Flexcar customers must pay car-rental tax

Flexcar, the car-sharing company, must begin collecting the car-rental tax beginning Nov. 1, according to the state Department of Revenue.

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

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

Carlton Findley joined Flexcar a week ago as a way to get to doctor's appointments. "I started riding the bus full time to work in January, and a big inconvenience was needing to get somewhere quickly during business hours," he said. "Flexcar is a unique and innovative service that makes a real difference for people in Seattle, including me. I think it is very unfair to pay nearly 20 percent tax on a service that truly is on the front lines of efforts to reduce traffic and greenhouse-gas emissions."

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

But the state argued that Flexcar, a for-profit business, is a car-rental business and should be taxed. The state last year collected $22 million from the car-rental tax, and King County collected another $14 million.

For the typical Flexcar member, the tax will add about $1 to an hourly $10 charge. Together, the sales tax and car-rental tax total 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," Williams said 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