NCPA - National Center for Policy Analysis


June 20, 2008

In cities around the country, fans of Zipcar Inc. and other car-sharing companies are seeing prices rise for those jaunts to the grocery store.  For that, they can blame the taxman, says the Wall Street Journal. 

As car-sharing companies have enjoyed skyrocketing growth in recent years, several state and city governments have ruled that car-sharing companies need to charge their members the car-rental taxes that are already paid by large rental car-companies, such as Hertz and Budget.  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, says the Journal.

For example:

  • In Pittsburgh, a two-hour errand run now costs about $22 instead of $18, not including sales tax.
  • In Seattle, two hours of Zipcar use is now about $21 instead of $19, without sales tax.
  • In New York, car-sharing service members pay the state's 5 percent rental-car tax -- which comes out to about $1 more on a two hour Zipcar rental there.
  • In New Jersey, members must pay the state's $5 per rental "Domestic Security Fee."
  • In Philadelphia, members pay a 2 percent state rental-car tax, plus a $2-per-rental state tax, and the city's 2 percent rental-car tax.

A few areas have allowed partial exemptions:

  • In 2006, Chicago exempted car sharing from the city's car-rental tax on hourly rentals, but not daily rentals.
  • Boston allows Zipcar to charge members a flat tax of $10, instead of the $10 per rental it charges customers of traditional rental-car companies.
  • So far, only Portland, Oregon has given car sharing a total exemption from rental-car taxes.

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, says the Journal. 

Source: Sarah Nassauer, "If Your Zipcar Is Costing More, The Taxman May Be to Blame," the Wall Street Journal, June 19, 2008.

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