Friday, September 07, 2007

Flexcar Forced to Charge Rental Tax in Seattle

NOTE: This has been updated as of November 2007)

In a step backwards for carsharing, the State of Washington is insisting that Flexcar start charging members the 9.7% rental car tax. That brings the total tax to 18.6% on top of the $10 per hour usage!

The Seattle Times reports:

"Mike Gowrylow, spokesman for the Department of Revenue, said regardless of Flexcar's mission, it is a car rental business and should be taxed as one, just as any car-sharing business would be. "We need to be collecting the tax," he said. As for it targeting local residents, Gowrylow said, there's no way to distinguish who rents cars from the state-ordered tax. He added that any company, like Flexcar, can be billed for any taxes they should have been collecting for the past three years.

That could be a big number.

Flexcar isn't alone. To the north Community Car Share of Bellingham has been charging members the rental car tax since they started a year ago. And I've reported on the fiasco on Chicago with Zipcar and Enterprise Rent A Car stirring up the pot sufficiently that I-Go had to start charging their members the tax even though they had specifically been exempt before.

What can be done? Obviously, this is a political problem, so it will have a political solution - get the state, county, or city (whatever jurisdiction levies rental car taxes) to understand the difference between car rental and car sharing by formulating a definition and getting it passed by the appropriate body. It will be important to craft a definition that avoids including hourly car rental offerings, such as those by Enterprise and Hertz, unless they can show that they provide similar social, environmental benefits as carsharing.

I think carsharing adovcates in Washington state shouldn't have too hard a time making their case against the tax - there's both a for-profit and a non-profit carshare so there's no favoritism there; there are thousands of passionate members who are also voters; there's King County Metro, the visionary transit agency with a long-standing relationship with carsharing. Together they should be able to find a state legislator, if not the governor, willing to move legislation forward to sort this out.

Easy for me to say. (We took care of this problem in Portland during our second year with a specific exemption from Multnomah County, which levies the tax here.) You can read the full newspaper report here and find other information using Google News search to the right.

UPDATE: Apparently, the state Dept. of Revenue couldn't (or wouldn't) bend on their interpretation of their definition that carsharing was the same as rental cars. As reported in the Seattle Times on Oct. 26 Flexcar will begin charging the tax on November 1, which will increase usage fees about $1 per hour. Flexcar, and Community Car in Bellingham, no doubt already have plans to take their case to the Washington legislature.