Sportscar
Patrick Ishmael

We’re still a few months from the legislative session, but it’s becoming clear that one hot topic in 2020 will be whether the Missouri legislature will clarify the state’s rental car statutes to affirmatively include—or exclude—car-sharing companies like Turo.

For those unfamiliar with the company, Turo connects car owners to car renters. For example, if I own a car and want to make some extra money when I’m not using it, I could list my car on the Turo platform and get paid to let someone else drive it around.

If Turo’s model makes it sound like a rental car company, well, there’s an argument to be made for that. And if you think Turo’s model sounds a lot like the Uber or Lyft business model—where independent contractors essentially rent their services and vehicles like a taxi—then you wouldn’t be wrong there, either (minus the driver, of course.)

The problem is that under Missouri law, the taxes and regulations that cover “motor vehicle leasing companies” appear to exclude Turo from oversight. One of the touchstones of having a car leasing company in Missouri is the nature of the vehicle itself, and the state’s leasing law covers vehicles “which are to be used exclusively for rental or lease purposes.”

The cars rented through Turo typically are not used exclusively as rentals, and if it weren’t for a company like Turo, many of these vehicles would be exclusively personal vehicles. So the state’s rental car tax provisions do not neatly apply to Turo’s business model.

That isn’t to say that Turo is exempt from all fees dealing with rental cars in Missouri. For example, Kansas City’s rental car ordinance captures Turo’s business model in its definition of a “rental car agency”:

Rental car agency means an individual person or business entity as described in section 40-61 that provides the service of renting, leasing or letting passenger vehicles for compensation, whether the provision of such service is the primary, secondary, or incidental business of such person or entity.

Turo is a business entity that provides the service of renting passenger vehicles for compensation, and under Kansas City’s definition, the vehicle doesn’t have to be used exclusively or primarily as a rental vehicle; incidental rentals are enough to subject the business to the city’s  fee of $4 per day for rental cars.

There are important policy questions in play here. High among them is whether car rental (and hotel, and other tourism-type) taxes should exist in the first place. While politically attractive because visitors tend to pay such taxes rather than residents, I and other researchers at the Show-Me Institute have expressed policy reservations about such regimes many times before.

The most likely question to be debated in the legislature, however, isn’t whether such taxes should exist, but whether state rental car taxes and regulation should apply to these particular companies. Existing state law does not appear to contemplate these types of arrangements. The language of municipal statutes like Kansas City’s may offer legislators a blueprint for updating state laws that were drafted well before the advent of car share companies like Turo. Truthfully, if the state intends to impose taxes and regulations on rental car companies, it seems like Turo would fall under a common definition for such enterprises, even if it isn’t captured currently.

But—If such a tax is applied to Turo vehicles, legislators should simultaneously commit to reducing the associated taxes on all rental car companies against any added revenue expected from Turo rentals—that is, as they broaden the base for the tax, they also should lower the rate of the tax imposed for all involved. (This is much like my position on internet sales taxes in the state.) To be clear, I question whether rental car taxes should exist, but if they are going to exist, they should be applied equally and in a revenue-neutral fashion.

 

About the Author

Patrick Ishmael
Director of Government Accountability

Patrick Ishmael is the director of government accountability at the Show-Me Institute.