Tax man catches up to car-sharing

A Flexcar Prius

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TESS VIGELAND: Imagine having access to a car any time of day for as long as you need it. It's called car-sharing. People who don't want to own cars, rent one by the hour, and pay a membership fee. Our friends across the pond pioneered the idea. Here in the U.S. --- Boston and Seattle are among the cities getting in on the action. But starting today in Seattle, car-sharing drivers will have to pay almost 10 percent in car rental taxes. Users call it a penalty on doing right by the environment. From Seattle, Cathy Duchamp explains.


CATHY DUCHAMP: Car-sharing is pitched as a way to wean people off automobiles, to reduce greenhouse gas emissions. A good thing. But not just a green thing.

STEVE ORSER: We use these vehicles as kind of corporate cars. There are so many of them right downtown. That we're able to get cars, on pretty much a moment's notice.

That's Steve Orser, real estate developer. His company, Harbor Properties, has a corporate account with "Flexcar." The private company buys cars, same as rental companies do. Then, it leases parking spaces for those 350 cars all over Seattle. Flexcar rents them out for $10 an hour. Sitting behind the wheel of a Honda Hybrid, Orser says Flexcar beats out car rental companies on convenience.

ORSER: I don't have to figure out where a Hertz might be or go out to the airport or even go downtown. Within a matter of minutes I can be on the computer reserving it, and then straight into the car and using it.

That kind of talk has generated envy and interest among traditional car rental firms. Especially a few months ago, when the companies found out that in Washington State, tax collectors had exempted Flexcar from a 9.7 percent car rental tax. Not fair, says Laura Bryant, she's spokeswoman for the parent company of Enterprise, Alamo and National Car Rental.

LAURA BRYANT: I think trying to differentiate between, depending upon on how long you actually rent a car, I think that that certainly is a very gray area. And you can see if you rent it for two or three hours, it starts to be equivalent to renting it for a day, and then what is the difference?

The Washington State Department of Revenue agreed. The tax break for Flexcar went bye-bye. The phone started to ring in the office of State Senator Jeanne Kohl-Wells:

JEANNE KOHL-WELLS: Mainly I heard from my constituents that they didn't think it was fair that they pay more taxes. They're trying to do their part to reduce traffic congestion and not own a vehicle.

Kohl-Wells wants to re-institute the tax break for car-sharing, but it's tricky. You can't make a law that benefits just one company. And car rental companies want the tax break too. So, what about repealing the tax all together? Well, that would cost the state $33 million a year in lost revenue. Flexcar user Steve Orser is sticking with the service despite the new tax, though he wants a fix.

ORSER: We're so aware about global warming and we need to just cut down on single vehicle usage and gasoline usage all together. Here's where the rubber meet the road, where we can get a chance to really do that, and I hope that the state follows through on that.

For its part, Flexcar sees the loss of the tax break as a speed bump. The company just announced it's merging with Boston-based Zipcar. That creates a car-sharing co-op that will span the nation.

In Seattle, I'm Cathy Duchamp for Marketplace.

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