Tuesday, April 18, 2006

Why Shouldn't Carsharing Pay Rental Car Taxes?

The short answer is - because they're not the same thing!

As you may be aware there's a debate going on in Chicago about whether carsharing companies should have to pay the same 6% rental car tax that traditional daily car rental companies do.

Here's some background: until recently it appeared that non-profit carsharing (i.e. I-Go Cars) was exempt from a rental car tax which a for-profit carsharing company would have to pay. A couple of years ago, Zipcar, thinking about expanding to Chicago some day, started the ball rolling to get for-profit carsharing exempt from the tax as well. Now they've stirred up a minor hornets' nest in the Windy City and I-Go, the non-profit home town carshare, has ended up having to call every member to warn them that they will have to start charging the tax until the dust settles.

Further complicating things is the fact that Enterprise Rent A Car got in the act saying that if carsharing was exempt from the tax, they should be exempt, too! What's a politician in Illinois to make of all this?

It's worth remembering that the purpose of the rental car tax in most cities, including Chicago, is to fund convention and visitor services. Given the membership requirements of carsharing companies, usage by out of towners is virtually nil.

I think it's important for carshares to keep the distinction clear in peoples' minds that carsharing is more than just "hourly car rental" (a shorthand phrase sometimes used to describe carsharing). It has a different purpose - to provide an alternative to car ownership - not just be a replacement car when your regular car is in the shop or you're visiting another city. Studies in several cities have shown that the percentage of carsharing members that either sold a car or avoided buying one is over 50% for both for-profit and non-profit companies.

My belief is that any company that's providing an alternative to car ownership that carsharing has demonstrated should be exempt from the tax - whether for-profit or non-profit. And if Enterprise can show it has a similar effect on consumer car ownership behavior, then let them be exempt too.

My advice to carshares everywhere - get yourself specifically exempt from rental car tax in your area. It's much easier to do it proactively! A little history: when we started CarSharing Portland in 1998 one of my early efforts was to get language adopted by the county commissioners in Portland to specifically exempt carsharing from the rental car tax. (I haven't checked recently, but at the time I noticed that the actual regulations in Portland exempted longer-term car rentals from the tax, but no one at the car rental agencies seemed to be aware of it.)

Dr. Susan Shaheen, UC Berkeley carsharing researcher wrote a very good letter to one of the Chicago papers explaining why this tax is a bad idea Illinois tax puts car-sharing in slow lane. Take a look at it by clicking the LINK below.