Turo Sues LAX Over Permit Classification, Facility Fees

Peer-to-peer carsharing service Turo filed a lawsuit July 12 against the City of Los Angeles over Los Angeles International Airport’s (LAX) classification and permitting of the San Francisco-based company.

In a complaint filed with the U.S. Central District Court of California in LA, Turo alleges that LAX and the city are attempting to classify it as a rental car company. Turo transactions taking place at LAX would then be subject to the customary permits, taxes, and fees associated with rental companies operating at the airport.

Turo maintains that its platform is a technology company, not a rental car agency, and that the California legislature has recognized charsharing as “a new kind of entity, distinct from rental car companies.”

Turo therefore contends that it should not be subject to the gross receipt charge — 10% of each booking that gets paid to the airport. Further, the complaint contests LAX imposing a customer facility charge on Turo, which financially supports the construction and maintenance of the LAX’s future consolidated rental facility (CONRAC).

Since Turo doesn’t operate or own a fleet of vehicles, and will not be using the CONRAC, Turo argues that “imposing the LAX Facilities Charge on Turo and its users is thus unfair and unlawful… and not rationally related to the purpose for which the fee is being collected.”

The LAX facilities charge is $7.50 per day for the first five days of a rental.

Turo Chief Legal Officer Michelle Fang said that Turo met with LAX officials over a year ago to discuss the permitting process.

“Our CEO reached out to the CEO of the airport, offered to meet... expressed our desire to create something innovative, a peer-to-peer carsharing permit, our willingness to pay fees, [and] work out how carsharing would work at the airport with them,” Fang said. “And effectively, they refused to meet with us or have any discussions with us.”

Fang said that Turo would still prefer to negotiate an appropriate permit and applicable fee structure with LAX, rather than going to trial.

Related: Should Peer-to-Peer Renters Pay Airport Car Rental Fees?

“We would be willing to enter into a new permit much the way TNCs created a new permit with the airports that set them apart as a different industry from taxis,” she said. “We would be willing to pay fees commensurate with our use of the airport... So we were really open to discuss everything other than us being permitted as a rental car company.”

Currently, Uber and Lyft users pay $4 to be picked up curbside at an LAX terminal; limousines are charged $4 per trip and taxis $5 per trip.

“Bottom line is we are happy to continue, notwithstanding the lawsuit, to work with LAX and SFO to create a peer-to-peer car sharing permit,” Fang said.

The LAX lawsuit is the latest in a series of legal and legislative actions involving Turo with airports and state jurisdictions. Earlier this year, the City of San Francisco sued Turo for allegedly operating at San Francisco International Airport without paying applicable permit fees. In reply, Turo sued the city for classifying it as a car rental company.

In Illinois, a bill is awaiting the governor’s signature that would require peer-to-peer carsharing to abide by taxes and regulatory burdens included in the state’s Automobile Renting Occupation and Use Tax Act.

Maryland passed a bill, effective July 1, requiring peer-to-peer rentals to comply with state tax, insurance, and safety laws.

The American Car Rental Association (ACRA) has held that peer-to-peer carsharing companies should be regulated and taxed similarly to traditional car rental.

“ACRA has long sought parity between peer-to-peer carsharing companies … so that all entities that make motor vehicles available for rent to individuals for a profit are required to comply with the same federal and state insurance, safety, liability, and tax laws and regulations,” the association said in a statement after the passage of the Maryland legislation.

“ACRA welcomes innovative car rental services that meet the diverse and shifting demands of our industry’s millions of customers, but strongly supports the fundamental maxim that all companies who facilitate car rental services must comply with existing and future state and federal laws …” ACRA’s statement continues.

Related: Carsharing and Other Mobility Platforms: Legal Issues to Keep in Mind

Chris Brown contributed to this article. 

An earlier version of this article mischaracterized Turo's case against the City of San Francisco. It has been updated to correctly reflect the lawsuit.