Flexcar must pay rental tax

Members of Flexcar, the national car-sharing company that started in Seattle, will now have to pay the state and King County car rental tax, according to the state Department of Revenue.

In an advisory, sent out in July, the Revenue Department said, "carsharing organizations are providing rental cars and are required to collect the rental car tax, along with the retail sales tax from their customers."

For the average Flexcar member, that will add about a dollar to an hourly $10 charge when Flexcar must begin to collect the 9.7 percent state and King County car-rental tax in October. Flexcar operates only in King County in Washington state. It already pays the state and local sales tax which, together with the car-rental tax, is 18.6 percent.

Flexcar spokesman John Williams said the company started operating in Seattle in 2000 and this is the first time the car-rental-tax issue has come up. "Our issue is that Flexcar is a car-sharing company, not a car rental company," he said. "Over 90 percent of the users are Seattle residents."

He said the car-rental tax, which went into effect in the state in 1993, targets visitors, and local taxpayers shouldn't be penalized for joining a car-sharing program.

Further, he said, Flexcar gets cars off the street and encourages transit use, something that should be rewarded, not punished. "This will hit members in their pocketbook," he said. "The numbers add up. These are people who already live here and already pay taxes."

Mike Gowrylow, spokesman for the Department of Revenue, said regardless of Flexcar's mission, it is a car rental business and should be taxed as one, just as any car-sharing business would be.

"We need to be collecting the tax," he said. As for it targeting local residents, Gowrylow said, there's no way to distinguish who rents cars from the state-ordered tax. He added that any company, like Flexcar, can be billed for any taxes they should have been collecting for the past three years.

The state tax is 5.9 percent and the county tax brings it up to 9.7 percent. Last year the state collected $22 million from the tax; King County collected $14 million.

According to the Department of Revenue, about 70 companies now pay the rental-car tax; the only exemptions are taxis and cars loaned to customers of auto-repair businesses.

Williams said Flexcar has about 20,000 members in King County and the new tax will be hard on the company. It is circulating a petition to state and King County lawmakers asking that Flexcar be exempt from the tax.

Flexcar could either petition the Department of Revenue for an exemption from the tax, or could ask the Washington Legislature to put an exemption into law.

Susan Gilmore: 206-464-2054 or sgilmore@seattletimes.com

Information in this story, originally published on September 7, 2007, was corrected on September 15, 2007. The state last year collected $22 million from the car-rental tax, and King County collected another $14 million. An incorrect number was included in a story Friday about Flexcar and the tax.