Government Fleet Top News

For Flexcar, No Way Around New Tax

September 12, 2007

SEATTLE – Thousands of King County residents who use the Flexcar car-sharing service will be charged an extra 9.7-percent rental car tax after the state Department of Revenue determined that car-sharing services were essentially rental car businesses, according to the Seattle Post-Intelligencer. The tax, which Flexcar will start charging customers Oct. 1, could put the brakes on Flexcar’s rapid growth in Seattle, since Flexcar users already pay nearly nine-percent sales tax.

The Seattle-based company, which has almost 20,000 accounts in the area, is on track to double the size of its Seattle fleet this year to 400 cars. Flexcar users pay an annual membership fee (which is waived depending on use), reserve a time slot online or by phone, and then pay an hourly or daily rate to use the company’s vehicles, which are parked throughout the city.

The company said its members should be exempt from the tax because they are mostly local residents and the company’s model differs from that of traditional rental car companies. But in an advisory Jul. 20 sent to Flexcar, the state Department of Revenue said, “Carsharing organizations are providing ‘rental cars’ and are required to collect the rental car tax along with the retail sales tax from their members/customers.”

Flexcar notified its customers of the impending tax in its September newsletter. The company’s Seattle general manager, Jamie Cheney, organized a petition online urging Washington state and King County decision makers to exempt the company from local rental car taxes.

Flexcar’s growth has accelerated recently. During the last three weeks of August, so many customers signed up for Flexcar that new members across the U.S. had to wait up to two weeks to receive access keys to the company’s fleet, rather than the customary couple of days, according to the Seattle Post-Intelligencer.

Ironically, King County -- which helped start Flexcar in 1999 -- will receive some of the proceeds of the new 9.7 percent tax. The county levies a one-percent tax on car rentals, which benefits its general fund. A little more than two percent also goes to the county in order to pay for Safeco Field, and 0.8 percent goes to the Regional Transit Authority. The state levies a 5.9-percent tax on car rentals.

King County Executive Ron Sims insisted that car sharing was not car renting and said Thursday that the county would go to the legislature to exempt car-sharing companies from the rental car tax.

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