Rental car taxes are getting jacked up

Anyone renting a car in Maine would be paying the state 12.5% of their bill in excise taxes starting last month if the legislature there had its way.

But residents blocked the state's new tax-reform law — which included a tax increase from 10% to 12.5% on rental car bills — by signing petitions in opposition. If the signatures on the petitions turn out to be valid, the increase will be put to a vote in June, says Sara Lewis, a Maine taxation official.

The action in Maine represents something of a victory for business travelers, corporate travel departments and rental-car companies who are increasingly upset over what's been an explosion in taxes imposed on renting a car.

Airline fees "are bad, but the worst are car-rental taxes," says frequent business traveler Tony Harrison, who has rented cars 75 days so far this year and paid upwards of 20% of his bill in taxes in some cities.

Harrison, president of a company in Edmond, Okla., that trains public-safety officials, says the city, state and airport tax levies on what he pays to rent a car have gotten so bad that he factors them into deciding which airport he'll fly into.

The taxes are tough to avoid. There were 114 separate state and local excise taxes for renting or leasing a car in 43 states and the District of Columbia as of the end of last year. In 1990, there were only 14 of them, according to the Coalition Against Discriminatory Car Rental Excise Taxes, a group formed to combat the proliferation of the taxes and which tracks them.

Taxes a way to close budget gaps

The taxes can cost a Fortune 100 company $5 million to $10 million a year, figures Michael McCormick, executive director of the National Business Travel Association, which represents about 4,000 corporate travel managers and suppliers.

Rental-car companies aren't happy with them either. They don't want to be tax collectors. Nor do they want to hear disgruntled renters complain about the charges on their bills. So three years ago, eight rental-car brands and the National Business Travel Association formed the coalition to publicize the taxes, educate consumers about them and lobby against them.

The taxes are proliferating, however, as states and localities look for revenue to balance their budgets in recessionary times.

Source: http://www.usatoday.com/