Only three local governments had enacted car rental taxes at the beginning of 2004, according to Washington-based nonprofit tax watchdog group the Tax Foundation. In less than two years, that had grown to 44, and the trend shows no sign of stopping.

The taxes aren't limited to municipal governments, either. State and federal taxes, transportation fees and utility fees all stack up to a maddening situation for travel managers, Iwamoto said. In total, there are 83 enacted car rental excise taxes in 39 states and Washington and 43 proposals under discussion in 29 states, according to Enterprise Rent-A-Car, which monitors all the proposals. Enterprise estimated that since 1993, governments have levied more than $3.2 billion in such taxes.

Some cities have developed worse reputations for this than others. Houston is one of the worst, where the added on fees actually are higher than the car rental rate, Iwamoto said, but NBTA executive director Bill Connors said the entire state of Texas is notorious for its high fees. On average, taxes at the 100 busiest airports even one year ago made up more than one-quarter of the overall cost of renting a car, according to a study by Travelocity (BTN, March 29, 2005), with Dallas and Phoenix also joining Houston with fees surpassing the base rate. Other expensive cities include two other major Texas cities—Austin and San Antonio—along with Kansas City, Baltimore, Tulsa, Cleveland and Albuquerque.

However, Connors said the problem is so widespread that it cannot be pinpointed to any particular region. Some out-of-the-way municipalities also have high rates. Davis County in Utah, for example, has levied more than $2.2 million on a short-term rental tax since 1999, on top of a statewide tax in Utah of 2.5 percent—while some of the larger cities are not so bad, he said.

"What has gotten crazy about it is not only the tax rates but also what the revenues are being used for: culinary schools, kids' soccer fields," Connors said. "It's really frustrating."

Both the car rental companies and business travelers have begun fighting back, however. NBTA and all the major rental companies recently joined forces to speak out against the tax situation, and NBTA is working to get its members involved, too (BTN, May 15). The aim is to notify members whenever a tax issue arises in their city so they can mobilize to fight them.

The erroneous assumption by the governments, Connors said, is that they are enacting a tax on out-of-towners. Companies based in the city, however, account for much of the business car rentals in such markets as Dallas. "A lot of the local rentals are done by big corporations within their corporate headquarters," he said. "This is a tax on their biggest employers."

Iwamoto said the actions could be effective and are long overdue. He acknowledged, however, that the breadth of the tax problem will make it difficult to fight.

"The sad part is: You're subject to the state, city and federal government, and they all have the right to say they want a piece of this," Iwamoto said. "It's not like you can just go to one place and say, 'Let's take care of it here.'"

Even so, NBTA has claimed a part in one victory. Florida Gov. Jeb Bush last month vetoed a transportation bill that would have doubled its $2-per-day surcharge on rental cars. Both NBTA and car rental companies spoke out against the bill while it was under discussion in Tallahassee.

In his veto, however, Bush addressed tourism concerns and did not directly mention issues related to business travel.

"While I appreciate the inclusion of voter approval as a prerequisite to implementing the new tax, these taxes will be paid disparately by tourists visiting Florida, consequently creating taxation without representation on a large scale," Bush wrote in his veto of the bill. "Philosophically, I cannot support this."

 
Source: BTN Online