Reprieve's over: Flexcar users will start paying rental tax next week

Flexcar, the car-sharing company, must begin collecting the car rental tax beginning Nov. 1.

Those who use Flexcar will pay a 9.7 percent tax, said Flexcar spokesman John Williams. Now it's up to the state Legislature to determine whether car-sharing organizations, like Flexcar, should be exempt from the tax.

"We exhausted any possible remedies," said Mike Gowrylow, spokesman for the state Department of Revenue. "There was no administrative way to exempt them. We'll work with the Legislature for legislation that would explicitly do that."

Shortly after the state announced the tax in September, Gov. Christine Gregoire sent a letter to the department suggesting that Flexcar shouldn't be taxed. "I believe our tax code should act as an incentive, not a hindrance, to innovation," she wrote.

Because of that, the state in October agreed to defer the tax.

Flexcar complained that the tax was unfair because it was targeting local residents, who already pay taxes, and that it punishes a company trying to get cars off the road and people onto buses.

But the state argued that Flexcar is a car-rental business and, as one, should be taxed.

For the average Flexcar member, the tax will add about a dollar to an hourly $10 charge. Flexcar members already pay the state and local sales tax which, together with the car-rental tax, totals 18.6 percent. Almost all the cars are in Seattle, and there are about 20,000 members.

"We are disappointed that we were not able to fully resolve the issue with the Department of Revenue," said Williams in a statement. "While we were unable to achieve an administrative fix to this issue, we are already working with the department and members of the Legislature on a legislative solution and are optimistic about a favorable outcome."

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