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The Conversation

Peer-to-Peer Car Rentals on Honolulu Streets Draw Attention From Tax Department, Neighbors

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Complaints about tourists picking up peer-to-peer car rentals in local neighborhoods have the state Department of Taxation taking note.

Department Director Isaac Choy said Hawai‘i residents should do research before making their personal vehicles available for rent through platforms like Turo.

"I think it's along the lines of vacation rentals and everything. Everybody's trying to make a little extra money," Choy said. "Peer-to-peer cars, I don't know if it's going to be the next big thing, but it's going to be a thing and we just want to make sure that if you're renting your car that you're being really, really fair with any commercial car rental operation."

He said one thing to know is that Hawai‘i law requires taxes and a rental car surcharge to be collected on every vehicle.

"If you do rent your car through a platform, the platform becomes the lessor and they have to pay the 4% (tax) and the daily rental vehicle surcharge," he said. "The person that owns the car will have to pay half percent wholesale rate."

In this case, the lessor would be Turo.

Lou Bertuca, the head of government relations for Turo, told The Associated Press rental car companies don't pay sales taxes on vehicles they purchase in most states, creating what he called a “front-end sales-tax loophole.” In Hawai‘i, Bertuca claimed the companies must pay a 0.5% tax on vehicle purchases, which is significantly less than the more than 4% general excise tax plus paid by Hawai‘i retail car buyers.

Choy advised owners should check with their insurance before posting their vehicle on Turo because it’s important to know what their liability would be if a renter damages the vehicle or private property.

Choy told The Conversation that his department is stepping up how it monitors the industry, through data collection and site visits.

"In the future, we will have an initiative on a ridesharing type of operation," he said. "These initiatives, we can’t just do overnight. And we want to do it fairly so we can get tax compliant across the board."

Residents in some neighborhoods complain that their streets have become parking lots for rental vehicles. The issue emerged at a Wai'alae-Kahala neighborhood board meeting this month.

"(Honolulu) Council Chair Waters had received complaints about it and they reported it to the Department of Planning and Permitting, and they assured the councilman’s office that they’re going to do an investigation," said Wai‘alae-Kahala Board Chair Rich Turbin. "We asked for a report at the next meeting—the July meeting."

The DPP, which handles zoning issues, told Hawai‘i Public Radio that the complaints surfaced almost three weeks ago and an inspector only got out there this week.

However, tax department investigators recently checked out the residence on Ahuawa Loop around the same time. HPR learned that investigators took pictures of more than a dozen cars offered on Turo that were parked on the public streets.

Neighbors of the Ahuawa property said they also complained to Turo and the leasing company about the renters.

The DPP did not provide exact information on the number of complaints but said it has received complaints from Ewa, Kalihi and Salt Lake.

Turo wants people to reach out to the company to let them know if a host is not being a good neighbor, Bertuca said. “We want hosts to be good community members and citizens,” he said.

Hawai‘i's airports have also found platforms like Turo using airport parking lots as transfer points. On the other side of the country, Boston's Logan International Airport has prohibited Turo from using the facility as a transfer point.

Airport officials have ticketed some operators in Honolulu and Maui. They said they are monitoring the situation closely and considering changing some administrative rules.

Turo is trying to obtain parking permits from airports around the country, Bertuca said. It already has such arrangements with airports in Denver and Tampa, he said.

This story aired on The Conversation on June 23, 2021.

Updated: June 24, 2021 at 2:24 PM HST
2:30 p.m., June 24: This story has been updated with comments from Turo provided to the Associated Press.
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