HB2688 - 541R - Senate Fact Sheet

Purpose

Effective January 1, 2020, 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 the state 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 5 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 (Authority) and stadium districts (A.R.S. §§ 5-839 and 48-4234).

There may be a fiscal impact to the state General Fund if this legislation results in an increase in monies collected from TPT and car rental surcharges 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 program.

2. Specifies that there is no fee for a TPT license related to peer-to-peer vehicle sharing transactions.

3. Requires a program to electronically remit applicable taxes and surcharges to ADOR.

4. Requires a program to electronically report and remit aggregate total taxes levied by each jurisdiction on a monthly basis.

5. Requires a program to retain surcharge and tax information from each transaction to be made available on request from ADOR.

6. Specifies that a program 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 program without the written consent of the program.

8. States that an owner is excluded from applicable taxes on vehicle sharing transactions facilitated by a program if the owner is notified of both of the following:

a) the program is licensed with ADOR to collect applicable taxes for all vehicle sharing transactions facilitated by the program; and

b) transaction history documenting TPT taxes collected.

9. 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 program has notified the owner that the program is licensed with ADOR and is responsible for tax remittance.

10. Requires vehicle sharing transactions facilitated by a program to be sourced at 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 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 program has provided written notice that it is responsible for tax remittance.

Applicability of Rental Laws

14. Stipulates that a vehicle sharing transaction facilitated by a program is subject to all laws imposing taxes and fees for private passenger motor rental vehicles, including rental surcharges levied by an Authority and stadium districts, which are to be collected and remitted by the program.

15. Exempts a program, owner and shared vehicle driver (driver) from the rental car surcharge established as a reimbursement for vehicle license tax owed.

16. 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.

17. Requires a program who sells the same insurance policies as a rental car agent 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.

Insurance Liability

18. 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.

19. Requires a program to ensure that an owner and driver both have insurance policies that provide coverage during a sharing period in statutorily prescribed minimum amounts.

20. Allows insurance requirements during a sharing period to be met by an owner, driver, or program, or a combination of all three.

21. States that the insurance required during a sharing period is primary during each sharing period.

22. 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.

23. Specifies that insurance maintained by a program is not dependent on a personal motor vehicle liability insurer first denying the claim.

24. 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.

25. 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 Vehicle with a Lien

26. 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

27. Allows an insurer to exclude coverage and the duty to defend or indemnify any claim afforded under a shared vehicle owner's personal motor vehicle liability policy.

28. Allows an insurer to limit the number of vehicles insured under a single policy if the vehicles are made available for a program.

29. Specifies that exclusions in policies for motor vehicles made available for rent or sharing are not invalidated or limited by the legislation.

30. Require 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.

31. Requires such records to be retained for at least two years.

32. Exempts a program and an owner from vicarious liability.

33. 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 satisfies both of the following:

a) is made against the owner or driver for loss or injury that occurs during the sharing period; and

b) is excluded under the terms of the insurer's policy.

34. Stipulates that a program has an insurable interest in a shared vehicle during the sharing period, but that a program is not liable to maintain mandated coverage.

Car Sharing Program Agreements

35. Requires a program agreement to disclose to the owner and driver all of the following:

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 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.

36. Prohibits a person from entering a program agreement with a driver unless the driver complies with one of the following:

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.

37. Requires a program to keep record of all of the following:

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

38. 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.

39. Requires a program to notify an owner of requirements related to safety and recall and removal of a vehicle from the program.

40. 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.

41. 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.

42. Requires an owner, if a shared vehicle is in the possession of a driver when a safety recall is issued, to notify the program within 24 hours of receiving the recall.

43. 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 sharing period if the owner is not the cause of damage or theft.

44. Allows a program to seek indemnity from a driver for any loss or damage to the equipment that occurs during the sharing period.

Miscellaneous

45. Defines terms.

46. Makes technical and conforming changes.

47. Becomes effective on January 1, 2020.