Hawaii Taxes and Penalties are Coming to Get Peer-to-Peer Rental Car Businesses

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By: Jeff Tadashi

Entrepreneurial Hawaii Residents have taken advantage of the rental car shortage to make some money following the pandemic’s harsh economic realities.  The money might be short lived because Hawaii taxes are coming for that income.

The pandemic created a rental car shortage in Hawaii.  The root of the problem is two-fold. When the pandemic hit, Hawaii imposed the nation’s strictest travel rules.  Tourism dried up. Rental companies like Hertz and Budget started to sell off portions of their fleet and ship some of their inventory to the mainland, where they could still make money.  A national shortage of semi-conductor computer chips is making it difficult for car manufacturers to put new cars on the market.  In turn, rental car companies are now struggling to increase their fleets.  For those lucky enough to land in Hawaii with a rental car reservation, daily rates are sky high — in some cases up to $700.  The Office of Consumer Protection is looking into the possibility of rental car price gouging related to the sharp spike in car rental rates, but it has not yet reached a conclusion.

Hawaii residents seeking to restore lost income have somewhat filled the rental car void by renting out their personally owned automobiles to tourists.  The Hawaii Department of Taxation has been boosting its monitoring of peer-to-peer car rentals, most namely of Turo, an app which people use to rent their cars to others. 

The Department of Taxation says that it wants to make sure that renting personally owned cars is really fair with any commercial car rental operation.  The state requires Turo to pay rental car taxes while the person who owns the car must pay a half-a-percent wholesale rate.  Retail car buyers in Hawaii usually pay a 4 percent general excise tax, but Turo does not pay this amount because there is a front-end tax loop hole.  The Department of Taxation wants to close this front-end loophole so as to bring in more revenue.

The Honolulu Department of Planning and Permitting is also cooperating with the Department of Taxation.  Some residents have complained to officials after seeing their streets become parking lots for peer-to-peer rental vehicles.  Tax department investigators check out reported violations and take pictures of cars and then compare the pictures with Turo.  If they find matches, the reports are filed with Honolulu Department of Planning and Permitting.  Peer-to-peer operators discovered without the proper permits or violating zoning rules for the exceeding the reasonable number of personally owned cars in common areas are ticketed.   

Hawaii airport officials have also ticketed peer-to-peer operators in Honolulu and Maui.  Turo is trying to obtain parking permits from airports around the country, including airports in Hawaii.  It already has such arrangements with airports in Denver and Tampa, he said.

Hawaii is at least $880 million short in annual operating revenue with no real way in sight to making this delta.   Hawaii Democrats have a long history of turning inward to tax the people; unfortunately, their tactic has led us to having $97 billion worth of unfunded liabilities. 

Democrat tactics on peer-to-peer car rentals though smacks of a larger, more ominous design, which is to remain in power through protecting their base.  In this state, the Democrat base consists of unions which represent up to 35 percent of Hawaii workers.  Some of these same unions are now putting pressure on Democrats nationwide to halt gig workers – including peer-to-peer car rentals.   It was these same unions, now putting pressure on private car rentals, that stopped in Hawaii Superferry in 2009. 

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With the Superferry in operation, hotel, airline, and rental car companies stood to lose a lot of money on the other islands.  With Hawaii judges and lawyers in their pockets, the unions united behind a banner of environmental impact requirements and litigation designed to drive the Superferry out of business.   Ferry operations were suspended in March, 2009 after the Hawaii Supreme Court ruled that a state law allowing the Superferry to operate without a second complete environmental impact statement was unconstitutional.  The company went bankrupt as a result of these actions which prevented service in Hawaii. Both ships were abandoned and sold to U.S. Maritime Administration in 2010. The United States Navy eventually purchased both craft for a total of $35M, a small fraction of their original $180M costs.

Any new business ideas, like the Superferry and peer-to-peer car rentals, that occur in Hawaii is a threat to the Democrat and union establishment here.  They will deliberately target each innovation through taxes, penalties, and litigation until they quit or submit to “pay-to-play” demands.