In 2006, New York collected $42 million in revenue from the 5 percent tax on car rentals. It was a small percentage of more than $2 billion the state reaped from fuel taxes and “sin” taxes on cigarettes, alcohol, wagering, hazardous waste and boxing.
Nevertheless, it has some spoiling for a fight.
In May, several U.S. representatives proposed a bill to prohibit states and municipalities from imposing car-rental taxes, though existing taxes would be allowed on a “grandfathered” basis. The law would allow airport authorities to impose concession fees on car-rental agencies.
“Politicians have come to see the pockets of car-rental customers as magic pots of gold they can reach into any time,” said Bill Connors, executive director of the National Business Travel Association. “Their actions are the result of the myth that they won”™t hurt anybody but a few one-time visitors ”¦ First, for those visitors who do rent cars, the taxes make a city or county less attractive as a repeat destination. Second, they create a hidden tax on local citizens and businesses who make up a significant portion of the car-rental customer base.”
In a survey this year of its members, the National Business Travelers Association found that hotel and excise taxes are among the top five concerns of corporate travel planners.
More than half of the planners surveyed said they rent cars the majority of time in their local markets, adding that car-rental taxes influence the sites they choose for conferences.
It is becoming harder to dodge such taxes; from car-rental excise tax in a single state in 1976, more than 100 are in place today.
According to the National Business Travelers Association, car-rental customers have helped cover the costs of 18 sports stadiums and venues, with 17 more initiatives under consideration. The Alexandria, Va., organization estimates $6 billion has been siphoned out of the wallets of consumers and businesses since 1990 as a result of such taxes.
Just as perilous for businesses is the prospect of customers fleeing to nearby areas that offer havens from excise taxes. In a 2006 study of a $4 car-rental tax in Kansas City, Mo. ”“ commissioned by Enterprise Rent-A-Car and relying on data supplied by the company ”“ Brookings Institution economist William Gale and Urban Institute economist Kim Reuben found that one in 10 customers crossed the Kansas border to rent a car, costing Missouri car-rental agencies customers and the state revenue via its sales tax.
As a worldwide commerce and tourism destination, however, New York has been immune to consumer whimsy. Car-rental tax revenue has largely mirrored the travel economy as a whole, with an 11.4 percent jump in 2005 as the airline and hospitality industry rebounded from 9/11.
For travel planners looking to make a statement by scheduling their next conference in a state free of excise taxes, first check that your attendees like a little nature ”“ West Virginia is the nearest state lacking a car-rental excise tax.
Â
Â
