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Business/Economy

Alaska sues Turo, an Airbnb-style firm for car rentals, over tax

Alaska is suing Turo, a website that allows people to advertise and rent out their cars, after the company refused to provide records the state needs to determine the tax liability for the company and car owners.

The San Francisco-based firm operates somewhat like Airbnb, providing a web platform where people can rent cars from individuals, bypassing large companies.

In the case, filed in March in Juneau Superior Court, Turo argues it's not a car-rental firm with a fleet of vehicles. It maintains it's not subject to the state's vehicle-rental tax, nor are the Alaskans renting out their cars, called "hosts."

The state's lawsuit says both parties owe the tax. Turo is also supplying the product because it provides the insurance and receives the rental fee from the customer, keeping a 25 percent cut and passing the rest to the host, the state says in a May 25 filing signed by Robert Schmidt, an assistant attorney general.

The case contemplates questions about Alaska's ability to regulate e-commerce firms that impact traditional business models, such as Uber, challenging cab companies, or Airbnb, challenging hotels.

Turo believes the state's effort is unjust, according to a statement emailed Thursday by Christin Di Scipio, a Turo spokeswoman. The company said it's helping Alaskans, not giant rental companies, to supplement their incomes.

"The Department of Revenue's desire to tax Alaska residents who share their cars with their neighbors, as if they were multibillion-dollar rental car companies, is unfair and is no doubt the direct result of lobbying" by large car-rental companies, Turo said.

The Alaska Tax Division in December, getting nowhere with earlier requests, issued a subpoena to obtain Turo's financial records in Alaska back to 2009, said Ken Alper, division director.

Turo refused. The state wants the court to enforce the subpoena.

The division doesn't know how much money the rentals have generated over the years, said Alper.

There's no easy way to find the hosts, because they don't include their last name on the site, he said. The state has to rent a car to get that information, he said.

"If you're Hertz, we know about you," Alper said. "You register with us and pay your taxes. Turo is invisible to us because we don't know the names, let alone contact information, for people renting the cars."

The state is owed money for its 10 percent tax on passenger vehicles, Alper said. "We're losing something, but it's hard to tell how much," he said.

Lots of Alaskans are renting cars out through Turo, including at least dozens in Anchorage alone, the state's May 25 filing argues.

Through correspondence with Turo, the state knows the company has enabled "at least tens of thousands of dollars" of transactions, the filing says.

If not for Turo's website, the rentals would not have happened, the state says.

Turo claims state law doesn't allow the Tax Division to "burden a third party, not liable for any tax, simply as a shortcut to obtaining identifying information about possible taxpayers," according to a May 21 filing signed by attorney Leon Vance, of Faulkner Banfield in Juneau.

Turo added: "Turo also does not concede, and in fact disputes, that its users are subject to the Vehicle Rental Tax."

Anchorage, which assesses an 8 percent vehicle-rental tax atop the state tax and has similar challenges finding Turo users, is watching the case, said Blyss Cruz, a manager in Anchorage's Treasury Division.

The city intends to collect any taxes it's owed, which under Anchorage code would be collected from the individuals renting out the cars, not Turo, she said.

"The city has the ability to coordinate with the state regarding rental vehicles," she said. "We're waiting to see the outcome of the state's case" to determine next steps.

Following a May 29 hearing, Louis Menendez, the judge, said he would consider the matter.

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