disadvantage.
The platforms argue those rules shouldn’t apply to them.
Their reasoning against collecting sales tax is tied to a Florida law that allows rental car companies to buy fleets of vehicles without paying the tax, saving them tens of thousands of dollars a year in upfront costs. In exchange, they collect and remit sales tax on every rental and when they sell the car after it’s tour of duty in their fleet comes to an end.
Since individuals pay sales tax on their cars at purchase, peer-to peer-companies argue a sales tax on rentals is redundant — because the car owner paid sales tax when they purchased their personal vehicle. While there’s some logic there, the argument quickly reveals itself as a clunker in practice.
The sales tax break enjoyed by rental car companies isn’t a carveout for any one industry. It applies to any company with major outlay — when Florida Power & Light buys a few dozen F-150s for their field teams, or Cox Cable needs 50 new vans to get customers hooked up to broadband, they also get a tax break.
A person who puts their car on the site to rent, allows them to earn back the tax they paid at purchase. Also, if someone seizes the opportunity, they can use these companies as a springboard to start their own rental car company. All they have to do is incorporate and apply for the exemption.
That’s already happening.
Some Turo users have multiple cars for rent. Two or three cars could still fit the mold of a typical family, but one user, “Gabriel,” has a fleet of 42 vehicles, ranging from Porsches to Jeeps, available to book.
Some of the other multicar “host” accounts are mom and pop rental companies that have adopted the platform as an easy way to get their vehicles online, though the state indicates that a good portion of those outfits are collecting and remitting taxes on their own time.
As for the surcharge and sales tax, whether it should be collected depends on one’s definition of renting. Peer-to-peer car-sharing companies claim they are simply connecting owners with drivers, but not actually renting out vehicles.
One could argue semantics over who the renter and rented are in this transaction, but at the end of the day someone is paying to use something that isn’t theirs for a set amount of time. That’s renting. A letter of technical advice from the state Department of Revenue stated these companies are in the business of “directly or indirectly” renting cars and that either the car owner or the platform should already be collecting the fee from renters.
That advisement certainly fits with the spirit of the surcharge. Rentals put the same wear and tear on roads regardless of the platform that facilitated them — cars listed on Turo would likely be parked in the owner’s driveway if they weren’t being driven around by a customer, just as the Hertz fleet is stationed in a parking lot when they’re not rented out. Complaints that the surcharge would make peer-to-peer car-sharing cost prohibitive are unfounded, too, as peer-to-peer car sharing companies are thriving in states such as Maryland, Indiana and Colorado, where laws requiring collection of the sales tax and surcharges have taken effect.
But the surcharge argument feeds into a more complex issue raised by the growth of the peer to peer car-sharing industry — who’s liable when a renter injures or kills someone in a car accident?
Rental car companies are shielded, thanks to a federal law known as the Graves Amendment, which protects them from being sued by accident victims so long as the car they rented out was in good working order.
Though they claim they aren’t renting cars when it comes to every other aspect of industry regulation, peer to peer car-sharing companies say they should have those same protections.
They could have that protection — and local communities’ roads could benefit from the owed but not collected surcharge money — if lawmakers approve a proposal filed by Rep. Chris Latvala and Sen. Keith Perry.
Their bills (HB 377 and SB 478) wouldn’t set up a new tax, but would instead make a simple clarification that renting a car parked in a driveway down the street is no different from renting one from a lot at the airport.
So far, lawmakers appear to be on board.
Latvala’s bill has already passed through the Transportation and Infrastructure Subcommittee and the Ways and Means Committee. It’s now awaiting a hearing in the State Affairs Committee, it’s final stop before the House floor.
Perry’s bill got the OK from the Innovation, Industry, and Technology Committee last month and is scheduled to go before the Banking and Insurance Committee when it meets on Wednesday. If successful, it would still need the Appropriations Committee to sign off before the full chamber could cast a vote.