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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
peer-to-peer car sharing
Purpose
Establishes guidelines for insurance requirements, safety and taxation of vehicle sharing transactions that occur on a peer-to-peer car sharing 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 contract that is for a period of fewer 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 (AZSTA) and stadium districts (A.R.S. §§ 5-839 and 48-4234).
There may be a fiscal impact to the state General Fund (GF) if this legislation results in an increase in monies collected from TPT levied on car sharing transactions.
Provisions
Taxation
1. Requires a program to register for a TPT license with the Arizona Department of Revenue (ADOR) for the purpose of collecting TPT due from a shared vehicle owner (owner) for vehicle sharing transactions facilitated by the provider.
2. Requires a program to electronically remit applicable taxes to ADOR.
3. Requires a program to electronically report and remit aggregate total taxes levied by each jurisdiction on a monthly basis.
4. Requires a provider to retain surcharge and tax information from each transaction to be made available on request from ADOR.
5. Specifies that a provider is not required to identify any individual owner on a return or attachment to a return.
6. States that an owner is excluded from applicable taxes on vehicle sharing transactions facilitated by a provider if the owner is notified that the provider is licensed with ADOR to collect applicable taxes for all vehicle sharing transactions facilitated by the program.
7. Specifies that gross income received by an owner from vehicle sharing 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.
8. Requires vehicle sharing transactions facilitated by a program to be sourced at:
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.
9. Requires ADOR to administer, collect, enforce and distribute to the appropriate taxing jurisdictions in a uniform manner.
Surcharges and TPT Distribution
10. Exempts a program, shared vehicle driver (driver) and owner from car rental surcharges levied pursuant to vehicle license tax replacement, the AZSTA and stadium districts.
11. Requires TPT collected from a program, after distributions have been made to cities and counties, to be distributed in the following manner:
a) 3.5 percent of TPT collected from program transactions sourced to a county in which a sports and tourism authority is established to that authority's GF;
b) 3.5 percent of TPT collected from program transactions sourced to a county with fewer than two million persons, and an established stadium district, to the County Stadium District Fund; and
c) all remaining monies to the state GF.
Airports
12. Stipulates that a public airport is not restricted from implementing rules or licensing requirements, or assessing fees or charges on car sharing transactions that are conducted at the public airport.
Insurance Liability
13. Requires a program to assume liability of an owner for injury or damage, or uninsured and underinsured motorists, or personal injury protection losses during the car sharing period in an amount stated in the program agreement but not less than statutorily prescribed minimums.
14. Negates assumed liability for an owner if an owner makes an intentional or fraudulent material misrepresentation to the program before the car sharing period in which the loss occurs.
15. Requires a program to ensure that an owner and driver both have insurance policies that provide coverage during a car sharing period in statutorily prescribed minimum amounts.
16. Allows insurance requirements during a car sharing period to be met by an owner, driver or program, or a combination of all three.
17. States that the insurance required during a car sharing period is primary during each sharing period.
18. Requires insurance maintained by a program to provide coverage and for the program to defend a claim if insurance held under either the owner or driver has lapsed.
19. Specifies that insurance maintained by a program is not dependent on a personal motor vehicle liability insurer first denying the claim.
20. Prohibits a program from:
a) offering or selling insurance except in conjunction with and incidental to car sharing agreements;
b) advertising, representing or otherwise portraying itself or any of its employees or agents as licensed insurers or insurance producers, unless the program is a licensed insurer or insurance producer; and
c) paying a person any compensation, fee or commission that is dependent on the placement of insurance under a program's license.
21. Specifies that production or incentive payments to an employee are not prohibited if the payments are not dependent on the sale of insurance.
22. Specifies that the liability of a program for an act or omission resulting in injury by a shared vehicle is not limited by the provisions of this legislation.
23. Specifies that the ability of a program to seek indemnification for economic losses due to a breach in an agreement by the owner or driver is not limited by the provisions of this legislation.
Sharing a Vehicle with a Lien
24. Requires a program to notify an owner prior to a vehicle becoming available on the program that sharing a vehicle that has a lien may violate the terms of the contract with the lienholder.
Authorized Exclusions and Indemnification
25. Allows an insurer to exclude coverage and the duty to defend or indemnify any claim afforded under an owner's personal motor vehicle liability policy.
26. Allows an insurer to limit the number of vehicles insured under a single policy if the vehicles are made available for a program.
27. Specifies that exclusions in policies for motor vehicles made available for rent or sharing are not invalidated or limited by this legislation.
28. Prohibits an insurer from cancelling a personal private passenger motor vehicle liability insurance policy solely on the basis of the vehicle being available on a program.
29. Allows an insurer to cancel a policy if the policyholder fails to provide complete and accurate information about the use of a shared vehicle on a program as requested by the insurer.
30. Allows an insurer to limit the number of vehicles that the insurer will insure on a single policy if the vehicles are made available on a program.
31. Requires a program to collect records relating to a shared vehicle, including times used, fees paid and monies received by an owner, to be made available on request of the owner, owner's insurer or driver's insurer in order to facilitate an investigation.
32. Requires such records to be retained for at least two years.
33. Exempts a program and an owner from vicarious liability.
34. Allows an insurer to seek indemnification from a program's insurer for a claim against a shared vehicle excluded from the insurer's policy if the claim:
a) is made against the owner or driver for loss or injury that occurs during the car sharing period; and
b) is excluded under the terms of the insurer's policy.
35. Stipulates that a program has an insurable interest in a shared vehicle during the car sharing period, but that a program is not liable to maintain mandated coverage.
Program Agreements
36. Requires a program agreement to disclose to the owner and driver:
a) any right of the program to seek indemnification from the owner or driver for economic loss sustained from a breach in the agreement;
b) that a motor vehicle liability insurance policy issued to the owner or driver does not provide a defense against a claim asserted by the program;
c) that the program's insurance on an owner or driver only applies during a car sharing period and that the owner or driver may not have insurance when otherwise operating a shared vehicle;
d) the daily rate, fees and insurance or protection package costs that are charged to an owner or driver;
e) that the owner's motor vehicle liability insurance policy may not provide coverage for a shared vehicle; and
f) an emergency telephone number for roadside assistance and other customer service inquiries.
37. Prohibits a person from entering a program agreement with a driver unless the driver:
a) holds a valid driver license for the class of shared vehicle issued by the Arizona Department of Transportation (ADOT);
b) is a nonresident that holds a valid driver license for the class of shared vehicle and is at least the same age as required of a resident to drive; or
c) otherwise is specifically authorized by ADOT to drive vehicles of the shared vehicle class.
38. Requires a program to keep record of:
a) the name and address of each driver;
b) the driver license number of each driver; and
c) the date and place of issuance of the driver's driver license.
Safety Recall
39. 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.
40. Requires a program to notify an owner of requirements related to safety and recall and removal of a vehicle from the program.
41. Prohibits an owner 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.
42. 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 as soon as practicable after receiving notice of the recall.
43. Requires an owner, if a shared vehicle is in the possession of a driver when a safety recall is issued, to notify the program as soon as practicable after receiving the recall.
44. States that a program has sole responsibility for any equipment that is put in or on a shared vehicle to monitor or facilitate the car sharing transaction, and shall hold an owner harmless for damage or theft of equipment during a car sharing period if the owner is not the cause of damage or theft.
45. Allows a program to seek indemnity from a driver for any loss or damage to the equipment that occurs during the car sharing period.
Miscellaneous
46. Defines terms.
47. Makes technical and conforming changes.
48. Becomes effective on the general effective date.
House Action
COM 2/19/19 DPA 9-0-0-0
3rd Read 3/13/19 44-16-0
Prepared by Senate Research
March 25, 2019
ZD/gs