Texas Proposal to Tax Peer-to-Peer Car Sharing is Creative but Misses the Mark

Like other states, the Texas legislature is examining a proposal to extend the state’s 10 percent rental car excise tax onto peer-to-peer car-sharing firms. The proposal is creative in trying to resolve how sales taxes should apply to vehicles sold and used in peer-to-peer car-sharing arrangements but suffers from attempting to further extend an inefficient tax applied to car rental companies. Texas levies a 10 percent state excise tax on car rentals. Additionally, municipalities may levy a local-option rental car excise tax of up to 6 percent to fund local stadiums, convention centers, and tourist development. There are restrictions on how localities can use the rental car excise tax revenue under Section 334 of Texas’ Local Government Code. Texas House Bill 2872 would require peer-to-peer car-sharing firms—labeled “marketplace car rental providers” in the bill—to collect and remit the Texas excise tax on car rentals on behalf of private car…

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