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BILL # HB 2688 |
TITLE: |
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SPONSOR: Thorpe |
STATUS: As Amended by Senate TPS |
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PREPARED BY: Hans Olofsson |
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Description
The Senate Transportation & Public Safety Committee strike-everything amendment to HB 2688 would establish guidelines for insurance requirements, safety and taxation of peer-to-peer (P2P) car sharing transactions using an online platform that connects vehicle owners with individuals who want to drive their vehicle under a car sharing agreement.
The bill, which would become effective January 1, 2020, provides that P2P car sharing programs be subject to the following taxes and rental car surcharges:
· State transaction privilege tax (TPT) on personal property rentals (5.6% on the gross income from contract).
· County tax on personal property rentals (0.25% to 2.0% of gross income from contract).
· Municipal tax on rentals of tangible personal property (1.5% to 6.5% of gross income from contract).
· Maricopa County rental car surcharge (the greater of $2.50 or 3.25% of the gross income from contract) used to fund the Arizona Sports and Tourism Authority and the Maricopa County Stadium District.
· Pima County rental car surcharge ($3.50 fee per contract) used to fund the Pima County Stadium District.
The bill would exempt the statewide rental car surcharge (5.0% of gross income from contract) collected by rental companies for the reimbursement of the vehicle license tax (VLT) paid on their rental vehicles. (Under current statute, any surcharge collected in excess of the VLT must be remitted to the Arizona Department of Transportation (ADOT) to be deposited into the Highway User Revenue Fund (HURF)).
In addition to the taxes and surcharges listed above, the bill would also allow public airports to assess fees or charges on P2P car sharing transactions conducted at such airports.
Estimated Impact
Due to a lack of verifiable data on current P2P car sharing tax collections, the JLBC Staff is not able to estimate the General Fund impact of the bill with certainty. Based on limited information and some assumptions described in the Analysis section below, we estimate that the bill could generate General Fund revenue of up to $274,000 in FY 2020 and $657,500 in FY 2021 relative to current collections. Due to considerable uncertainty regarding the future growth of the car sharing industry, we have not attempted to project possible revenue collections past FY 2021.
As a fiscal note, our analysis does not address any legal issues concerning the bill.
Analysis
We have asked the Department of Revenue (DOR) whether any taxes are currently collected from P2P car sharing transactions in Arizona but have not yet received a response. Representatives from the only P2P car sharing company currently operating in Arizona have indicated that this company does not collect any taxes or surcharges in the state. Some of the vehicle owners using their platform, however, could do so on their own. We are not able to determine to what extent this currently occurs, if at all.
(Continued)
According to representatives of the car sharing industry, there is currently only one P2P car sharing company operating in Arizona. According to a spokesperson for this company (as recently reported in the Arizona Capitol Times), there are 4,950 vehicles currently offered for rent on the company's online platform for Arizona. The JLBC Staff has asked company representatives for the average income per vehicle in Arizona but have not yet received a response. The company's online calculator for the Phoenix area suggests that a car sharing owner's expected earnings can vary widely depending on the make, model, and year of the vehicle. As an exercise, we input a sample of vehicles into the online calculator and based on the result, we estimate that the average earnings per car sharing owner in the Phoenix area is approximately $300 per month. Given our methodology, however, we acknowledge the speculative nature of this estimate.
Based on the Arizona Capitol Times article and the P2P car sharing company's online calculator for the Phoenix area, we estimate the current annual gross income from car sharing transactions in the state to be $17.8 million [= 4,950 vehicles x $300 monthly gross income x 12 months]. Under the current state TPT rate of 5%, such activity would generate up to $891,000 in annual state sales tax revenues, of which $657,500 would be retained by the General Fund. This estimate would be less if any state TPT is currently collected from P2P car sharing transactions in the state.
The behavioral response of car owners and renters using the P2P sharing platform to the imposition of taxes and fees under the bill is uncertain. The taxes and fees would likely have the effect of either decreasing profitability or increasing car sharing prices, or some combination of both, which could result in fewer people participating in the car sharing program. All else equal, such behavioral response would result in less tax revenues being collected. We are not able to determine from available data or infer from existing studies, however, to what extent the bill's taxation of car sharing would affect such activity.
In conclusion, based on limited data and a set of assumptions described above, the bill could generate up to an estimated $657,500 in General Fund revenue during the first full year of implementation in FY 2021. With an effective date of January 1, 2020, the bill's General Fund revenue gain in FY 2020 would be up to an estimated $274,000.
Local Government Impact
Counties and Cities
Under the statutory revenue sharing formula for the personal property rental classification, counties receive 16.2% of state TPT whereas cities receive 10.0%. Based on the estimated amount state TPT generated from car sharing, counties would receive up to an estimated $60,100 in FY 2020 and $144,400 in FY 2021. Cities and towns would receive up to an estimated $37,100 in FY 2020 and $89,100 in FY 2021. In addition to state-shared revenue, counties and cities would also collect revenues from the imposition of their own taxes. The amounts collected would depend on where the transaction is sourced since tax rates vary from 0.25% to 2.0% for counties and from 1.5% to 6.5% for municipalities.
Arizona Sports and Tourism Authority
According to DOR's FY 2018 Annual Report, 77% of statewide personal property rental TPT revenue was generated in Maricopa County. Based on this figure, our analysis assumes that $13.7 million [= $17.8 million x 77%] of the statewide gross income from car sharing transactions would be generated in Maricopa County.
The current Maricopa County surcharge is 3.25% of gross income from the rental contract or $2.50 per contract, whichever is more. The surcharge, which generates funding for the Arizona Sports and Tourism Authority and the Maricopa County Stadium District, is estimated to generate up to $222,200 in FY 2020 and $444,400 [=$13.7 million x 3.25%] in FY 2021.
Pima County Stadium District
The surcharge in Pima is $3.50 per rental contract. The number of contracts that would be expected in Pima County under the bill cannot be determined from available data. For this reason, we were not able to determine the impact of the bill on the Pima County Stadium District.
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5% Rental Car Surcharge
Since the bill exempts the 5% statewide rental car surcharge, there would be foregone revenues from such surcharge of up to $445,500 in FY 2020 and $891,000 [= $17.8 million x 5.0%] in FY 2021.
4/8/19