HVS 2014 AUTO RENTAL TAX STUDY *

Transcription

1 REVISED AUGUST 2014 PRICE $350 HVS 2014 AUTO RENTAL TAX STUDY * Thomas Hazinski, MPP Managing Director Daniel Wonk Analyst * Revised from the previous July 2014 report to reflect new information on tax rates in San Jose and Birmingham HVS Convention, Sports, & Entertainment 205 W. Randolph, Suite 1650, Chicago, IL USA

2 Abstract The HVS 2014 Auto Rental Tax Study is an examination of the effective tax rates on motor vehicle rentals at the top 100 largest airports as measured by enplanements. The study ranks the tax rates and breaks down its analysis among several vehicle types. Introduction This analysis of motor vehicle rental taxes provides a comparison of the taxes imposed at the 100 largest airports in the United States. Auto rentals are typically subject to multiple taxes ranging from state sales taxes, city and county taxes, and taxes levied by special districts. Motor vehicle rental taxes are imposed as either ad valorem taxes (levied as a percentage of value) applied to the base cost of the rental or as fixed fees or surcharges that are added to the base cost. This study accounts for all the taxes imposed on a uniform set of rentals of economy, mid-size, and luxury cars. The results provide an apples-to-apples comparison of the tax burden in major U.S. cities. Methodology HVS study of motor vehicle rental taxes and fees analyzes rentals at the United States 100 largest airports as measured by enplanements. 1 We chose to analyze rentals at airports because they generate most of the vehicle rentals in any given metropolitan area and often apply the highest number of taxes on vehicle rentals. Motor vehicle rental tax rates may vary depending on the type of vehicle, the length of the rental period, and the amount of rental charges. To accurately compare tax rates across various airports, HVS gathered data on auto rentals for a 23-hour period (Monday-to-Tuesday) for economy, mid-size, and luxury vehicle rentals. 2 In cases where mid-size vehicles were not available, full-size rentals were substituted. The data collected includes the pre-tax cost of vehicle rental, the name and nominal tax rate of each tax or fee applied to the rental, and the amount of taxes charged for each tax. We calculated the effective tax rate of each rental by dividing the estimated total taxes by the pre-tax cost of the rental. In addition to state, city, county, and district taxes many airport locations levy charges that are calculated into the base cost of the rental. One grey area of concern in this analysis is often called a Concession Recovery Fee or Concession Recoup Fee. This charge, passed on to the renter of the vehicle, allows the auto rental agency to recover the licensing fees that they pay the airport and state to operate at that location. After recovery of the license fees, the remaining revenue may flow to a state or local government. For the purposes of this study, we did not classify concession fees as taxes because the revenues flow to the auto rental company and in part offset its operating costs. We excluded concession recovery fees in all cases in which the fee is added to the base rental cost and subject to taxation. 3 While the legal incidence of the tax may fall on the consumer, the economic burden of auto rental taxes is shared by auto rental agencies and their renters. The auto rental market is competitive, and in a competitive 1 This list was generated by the Federal Aviation Administration 2013 CY Passenger Boarding statistical analysis. 2 We gathered data from the reservations system of the National Car Rental agency for rentals between July 21 st and September 1 st, See Betsy Wade, Car Rental Fees: Adding Them Up, The New York Times, April, 19, 1998, for an industry perspective on this issue. HVS 2014 AUTO RENTAL TAX STUDY PAGE 2

3 market, the tax burden is shared between buyer and seller. An auto rental tax raises the price of auto rentals, but depending on the elasticity of the supply and demand for the vehicle, the auto rental agency may not be able to increase rates by the full amount of the tax. Since the elasticity of supply and demand changes depends on market conditions, the true incidence of an auto rental tax is subject to constant fluctuation. This study makes no attempt to estimate the economic incidence of auto rental taxes. Unfortunately, data on average annual auto rental rates are not available. The data presented in this study provide a snapshot of the cost of auto rentals and the effective tax rates for the analyzed period. These rates can vary based on the day of week and time of year in addition to the demand in the location of the rental and the availability of the vehicle. Highest and Lowest Effective Tax Rates The following figure shows the cities that levy the ten highest and ten lowest effective tax rates for mid-size vehicles. TOP TEN EFFECTIVE TAX RATES FIGURE 1 LOWEST TEN EFFECTIVE TAX RATES San Francisco Chicago (O'Hare) Chicago (Midway) Little Rock Minneapolis/St. Paul Spokane Las Vegas New York City (JFK) New York City (LaGuardia) Phoenix Kahului Columbus Dayton Akron Boise Des Moines Grand Rapids Louisville Lihue Birmingham 0% 5% 10% 15% 20% 25% 0% 5% 10% 15% 20% 25% Source: National Car Rental Reservation System and HVS San Francisco International Airport has the highest effective tax rate with 24.2%. Birmingham/Shuttlesworth International Airport has the lowest effective tax rate of 2.1%. Average Rental Costs and Taxes & Fees The following figure shows the average pre-tax rental costs of economy, mid-size, and luxury cars as well as the average taxes and fees associated with their reservations for the sample of rentals analyzed in this report. HVS 2014 AUTO RENTAL TAX STUDY PAGE 3

4 Luxury FIGURE 2 AVERAGE RENTAL COSTS AND TAXES $ $20.87 Mid-size Economy $ $ Average Pre-Tax Cost of Rental $15.41 $14.30 Average Taxes Sources: National Car Rental Reservations System and HVS As one would expect, economy vehicles are the least expensive and luxury vehicles are the most expensive rentals. But, the difference between economy and mid-size models total rental cost is substantially less than the difference between mid-size and luxury rental costs. Distribution of Effective Tax Rates at the 100 Largest Airports The figure below shows the distribution of the effective tax rates and their minimum, maximum, and average. FIGURE 3 DISTRIBUTION OF EFFECTIVE TAX RATES AT THE LARGEST 100 AIRPORTS ON MID-SIZE AUTO RENTALS 30% 25% 20% Maximum = 24.2% Average = 12.8% Minimum = 2.1% 15% 10% 5% 0% Sources: National Car Rental Reservations System and HVS Effective tax rates exceed 20% at seven airports. The average effective tax rate centers around 12.8%. Effective tax rates range between 5% and 20% at most airports. Effective tax rates may vary within cities that have more than one airport serving the market because the costs of rentals vary. For example, Chicago O Hare International Airport is the second highest rated airport with a 22.9% effective tax rate while Midway International Airport has an effective tax rate of only 21.9%. Number of Taxes All of the top 100 busiest airports in the United States levy motor vehicle rental taxes. Most commonly the distribution ranges from between one to three taxes. HVS 2014 AUTO RENTAL TAX STUDY PAGE 4

5 FIGURE 4 PERCENTAGE OF AIRPORTS Percentage of Airports Number of Taxes One 20.0% Two 44.0% Three 31.0% Four 5.0% Sources: National Car Rental Reservations System and HVS Types of Taxes Most cities allocate the revenue from taxes and fees on motor vehicles to a variety of governmental funds, including the airport enterprise funds. Most airports impose facility charges that support the capital development of auto rental facilities at the airport. Revenues may be used for general government operations and other revenue funds that support the development of convention centers, sports stadiums and arenas, and other public assembly venues. FIGURE 5 SOURCES OF TAXATION State Tax 76.4% Local County or City Tax 10.1% Special District Tax 13.5% Sources: National Car Rental Reservations System and HVS With 76.4%, State Taxes are the most consistently represented taxes, and include general sales and use tax. Local County or City Taxes are leveled on the local level and are often allocated to community capital development programs. Special District Taxes are levied as a special category in which the tax rate may be different or additional to the Local County or City Tax. Conclusion Auto rentals are subject to higher effective tax rates than most commodities and services. For example, the average effective rate on mid-size auto rentals of 12.8% compares to an average effective rate of 13.4% in hotel room rentals 4 and on general sales taxes that rarely exceed 10%. Auto rental taxes are often identified as revenue sources for large-scale community development projects like convention centers, sports stadiums, and public transportation systems that would otherwise require alternative funding. Since auto rental taxes are passed on to consumers who are visitors, they for the most part do not affect local residents and are less likely to meet with local opposition. 4 HVS 2013 Lodging Tax Report HVS 2014 AUTO RENTAL TAX STUDY PAGE 5

6 Effective Tax Rates at 100 Largest Airports The figure below ranks the top 100 largest airports in the United States by their effective tax rates from largest to smallest. Note on Revisions Included this Report The July 2014 publication of this study listed the effective tax rates of San Jose International Airport and Birmingham/Shuttlesworth International Airport as 0%. Those figures have been changed to 12.3% (San Jose International) and 2.1% (Birmingham/Shuttlesworth International). HVS 2014 AUTO RENTAL TAX STUDY PAGE 6

7 EFFECTIVE AUTO RENTAL TAX RATES AT THE 100 LARGEST US AIRPORTS Rank* City Airport Economy Tax Mid-Size Tax Luxury Tax 1 San Francisco San Francisco International 25.1% 24.2% 24.8% 2 Chicago O'Hare International 23.0% 22.9% 21.3% 3 Chicago Midway International 22.4% 21.9% 21.6% 4 Little Rock Clinton National 21.5% 21.5% 21.5% 5 Minneapolis/St. Paul Minneapolis/St. Paul International 21.4% 21.4% 17.2% 6 Spokane Spokane International 20.9% 20.5% 19.5% 7 Las Vegas McCarran International 20.1% 20.1% 20.1% 8 New York City LaGuardia 19.9% 19.9% 19.9% 9 New York City JFK International 19.9% 19.9% 19.9% 10 Phoenix Phoenix Sky Harbor International 20.0% 19.8% 18.7% 11 Reno Reno/Tahoe International 19.7% 19.7% 19.7% 12 White Plains Westchester County 18.4% 18.4% 18.4% 13 Anchorage Ted Stevens Anchorage International na 18.0% na 14 Seattle/Tacoma Seattle/Tacoma International 17.2% 17.2% 17.2% 15 Portland Portland International 17.0% 17.0% 17.0% 16 Indianapolis Indianapolis International 17.0% 17.0% 17.0% 17 El Paso El Paso International 16.9% 16.9% 16.1% 18 San Antonio San Antonio International 16.5% 16.5% 16.1% 19 Salt Lake City Salt Lake City International 16.3% 16.4% 16.4% 20 Phoenix Phoenix/Mesa Gateway 16.3% 16.3% 16.3% 21 Houston George Bush 16.2% 16.2% 16.0% 22 Houston William P. Hobby 16.1% 16.1% 15.8% 23 Austin Austin Bergstrom International 16.0% 16.0% 16.0% 24 Dallas/Fort Worth Dallas/Fort Worth 16.0% 15.9% 15.8% 25 Omaha Eppley Airfield 15.9% 15.6% 17.5% 26 Tucson Tucson International 15.7% 15.1% 13.4% 27 Albuquerque Albuquerque International Sunport 15.1% 15.0% 14.0% 28 Buffalo Buffalo Niagara International 14.8% 14.8% 14.8% 29 Denver Denver International 14.6% 14.6% 14.7% 30 Greensboro Piedmont Triad International 14.6% 14.5% 14.5% 31 Memphis Memphis International 14.5% 14.5% 14.5% 32 Tulsa Tulsa International 14.5% 14.5% 14.5% 33 Charlotte Charlotte Douglas International 14.5% 14.5% 14.5% 34 Raleigh Raleigh/Durham International 14.5% 14.5% 14.5% 35 Providence Theodore F. Green Memorial State 14.4% 14.4% 14.4% 36 Oklahoma City Will Rogers World 14.4% 14.4% 14.4% 37 Albany Albany International 14.0% 14.0% 14.0% 38 Rochester Greater Rochester International 14.0% 14.0% 14.0% 39 Syracuse Syracuse Hancock International 14.0% 14.0% 14.0% 40 Myrtle Beach Myrtle Beach International 14.5% 13.6% 14.5% 41 Milwaukee General Mitchell International 13.6% 13.6% 13.6% 42 Nashville Nashville International 13.5% 13.5% 13.5% 43 Charleston Charleston International 13.5% 13.5% 13.5% 44 Cleveland Cleveland Hopkins International 13.5% 13.4% 13.1% 45 Hartford Bradley International 12.8% 12.7% 12.7% 46 Knoxville Mcghee Tyson 12.5% 12.5% 12.5% 47 San Jose San Jose International 12.3% 12.3% 12.3% 48 Philadelphia Philadelphia International 12.0% 12.0% 12.0% 49 Washington Washington Dulles International 12.0% 12.0% 12.0% 50 Los Angeles Los Angeles International 11.8% 11.8% 11.8% *Airports are ranked by the mid-size effective tax rate. **Effective tax rate for a 23- hour period (Monday to Tuesday). Sources: National Car Rental Reservation System and HVS HVS 2014 AUTO RENTAL TAX STUDY PAGE 7

8 EFFECTIVE AUTO RENTAL TAX RATES AT THE 100 LARGEST US AIRPORTS (CON T) Rank* City Airport Economy Tax Mid-Size Tax Luxury Tax 51 Baltimore Baltimore/Washington International 11.5% 11.5% 11.5% 52 Boston Logan International 11.9% 11.5% 10.1% 53 Newark Newark Liberty International 11.5% 11.5% 11.5% 54 Burbank Bob Hope 11.3% 11.3% 11.3% 55 Oakland Oakland International 11.3% 11.3% 11.3% 56 Long Beach Long Beach 11.3% 11.3% 11.3% 57 Palm Springs Palm Springs International 11.3% 11.3% 11.3% 58 Kansas City Kansas City International 11.4% 11.3% 11.0% 59 Dallas Dallas Love Field 11.2% 11.2% 11.1% 60 Greer Greenville/Spartanburg International 11.0% 11.0% 11.0% 61 Pittsburgh Pittsburgh International 11.0% 11.0% 11.0% 62 Pensacola Pensacola International 11.1% 10.9% 9.5% 63 Miami Miami International 11.1% 10.9% 8.2% 64 New Orleans Louis Armstrong New Orleans International 10.7% 10.8% 10.7% 65 Wichita Wichita Mid-Continent 10.7% 10.6% 10.6% 66 Fresno Fresno Yosemite International 10.6% 10.6% 10.6% 67 Madison Dane County Regional 10.5% 10.5% 10.5% 68 Ontario Ontario International 10.3% 10.4% 10.4% 69 Kalaoa Kona International at Keahole 10.8% 10.4% 6.8% 70 San Diego San Diego International 10.3% 10.3% 12.4% 71 Anaheim John Wayne 10.3% 10.3% 10.3% 72 Sacramento Sacramento International 10.3% 10.3% 10.3% 73 Orlando Orlando International 10.2% 10.0% 8.2% 74 Richmond Richmond International 10.0% 10.0% 10.0% 75 Norfolk Norfolk International 10.0% 10.0% 10.0% 76 Portland Portland International Jetport 10.0% 10.0% 10.0% 77 Washington Ronald Reagan Washington National 10.0% 10.0% 10.0% 78 Atlanta Hartsfield/Jackson Atlanta International 10.0% 10.0% 10.0% 79 Savannah Savannah/Hilton Head International 10.0% 10.0% 10.0% 80 Tampa Tampa International 10.4% 9.8% 8.3% 81 Sanford Orlando Sanford International 9.3% 9.1% 7.6% 82 Cincinnati Cincinnati/Northern Kentucky International 9.0% 9.0% 9.0% 83 Manchester Manchester 9.0% 9.0% 9.0% 84 West Palm Beach Palm Beach International 9.1% 8.9% 7.6% 85 St. Louis Lambert-St. Louis International 8.9% 8.9% 8.9% 86 Jacksonville Jacksonville International 8.9% 8.8% 8.4% 87 Honolulu Honolulu International 8.8% 8.6% na 88 Fort Lauderdale Fort Lauderdale/Hollywood International 8.2% 8.2% 7.1% 89 Detroit Detroit Metropolitan Wayne County 8.0% 8.0% 8.0% 90 Fort Myers Southwest Florida International 8.0% 7.9% 7.6% 91 Kahului Kahului 7.9% 7.8% na 92 Columbus Port Columbus International 7.5% 7.5% 7.5% 93 Dayton Dayton International 7.3% 7.3% 7.3% 94 Akron Akron/Canton Regional 6.8% 6.8% 6.8% 95 Boise Boise 6.0% 6.0% na 96 Des Moines Des Moines International 6.0% 6.0% 6.0% 97 Grand Rapids Gerald R. Ford International 6.0% 6.0% 6.0% 98 Louisville Louisville International 6.0% 6.0% 6.0% 99 Lihue Lihue 5.9% 5.8% 5.4% 100 Birmingham Birmingham/Shuttlesworth International 2.2% 2.1% 1.5% *Airports are ranked by the mid-size effective tax rate. **Effective tax rate for a 23- hour period (Monday to Tuesday). Sources: National Car Rental Reservation System and HVS HVS 2014 AUTO RENTAL TAX STUDY PAGE 8

9 About HVS About the Authors HVS is the world s leading consulting and services organization focused on the hotel, mixed-use, shared ownership, gaming, and leisure industries. Established in 1980, the company performs assignments each year for hotel and real estate owners, operators, and developers worldwide. HVS principals are regarded as the leading experts in their respective regions of the globe. Through a network of more than 30 offices and 450 professionals, HVS provides an unparalleled range of complementary services for the hospitality industry. Thomas Hazinski is the managing director of HVS Convention, Sports, & Entertainment Facilities Consulting in Chicago, Illinois. His consulting practice is dedicated to the market and financial analysis of public assembly facilities. Mr. Hazinski has over 20 years of experience in the public policy arena, as both a public official and a consultant. He specializes in providing economic and financial research to public agencies involved in economic development initiatives. Before starting his consulting career, Mr. Hazinski served in several positions for the City of Chicago, including assistant budget director. Mr. Hazinski holds a master s degree in public policy from the University of Chicago s Harris School of Public Policy. thazinski@hvs.com Superior Results through Unrivalled Hospitality Intelligence. Everywhere. HVS CONVENTION, SPORTS, & ENTERTAINMENT FACILITIES CONSULTING has performed hundreds of assignments around the world analyzing the feasibility of convention and conference centers, headquarters hotels, arenas, stadiums, event and civic centers, performing arts facilities, hospitality developments, tourism attractions, water parks, entertainment/ urban development districts and museums. Our service delivery methods set the industry standard with techniques based on sound economics and rigorous analytical methods. Daniel Wonk holds a Bachelor s Degree in Religion from the University of Puget Sound He serves as an analyst for HVS Convention, Sports, & Entertainment Facilities Consulting. HVS Convention, Sports, & Entertainment 205 W. Randolph, Suite 1650, Chicago, IL USA