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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
peer-to-peer car rentals
Purpose
Effective January 1, 2020, establishes guidelines for insurance requirements, safety and taxation of vehicle rental transactions that occur on a peer-to-peer car rental program (program).
Background
Peer-to-peer car sharing is a relatively new sector of the sharing economy, which involves the activity of acquiring, providing or sharing access to goods and services that are facilitated by a community-based online platform. The premise of car-sharing is similar to that of an online lodging marketplace in which the owner of a vehicle registers their vehicle with an online program, thereby making their vehicle available for use by a renter when the owner is not using it. The renter uses the vehicle for a predetermined amount of time and pays an hourly or daily fee, which is then transmitted to the owner of the vehicle with a percentage of proceeds withheld by the online provider.
Transaction privilege tax (TPT) is currently levied by the state of Arizona for the privilege of conducting business in Arizona under 16 separate business classifications, including retail, transporting, utilities and telecommunications. TPT is imposed on the gross receipts of taxable businesses, with the exception of prime contractors, which are taxed at 65 percent of their gross receipts. All gross receipts are subject to tax under one of the TPT business classifications, unless explicitly exempted or excluded by statute. Unless specifically provided for by law, exemptions and deductions under one TPT business classification may not be used under another such classification.
Currently, a person engaged in the business of renting motor vehicles without drivers is required to collect a five percent surcharge on each rental contact that is for a period of less than 180 days. The surcharge is computed on the total amount stated in the contract less any applicable taxes, and is a reimbursement for the amount of the vehicle license tax imposed on the vehicle (A.R.S. § 28-5810). Rental car surcharges are also levied and collected by the Arizona Sports and Tourism Authority and stadium districts (A.R.S. §§ 5-839 and 48-4234).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
Taxation
1. Requires a peer-to-peer car rental program provider (provider) to register for a TPT license with the Arizona Department of Revenue (ADOR) for the purpose of collecting TPT due from a peer-to-peer car rental owner (owner) for vehicle rental transactions facilitated by the provider.
2. Specifies that there is no fee for a TPT license related to peer-to-peer vehicle rental transactions.
3. Requires a provider to electronically remit applicable taxes and surcharges to ADOR.
4. Requires a provider to electronically report and remit aggregate total taxes levied by each jurisdiction on a monthly basis.
5. Requires a provider to retain surcharge and tax information from each transaction to be made available on request from ADOR.
6. Specifies that a provider is not required to identify any individual owner on a return or attachment to a return.
7. Prohibits ADOR from disclosing information provided by a provider without the written consent of the provider.
8. States that an owner is excluded from applicable taxes on vehicle rental transactions facilitated by a provider if the owner is notified of both of the following:
a) the provider is licensed with ADOR to collect applicable taxes for all vehicle rental transactions facilitated by the provider; and
b) transaction history documenting TPT taxes collected.
9. Specifies that gross income received by an owner from vehicle rental transactions is not included in the tax base for the personal property rental classification as long as the provider has notified the owner that the provider is licensed with ADOR and is responsible for tax remittance.
10. Requires vehicle rental transactions facilitated by a provider to be sourced to either of the following:
a) the permanent street address of the registered owner of a vehicle used in a program if the vehicle is registered in Arizona; or
b) the street address in Arizona where an owner resides while in Arizona if the vehicle is registered in another state.
11. States that a broker as defined under the Model City Tax Code engaged in the renting or leasing of tangible personal property is subject to all of the following:
a) TPT licensure through ADOR;
b) requirements relating to tax returns; and
c) current tax rates imposed by a city, town or other jurisdiction.
12. Requires ADOR to administer, collect, enforce and distribute taxes remitted for vehicle rental transactions to the appropriate taxing jurisdictions in a uniform manner.
13. Stipulates that a city, town or other jurisdiction may not collect taxes from a lessor of tangible personal property if the online rental marketplace has provided written notice that it is responsible for tax remittance.
Insurance
14. Stipulates that a vehicle rental transaction facilitated by a provider is subject to all private passenger motor vehicle laws, including laws relating to rental surcharges and insurance liability requirements.
15. Requires a provider to be licensed as either of the following:
a) a property or casualty insurer line of authority or both; or
b) a rental car agent.
16. Specifies that a vehicle rental transaction remains in effect until the peer-to-peer rental program time period expires.
17. Specifies that a peer-to-peer rental program time period begins when a peer-to-peer car renter (renter) takes possession and control of a vehicle, and includes the time that a vehicle is under control of the renter.
18. Specifies that a peer-to-peer rental program time period ends when a vehicle is retrieved by an owner or owner's designee, or returned to an agreed-upon location or location designated by the provider, and any of the following apply:
a) the time period established by the provider expires;
b) the renter verifiably communicates to the owner or provider that the renter deems the time period terminated; or
c) the owner or provider takes control of the vehicle.
Safety
19. Requires a program to verify that a vehicle registered by an owner does not have unrepaired safety recalls before the vehicle is made available for rent on the program.
20. Prohibits a provider from making a vehicle available for rent on a program if any safety recalls have been issued for the vehicle, unless repairs to remedy the safety recall have been made.
21. Requires an owner, if a vehicle currently available on a program is issued a safety recall, to remove a vehicle from the program until the recall is remedied within 72 hours after receiving notice of the recall.
Miscellaneous
22. Defines terms.
23. Makes technical and conforming changes.
24. Becomes effective on January 1, 2020.
Prepared by Senate Research
February 11, 2019
ZD/gs