Turo and rental car companies compete on prices and policy

Hawaiʻi works for car rental companies, but taxpayers are funding their competitive offerings in return.

The significant drop in Maui’s Turo and other peer-to-peer listings is in part because of the low prices rental car companies can offer.

According to an April 2020 report by NetChoice, rental car companies receive approximately $4 billion annually in tax breaks, loopholes and subsidies nationwide

A deeper dive into Hawaiʻi’s economy showed that large rental car companies received subsidies of $15.2 million from the state and were exempt from $13.5 million in sales taxes.

In Hawaiʻi, that’s because those companies must pay a 0.5% tax on vehicle purchases while their peer-to-peer competitors pay a much higher rate at 4-4.5%, the state’s general excise tax.

The rental car tax deduction is specified under wholesale transactions (sales of tangible imported property for further resale at 1/2%), according to the State of Hawaiʻi Department of Taxation.

Rental car companies also pass onto their customers the vehicle registration fees paid to the state under a Vehicle Licensing Fee (VLF), costs which Turo hosts are required to pay in their vehicle registration and licensing fees.

At least five states have introduced bills to close their similar sales tax loopholes, including Massachusetts’ HB 2976, Georgia’s HB 1158, Maryland’s HB669 & SB688, Washington’s HB1572 and Arkansas’ HB1632.

Closing the doors on the breaks and loopholes will likely push the extra costs onto customers and balance price offerings between rental and peer-to-peer services.

“Turo currently pays state taxes, and for several years, Turo has been working with policymakers on how to best establish a regulatory framework for peer-to-peer car sharing in the Aloha State,” said Turo spokeswoman Catherine Mejia. “Turo runs on the commitment to be a good neighbor and contributor to the local communities that we serve, and Hawaiʻi is a special place with incredible hosts. When local residents and visitors choose Turo as their transportation option, they are giving back to the local economy.”

The Hawaiʻi House Committee did not respond to a request for comment.

Airport parking restrictions have been another hurdle for Turo amid a crack-down by Kahului Airport security.

“We understand that new policies are now being enforced at the Kahului airport,” Mejia said. “While Turo believes in fair access to airports, we are actively working to find a solution with the appropriate local and state authorities to resolve this issue on behalf of our community.”

Turo suggests hosts consider offering delivery to other convenient locations like a guest hotel, while those conversations and negotiations are being had.

Turo has taken several measures to ensure its longevity, including announcing its entrance into the public stock market (TURO) earlier this month.

To help the host community build their businesses, Turo committed $30 million in the second half of 2021 to put dollars into hosts’ pockets and boost the profitability of their Turo businesses. The program known as the Turo Seed Initiative offers an interest-free $15,000 loan through LoanGuide to purchase a car and list it on Turo.

The peer-to-peer service also offers a Host Team to navigate the fluctuating pricing and demand on the Valley Isle.

“We understand the fluctuations in demand that some of our hosts may be seeing in Maui — due both to the COVID pandemic and the seasonal nature of the travel business — can be challenging to navigate,” said Mejia. “We have a dedicated Host Team at Turo always ready to help guide our hosts through any questions about pricing and demand.“

Lawmakers are considering a bill that would ban peer-to-peer car-sharing programs like Turo, saying that it is not regulated and can lead to over-tourism, per Hawaii News Now.

Turo is among many peer-to-peer rental services — like Riders Share (motorcycle rentals) and Uber — operating in Hawaiʻi.

The public will know whether or not the bill will be heard in legislation by as soon as Thursday.