LIHU’E – State tax officials are interested in the impact of car rental apps like Turo, but the agencies are not commenting on alleged tax crimes among users of the platform.
The state tax department announced in an Aug. 10 announcement to taxpayers that they were using “peer-to-peer car sharing apps” to get proper registrations and a general excise license before starting a business.
Car rental revenue generated through a marketplace facilitator app is subject to general excise tax and state income tax, the DOT said. Taxpayers who rent their motor vehicle without using such apps are subject to general consumption tax, net income and the daily rental vehicle surcharge tax.
Department spokesman Joshua Mapanao declined to estimate tax losses related to car rentals in Kaua’i.
“The department cannot provide details on whether an investigation is currently underway against taxpayers,” he told The Garden Island. “However, there may be cases where individuals do not do this because they believe the market intermediary is performing their tax obligations on their behalf.”
The DOT is proactive, Mapanao said, noting that the department wants taxpayers to know their tax obligations rather than exposing them to additional taxes, penalties and interest.
A Turo spokesperson declined to tell The Garden Island the number of Turo users and vehicles on Kaua’i.
“We are currently not breaking data by market,” said the spokesman. “Turo has created community guidelines that state that hosts are expected to comply with the law and have a responsibility to ensure their vehicle complies with all applicable regulatory laws.”
Kaua’i County Council is now considering Act 2828, which addresses the local surge in popularity of car rental apps by quantifying a fleet size greater than 10 as a commercial vehicle rental company.
“We don’t want to discourage the sensible use of Turo, but we want to limit car rental in residential areas,” said Reiko Matsuyama, director of the county’s Treasury Department, in a July 8 memo. “With this ordinance, a new tax class is created in order to guarantee a fairer distribution in the statutory annual setting of the property tax rates.”
The bill does not set a tax rate for the proposed tax classification. If it goes into effect, a tax rate would have to be set in the county’s next annual budget process, Matsuyama told The Garden Island in an email.
The draft law will be subject to a public hearing by the council on Wednesday.
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Scott Yunker, General Task Rapporteur, can be reached at 245-0437 or [email protected].