The National Business Travel Association is uniting suppliers and buyers as it battles the explosion of car rental taxes across the United States.
All of the major car rental companies recently sent representatives to meet with the NBTA and discuss the heavy tax burden they face from local municipalities and states, which see the industry as an easy mark for tax money, often for economic development projects. However, the NBTA wants such municipalities to know that more than the eight largest car rental brands oppose such taxes, said NBTA executive director Bill Connors.
"We're going to rally our chapters around the country when one of these proposals come up," Connors said. "We'll get members excited about it and fight it at the local level, a kind of a tax SWAT team."
State and local taxes on rental cars have been on the rise for years, but recently they have been increasing at a geometric rate, said Neil Abrams, president of Purchase, N.Y.-based Abrams Consulting Group. A Travelocity study last year showed that tax add-ons averaged about 26 percent of the whole rental cost at the 100 busiest U.S. airports
(BTN, March 29, 2005) and the problem since has worsened.
Two of the most recent proposals are in Florida and Charlotte, N.C. Charlotte City Council last month voted for a 3 percent tax increase on car rental rates, and Florida is considering doubling its $2-per-day surcharge on car rentals, a move that Connors testified against in Tallahassee last month. Enterprise Rent-A-Car has compiled a spreadsheet to watch more than 150 such issues around the country.
The taxes often go to fund such local projects as sports stadiums, arts centers or others designations of local interest. In some cases, they go to public transportation systems, so car rental companies are in effect subsidizing their competitors.
"It's a situation that's getting out of hand, the idea that you can tax out-of-towners for projects that should be paid for out of the general revenue," said Richard Broome, Hertz Corp. vice president of corporate affairs. "It's not fair for our customers to be paying the bill for somebody else's pet project. If these are such good ideas, they should be paid for by the general public."
States and municipalities mistakenly assume that these taxes don't affect residents, Connors said. Businesses, however, spend a large portion of their rental car dollars within their headquarters hometown, with tasks such as accommodating visiting clients and employees. An NBTA survey of members showed 62 percent said that 40 percent or more of their car rental spend was spent locally, Connors said, meaning the tax turns out to be on local commerce.
Abrams said a strong coalition of travel buyers should be a more effective way to battle car rental tax proposals, rather than leaving it to the major rental brands, because local politicians will be hearing from their own constituents instead of a national company with headquarters thousands of miles away.
To that same end, the American Car Rental Association—which does not include any of the major car rental brands but has numerous small local car rental companies as members—also is fighting the measures.
"If all they're hearing from is the rental industry, the attitude is: 'Guys, get over it,' " Abrams said. "It is important to have a broader constituency of opponents who are rooted in these communities. This means travel managers getting their CEO or CFO involved."
The fact that the major brands, which do not coexist in any kind of industry association, have united on this also is significant, Abrams said. Rental cars still remain among the cheapest of travel options, but the influx of taxes could mean other options such as taxis, trains and car services become the buyer's choice over rental cars.
NBTA's battle on taxes is not limited to rental cars, Connors said. More than 50 suppliers and buyers gathered in Washington recently for the NBTA's legislative summit, which focused on a proposed air security increase. NBTA officials noted such travel taxes exceed the rates of "sin taxes" imposed on alcohol and tobacco.
From the buyers' perspective, those municipalities instituting such taxes might ultimately hurt their revenue from business travel, Connors said. Many travel buyers who are planning conventions and meeting are now including questions about taxes in their request for proposals.
"States like Florida heavily rely on tourism, conventions and meetings," he said. "We see them going down this way as a step in the wrong direction for that state."