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Competing bills address new era in car rentals

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Two Republican lawmakers are at odds over what constitutes a “car rental” in the new sharing economy.

At stake in Arizona are the future of companies such as Turo, a website and app that functions like Airbnb, but with cars instead of homes. So, too, are the taxes, fees and surcharges imposed by the state and local governments on rental car transactions.

A bill backed by traditional rental services, such as Enterprise Rent-A-Car, would redefine the meaning of “rental car company” in state statute to ensure the new car-sharing companies like Turo and Getaround are treated the same as traditional rental companies.

To that end, they’ve recruited Sen. David Livingston, who sponsored SB 1305 to ensure new peer-to-peer car shares are treated the same as rental car transactions. A competing bill from Rep. Travis Grantham calls the services Turo offers sharing, not renting, and favors treating the company as something different – just as Uber and Lyft are treated differently than taxis.

Livingston, a Peoria Republican, said it doesn’t matter that it’s called car sharing, or the method by which the car is “shared.” It’s a rental transaction all the same, he said.

“Right now I think they’re a rental car company that thinks of themselves as a technology company,” Livingston said.

Grantham, R-Gilbert, said there are key differences between the Enterprises and Turos of the world, chief among them the fact that Turo and similar companies don’t own the vehicles that are being rented by the hour or day. Those peer-to-peer companies facilitate transactions between private individuals – the owner of a car or truck that wants to rent out their vehicle for a quick buck, and the renter who needs access to a vehicle temporarily.

There are more than 4,950 vehicles in Arizona that are offered for rent on Turo, according to a company spokeswoman. Nationwide, Turo users make roughly $625 a month by putting their vehicle up for rent.

So instead of redefining the meaning of a rental car company, Grantham’s HB 2559 creates an entirely new regulatory framework to guide peer-to-peer car sharing companies operating in Arizona.

Grantham’s plan also doesn’t propose applying any more taxes on the car-sharing economy, other than the income taxes on profits renters already owe.

“My bill gives them their own structure,” Grantham said. “Sen. Livingston’s bill is written by and for the rental car companies who would like to pull peer-to-peer car share companies that are part of this transportation company structure into their realm and regulate them. And I don’t think that’s right.”

Defining Rental

Both lawmakers say the disagreement is similar to past legislative debates over Uber and Lyft, which in 2014 flustered taxicab companies, airports and lawmakers trying to get a handle on the ride-sharing economy.

After the Gov. Jan Brewer vetoed a bill to regulate ride-sharing in 2014, lawmakers went back to the drawing board and crafted a plan to regulate insurance requirements for Uber and Lyft drivers in 2015.

Livingston was a key player in drafting the 2015 proposal, and he’s again at the table to sort out insurance issues with the sharing economy. While companies like Turo offer insurance policies for renters through Liberty Mutual, they also allow are offering the car for rent, and those doing the renting, to opt out.

But if a host declines coverage, they’d need their own commercial rental insurance – a fact Livingston worries isn’t crystal clear. And renting a vehicle on Turo could also violate a person’s loan agreement, if they used a loan to purchase the automobile, he said.

Livingston wants to clarify those insurance requirements, something Grantham fully agrees with.

The two Republicans are also in sync when it comes to vehicle safety, and want to require car-sharing companies to vet vehicles listed on their websites or apps. That would ensure no vehicles subject to a recall for safety reasons are rented out.

Beyond that, Livingston and Grantham are at odds.

“What really is the driver here is the money involved and who’s paying what taxes, fees, tourism fees, airport fees and various rental car surcharge fees,” Grantham said. “Stuff that in its spirit was crafted to capture out of state tourists who arrived at the airport, maybe came to a convention center event or sporting event, maybe came to golf for a week, rented a car and utilized all those various facilities. This peer-to-peer car sharing thing has taken on a different role.”

Grantham describes the companies as operating on a smaller scale, like neighbors renting their cars to one another, offering access to a vehicle for someone who needs a ride once or twice a week, but otherwise can’t afford, or doesn’t want, to own their own car.

As for taxes, individuals who rent out their vehicles are taxed on the revenue they earn through the car-sharing service.

“This is an existing industry that’s very well established, the rental car companies, trying to regulate a fledgling industry that threatens a little bit of competition,” Grantham said. “I think competition is a good thing for the consumer.”

After doing his own research, Livingston doesn’t buy the argument that Turo is offering a sharing service, not rentals.

“That is what they’re saying. But I went to the website and looked, because I didn’t know a lot about them. … And they say ‘car rental’ all over the websites,” Livingston said. “So if I rent my car to you and you pay me, I don’t know how that’s not a rental transaction.”

Its Own Framework

Michelle Peacock, vice president of government relations at Turo, said the company is open to discussions about what taxes and fees it should pay.

But thinking only in terms of the rental transaction, as Livingston described, misses the bigger picture, she said.

“We have offered repeatedly to work with the Legislature to pay an appropriate fee, just like Uber and Lyft have negotiated different regulatory frameworks and different fees,” Peacock said. “We want the same consideration because the businesses aren’t identical.”

Peer-to-peer car sharing companies deserve their own regulatory environment, and that’s what they’re asking Grantham for, Peacock said.

Meanwhile, Enterprise is trying to snuff out competition in the rental industry, she said. Peacock counts bills in 13 states this year that, similar to Livingston’s proposal, would regulate car share companies under state laws applied to traditional car rental companies.

On their website, Turo boasts of legislative victories over Enterprise in various states, accusing Enterprise of “anti-Turo vitriol” in 2018.

“The last couple of years, Enterprise Rent-A-Car has launched a nationwide campaign to essentially regulate peer-to-peer car sharing out of existence,” Peacock said. “At least that’s the effect.”

A spokeswoman for Enterprise said the company has no intent of suppressing the car-sharing economy. In fact, they may want to enter the peer-to-peer market as well.

“That’s why laws governing car rentals not only should provide more clarity, but also should apply equally regarding taxes, airport rules, and safety, regardless of who owns the vehicle,” spokeswoman Laura Bryant said in an emailed statement. “Equal rules of the road is the only public policy that makes sense for the long term.”

Livingston said his proposal may also draw support from airport officials who’ve struggled to work with Turo, much like previous spats with Uber and Lyft.

For example, traditional rental car companies enter into an agreement with Phoenix officials responsible for operating Sky Harbor International. Those agreements guide where and how companies like Enterprise can operate on airport grounds. Even Uber and Lyft now operate as transportation network companies under agreements with the airport.

Airports haven’t had luck negotiating with companies like Turo, Livingston said, but redefining car sharing as car renting could help facilitate an agreement.

Peacock said Turo would happily come to terms with airport officials, and the company is even willing to pay to operate on airport grounds. But they also demand that airport officials agree to new rules governing those operations, much like the agreements airports reached with Uber and Lyft. At the very least, Turo wants to be treated similarly to those transportation network companies.

“We’re saying, give us the same access at the airport that you gave Uber and Lyft,” Peacock says. “We’ll pay what they’re paying.”

Grantham’s bill is purposefully silent on the relationship between the airports and car-sharing services. He said it’s an issue best left for local airport officials to sort out.

“The airports made agreements with Uber. They made agreements with Lyft. There’s no reason they won’t be able to make agreements with the peer-to-peer car sharing industry once it’s its own industry,” he said.

Officials with the Phoenix Aviation Department declined to comment.

Editor’s note: This story has been updated to included statements from Turo

One comment

  1. What was it that Reagan said about government, “If it moves, tax it.”?

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