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Peer-to-peer car rentals must pay Hawaiʻi general excise tax under new law

Avis and Budget rental cars in Denver in 2020. (AP Photo/David Zalubowski)
David Zalubowski/AP

Peer-to-peer car rental companies like Turo are going to have to pay the state’s general excise tax under a new bill signed by Gov. David Ige.

Hawaiʻi Department of Taxation Director Isaac Choy says car-sharing platforms should be held to the same standard as conventional rental car companies like Hertz or Enterprise.

"I don't think they deserve any kind of special dispensation. I understand that peer-to-peer is a new concept, but it is car rental. It's a car rental business," he told HPR.

"If one type of entity is paying for doing essentially the same thing, then, of course, everybody should be paying the exact same amount," Choy said. "One shouldn't be getting a tax break over another."

Choy advises individuals using the platform Turo to apply for a general excise tax license as well. He says car owners can also be held responsible for the unpaid taxes, but his main priority is collecting from Turo.

"We've always taken the position that the car owners — the local people who actually rent their cars out — pay only 0.5% on whatever amount they rent the car out," Choy said. "Then the marketplace facilitators — for example, Turo — would have to be collecting the 4% from the tourists, and also the rental vehicle surcharge from the tourists, and then passing that along to the state."

"It's not new law. It's merely just to emphasize and clarify if there is any kind of argument that they would like to put forth," he said. It goes into effect July 1.

Prior to the bill's enactment, Choy says the state has tried to collect taxes from Turo. The company took the state to court over the matter.

"At this particular point, it is in our state court system. So we look forward to a favorable decision on that," Choy said. It is not yet clear how the recently signed law will affect the case.

In a statement to Hawaiʻi Public Radio, Turo said it "is committed to being a positive contributor to the local communities" that it serves.

"We have actively worked with policymakers on how to best establish a regulatory framework for peer-to-peer car sharing in Hawaiʻi. Turo has voluntarily collected and remitted taxes to the state prior to this law, and reminds visitors and local residents that when they choose Turo as their transportation option they are giving back to the local economy," a Turo spokesperson said.

In other car news, President Biden is pushing for a three-month federal tax holiday due to rising gas prices. But in Hawaiʻi, there is little talk from the Ige administration about providing a state tax holiday.

Choy says he does not think it will have much of an effect at the pump. But overall it will impact road repairs and other special funds. In addition to federal taxes on fuel, the state assesses a tax on every gallon of gas, and each county also adds a tax to shore up its coffers.

This interview aired on The Conversation on June 28, 2022. The Conversation airs weekdays at 11 a.m. on HPR-1.

Catherine Cruz is the host of The Conversation. Originally from Guam, she spent more than 30 years at KITV, covering beats from government to education. Contact her at ccruz@hawaiipublicradio.org.
Sophia McCullough is a digital news producer. Contact her at news@hawaiipublicradio.org.
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