Peer-to-peer vehicle rental legislation finally clears committee

February 11, 2020

Legislation seeking to create a comprehensive framework for peer-to-peer vehicle rentals has finally made it out of Committee, reporting from Senate Finance by a vote of 14-1-1.

Peer-to-peer vehicle rentals involve a vehicle owner listing a vehicle for rent through an electronic marketplace, which sometimes provides insurance, dispute resolution, or other services, but is not involved in the physical exchange of the vehicle.  A prospective renter reviews vehicle selections on the marketplace platform and chooses a vehicle.  The rental platform facilitates the transaction between owner and renter, who then make arrangements for the renter to obtain the vehicle and keys and to return the vehicle after use. In many ways, this operates much like an “Airbnb” system, but for cars.

Currently, peer-to-peer vehicle companies operate in Virginia in an unregulated and untaxed environment.  As such, over the course of the last year, stakeholders have been working to draft legislation and establish taxation, insurance coverage, sale of insurance, disclosure, safety recall, airport operation, and recordkeeping requirements for peer-to-peer vehicle sharing platforms.

VACo partnered with Enterprise, Hertz, the American Car Rental Association, as well as several other regional and local governmental associations, to introduce SB 749 (Cosgrove) and HB 891 and HB 892 (both carried by Delegate Mark Sickles), while the peer-to-peer rental industry introduced their own legislation, SB 735 (Newman) and HB 1539 (Jones).  One of the main sticking points and differences between these two bills was the tax structure that was proposed, an issue that led to the defeat of HB 891 and HB 892 in House Finance (HB 1539 was rereferred to the House Appropriations Committee but not taken up).  Ultimately, after two weeks of hearings and negotiations, a compromise was reached, and a new bill was crafted.

Under this new, compromise legislation, owners of more than 10 vehicles that use one of these peer-to-peer vehicle rental platforms will be taxed at the same rate as ordinary rental companies.  Under the motor vehicle rental tax (MVRT) rate, rentals are taxed at a 10 percent composite rate (4 percent for localities).  For owners of 10 or fewer vehicles, however, a tax of 6.5 percent of gross proceeds shall be paid from July 1, 2020, until July 1, 2021.  After July 1, 2021, this rate climbs to 7 percent of gross proceeds.  This equates to a rate of 2.5 percent to be paid to localities in the first year, and 3 percent each year after.

VACo is grateful to have been a part of this coalition and was pleased to support the compromise legislation.  SB 735, which incorporated this substitute language, will now be heard on the Senate floor.

VACo Contact: Chris McDonald, Esq.

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