Michigan Legislature looks to tax Turo, other car-sharing services – Crain's Detroit Business

Detroiter Lavell Riddle has six vehicles available for rent through Turo. Riddle has worked through the car-sharing company for a year.
LANSING — A proposal to tax and regulate services that function as a sort of Airbnb for car rentals has sparked the latest legislative fight over the sharing economy.
The bills have drawn criticism from opponents who say they would increase costs and shield traditional rental companies from competition.
The legislation would affect “peer-to-peer” platforms that let people avoid rental counters and rent vehicles from their owners. The apps often are less costly and can offer drivers more flexibility and convenience, letting them browse for a specific model they want and get it delivered for a fee.
San Francisco-based Turo, the world’s largest peer-to-peer car-sharing operation and the most established one in Michigan, grew amid a shortage of rentals and soaring prices during the COVID-19 pandemic. It has more than 1,200 vehicles in the Detroit area and, this summer it secured authorization for hosts to leave their cars in designated areas at Detroit Metro Airport for arriving and departing travelers.
Critics say the measures would upend that deal and, more broadly, undercut Turo and other companies such as Getaround and RVshare by allowing new taxes on vehicle sharing.
“We’re paying sales tax on the vehicles. We’re paying income tax on the earnings from the vehicles. And now they’re wanting to layer in another tax,” said Bill Huffhine of Rochester Hills, who became a Turo host in 2018.
He listed his Scion tC to offset monthly payments and insurance so he could buy a convertible. It generated about triple his fixed expenses. So he gradually scaled up to 20 vehicles, five of which he co-hosted for owners from elsewhere, and retired from his job as a media executive.
Huffhine, who said he has since sold his cars for a profit as used-vehicle prices skyrocketed, now advises other Turo hosts. He also plans to help investors position fleets in cities around the country.
“The thing that’s great about Turo is it gives anybody and everybody an opportunity to improve their financial situation,” he said. “They can improve their financial position by offsetting their own vehicle expenses or, like me, building a business. It’s a great platform for that.”
The bills’ supporters, which include big car rental companies, say a state regulatory framework is needed to govern insurance, consumer protections, taxation and other issues.
Lisa Martini, a spokesperson for Missouri-based Enterprise Holdings — the owner of Enterprise Rent-A-Car, National Car Rental and Alamo Rent a Car — said the “model” legislation took years to develop and has received substantial input from insurers, automakers, and consumer and safety advocates along with car rental, car-sharing and peer-to-peer companies.
“The proposed legislation is an agreed upon set of standards for an emerging segment of the car rental industry, bringing clarity to taxation rules by restating existing tax laws that have been in Michigan for decades,” she said in a statement.
Some measures were approved by the Republican-led House Regulatory Reform Committee in the spring and are pending in the full House. The panel on Tuesday delayed taking testimony on a new bill that would authorize local governments to levy an excise tax on peer-to-peer vehicle sharing that they currently can assess on regular car rentals. Wayne County has a 2 percent tax to help pay off bonds for the construction of Comerica Park and Ford Field.
Another bill, which was considered Tuesday, would explicitly codify that hosts do not have to charge renters the state’s 6 percent use tax because they paid sales tax when they bought the cars. Car rental companies are exempt from paying sales tax on their fleets if they levy it on customers.
Americans for Tax Reform, a conservative anti-tax group based in Washington, D.C., is urging that the legislation be rejected. President Grover Norquist sent a letter to House members calling the bills a tax hike.
“We encourage legislators to promote the innovation of new and emerging industries instead of burdening them with taxes, fees and regulations that will only hurt taxpayers,” he wrote, later adding: “If lawmakers feel tax burdens on traditional rental car companies are too high, we would welcome legislation to reduce those burdens rather than impose them on different businesses and consumers.”
The sponsor of the main bill, the proposed Peer-to-Peer Car Sharing Program Act, said he is not trying to kill a new entrant into Michigan’s transportation marketplace but rather help it “prosper.”
“They’ve been kind of operating in the gray area for the last couple of years,” said Rep. Pat Outman, a Six Lakes Republican. “We really didn’t have any rules and regulations or system of taxation that applied to them at all.”
He likened the effort to how the state began regulating ride-hailing services Uber and Lyft under laws that took effect in 2017. Hosts, he said, would not be “double taxed.”
“If you’re a large enough Turo participant and you’re able to take advantage of the fleet exemption, then you’ve got to charge what would be the sales tax or the use tax through each transaction. But if you just use a regular vehicle and you’ve already paid sales tax on it, then there would be no (use) tax moving forward,” Outman said.
He is uncertain about whether both the House and Senate could pass the package before the end of the two-year term in December, saying it may be “really, really close.”
Turo remains opposed.
One issue, for example, is a provision that would govern agreements with airports. The Wayne County Airport Authority in June approved a deal designating Turo pickups and returns for parking lots at Detroit Metro, the first of its kind in Michigan. The bill’s detractors warn that it would jeopardize the agreement by requiring airport contracts to set forth the “same or reasonably similar” standards, regulations, procedures, fees and access requirements for car-sharing services that apply to rental companies.
The airport access “gives customers another option. The more options, the happier the people are,” said Lavell Riddle of Detroit.
He began as an Uber and Lyft driver roughly eight years ago, started his own black car service and last year became a Turo host based out of Dearborn. He lists six vehicles and drops them at the airport if requested by a customer. Once a guest lands and sends him the necessary insurance documents, he can unlock the car from his phone.
Riddle worries the legislation would increase prices.
“There’s a lot of people that can’t afford vehicles or a lot of people that live in downtown areas that don’t need a vehicle all the time,” Riddle said. “There is a huge need in metro Detroit for transit. To be able to offer a service to people looking to get a car for a day or a few hours or a week has been really rewarding.”
Editor’s note: The original version of this story misstated the name of Grover Norquist’s organization. This version is correct.
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