Heavy Taxes Crash Down On Car Rental Industry
Eight Companies Join To Fight For Their Customers As Charges Pile Up
By Roger Yu
April 18, 2006
USA Today
The normally fractious rental car industry is uniting to battle what it views as its
common enemy: state and local governments intent on imposing more taxes and
fees on renters.
Increasingly, governments are viewing taxes and fees on its cars as a primary option
for local civic projects that the rental industry says should be funded locally: sports
stadiums, art centers and convention centers.
"It's taken on a wave of popularity," says Richard Broome, a vice president at Hertz.
"It's politically expedient to tax out-of- towners because the presumption is that they
don't vote."
In a rare show of unity, representatives from eight major rental companies met in
early April to share information and plot a lobbying strategy. The National Business
Travel Association, a trade group for corporate travel managers, sponsored the
meeting, a result of growing concern among large companies about rising prices,
says NBTA spokesman Caleb Tiller.
Tiller and others didn't offer details on agreements but said industry executives will
spend more time and money lobbying elected officials, conducting media campaigns
and possibly filing legal challenges.
"(The meeting) brought us a single voice, and we said we have to fight this," says
Pat Farrell, an executive at Enterprise Rent-A- Car.
The industry unity extends only to state or local excise taxes that have no direct
relationship to its operations, not to the airport facility charges. "People have all
sorts of opinions about (airport fees) depending on what city and how much they
cost," Enterprise's Farrell says.
Arts centers, sports stadiums
Enterprise estimates about 80 special car rental taxes -- not including airport fees -have been imposed across the USA, and at least 44 proposals are pending. Some
examples:
*To pay for a performing arts center and expand a culinary institute, Clark County,
which includes Las Vegas, approved legislation last year to charge car renters 2% of
the base price.
*In Dallas, renters pay a 5% charge to help pay for the American Airlines Center,
home of the NBA's Dallas Mavericks.
*In Arkansas, a part of the 10% rental car tax goes toward teachers' salaries.
*In Wisconsin and several municipalities, the rental car tax is a key funding source
for public transportation projects. "It's like taxing Pepsi to build a Coke
manufacturing plant," Broome says.
Florida renters hit hard
The industry has plenty of support from business travelers such as Richard Hadden,
a Jacksonville-based author and professional speaker who rents frequently in Florida.
In early April he rented a midsize car at the airport in Pensacola for a three-day base
rate of $132. His bottom line: $169.37, or 28% more than the base rate. The addons include sales tax, a state surcharge of $2 per day and other rental fees.
"The excessive amounts being charged in some localities are wrong," he says.
Florida, with its heavy volume of tourists, is one of the top car rental markets in the
USA, and Hadden could soon be facing even higher bills. The Florida Legislature is
considering a bill that would allow counties to raise the rental car surcharge by
another $2 a day. Revenue would go for improving roads.
Officials from NBTA, auto club AAA, anti-tax group Americans For Tax Reform and
Consumer Federation of the Southeast plan to hold a news conference today in
Tallahassee to speak out against the bill.
Rosa Alvarez, a legislative aide for Republican state Rep. John Quinones, who
sponsored the bill, says tourists should pay for a portion of costs to maintain roads.
"It's directed at tourists and not local citizens," she says. "Tourists are not going to
make a decision (to visit) one way or the other on $2 a day."
Rental car taxes unfairly single out one industry for a special tax, says Andrew
Chamberlain of the Tax Foundation, an anti-tax organization in Washington, D.C.
"And it's not for the benefit of that industry."
The industry has complained about it repeatedly in the past. But competitiveness
and the lack of a trade group that lobbies have undermined past lobbying attempts,
Chamberlain says. "They've done a poor job defending themselves," he says.
Charges can tax local residents, too
Enterprise says it began tracking the increasing rate of new rental car tax proposals
after spending more than $1 million to battle a Kansas City, Mo., proposal two years
ago. Eventually passed, it imposes $4 a day to raise money for a downtown sports
arena.
The industry has been reminding lawmakers that local residents are making up a
bigger percentage of its customers. For the first time ever in 2004, revenue from
rentals at neighborhood locations exceeded revenue from airport rentals. The
argument "is not helping much," Farrell says.
Tom Ambrosino, mayor of Revere, Mass., says he doesn't have a lot of sympathy for
the industry. The city, which borders Boston Logan International Airport, recently
enacted a charge of $10 per rental and hopes to generate $250,000 to $400,000 a
year to build police and fire stations.
Revere endures heavy noise and traffic from being close to the airport, and it "ought
to gain some benefit," he says. The rental companies in Revere draw a lot of
customers from the airport, and the tax is "another cost of doing business," he says.
"We try to shift the (tax) burden away from our citizens as much as we can," he
says.
TEXT OF INFO BOX BEGINS HERE Taxing rental cars for civic projects City and state
governments are increasingly looking to tax car renters to pay for civic projects.
Here are some examples of taxes that have been enacted or are under discussion.
Location
Charge Fund use Revere, Mass. $10 a transaction Police and
fire stations. Kansas City $4 a day A downtown arena. Wisconsin
counties Kenosha, Racine and Milwaukee $2 a transaction
Extending commuter rail from Kenosha to Racine and Milwaukee
counties. Salt Lake County, Utah 7% Tourism promotion;
maintenance of recreation, cultural and convention facilities.
Washoe County, Nev. 2% A minor league baseball stadium. King
County, Wash. (Seattle) 1% Youth sports and stadium facilities.
Clark County, Nev. (Las Vegas) 2% Expansion of a culinary
training academy and building of a performing arts center. Florida
(county option) $2 a day Roads and other transportation
projects. Mecklenburg County, N.C. (Charlotte) Increase of 3
percentage points to 14% of base price Cultural arts facilities. 1
-- pending Sources: Enterprise Rent-A-Car, USA TODAY research