Car Sharing Companies Work to Avoid Car Rental Tax

As car sharing companies have enjoyed huge growth in recent years, several state and city governments have ruled that car-sharing companies such as Zipcar need to charge their members car-rental tax, according to the Wall Street Journal.

The laws are affecting customers in places such as Seattle, Pittsburgh and Chicago and may spread to other areas soon.

The concept of car sharing started in the U.S. as small, local, mostly non-profit ventures to help the environment, but city and state governments started to take note as national for-profit players Flexcar and Zipcar started to grow. When Zipcar bought Flexcar last October to become a much larger car sharing company, the question arose: Is “car sharing” the same as “car rental” and should services’ members be paying rental-car tax?

Car-sharing companies argue that they shouldn’t be required to pay rental-car taxes because their concept -- members renting cars for short periods of time from parking spots close to their home -- reduces the number of cars on the road, eases parking and traffic problems and gets people to drive fewer miles. Car sharing customers say they are being punished for being more aware of their carbon footprint.

Rental car companies such as Enterprise Rent-A-Car and Hertz Global Holdings Inc.’s Hertz Corp. already pay rental car taxes.

But since customers often use car-sharing services for just a few hours, those extra charges can end up making members’ bills a lot higher. In Pittsburgh, a two-hour errand run now costs about $22 instead of $18 with Zipcar, not including sales tax. The issue is creating a lobbying headache for the small, up-and-coming car-share industry and putting it in conflict with traditional car-rental companies.

Portland, Ore. has given car sharing a total exemption from rental-car taxes. A few areas such as Chicago, Boston and New York, have allowed partial exemptions.

While car-rental companies and car-sharing companies don’t currently see eye-to-eye on who should be exempt from the taxes, both are hoping for some type of federal solution, according to the Wall Street Journal. Enterprise Rent-A-Car, National and Alamo and the Coalition Against Discriminatory Car Rental Excise Taxes is sponsoring a House bill that would outlaw new car-rental taxes in the U.S. but not change existing car-rental-tax laws. Zipcar says it would like to eventually move toward federal legislation but plans to hold off launching a national battle.

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