Ride share companies accused of trying to bypass car rental laws

The debate over what constitutes a car rental business and a ride sharing venture continues to be a hot button issue across the U.S. Legislators in several states are pondering over how the two components in the transportation industry should be treated.

In one corner are car rentals like Enterprise, Avis and Hertz that argue laws affecting their business should equally be applicable to ride-sharing competitors like Lyft, Turo and Uber. Meanwhile, the other camp is just as adamant that since their clientele don’t rent cars but are provided a service taking them to predetermined destinations, their companies need to be exempt.

At least 20 states are wrestling with the issue, especially when it comes to defining ride-sharing and whether such a service is similar to what’s being offered by conventional car rental firms. Emerging ride-sharing players argue their business model does away with the rental aspect of their function, except when it comes to their drivers.

Last August, for an undisclosed fee, Lyft offered its drivers the option to rent vehicles from its Express Drive program, which has up to 600,000 cars in its fleet nationwide. Uber enables its drivers to get into its “vehicle solutions” program, by charging a weekly fee of more than $200. It should also be noted that Uber rents its vehicles for its program through Hertz.

And while ride sharers claim that the process doesn’t exactly mean it’s a rental, but more of a brokerage between the company and the driver, some of their ad campaigns have been sloppy in sticking to that argument. Turo briefly chest-thumped with its “Rent better cars” slogan until it was brought up that it could be used as evidence against them in the legislative forums.

Denials in the ride-sharing corner simply reinforce the fact that those companies will go to great lengths to avoid being regulated and taxed, according to Ray Wagner, who’s in charge of overseeing legislative activities for Enterprise Rent-A-Car. “I have sought to find a compromise,” said Wagner to Bloomberg. “Each time, it seems to break down because they don’t want any regulation at all.”

Car rentals weren’t exactly thrilled about recent laws passed in Maryland and Illinois, although ride sharers didn’t get off so easily either. In both cases, ride sharers were given their own regulatory classification, including how they are to be taxed. In the case of Maryland, ride sharers will be imposed with a tax of eight percent on all transactions between the driver and the customer.

Meanwhile, other states are at a loss in how to treat the two types of businesses. Utah lawmakers have all but given up trying. To that end, the American Car Rental Association, which represents 98 percent of all participants in the industry, is pressing legislators to avoid differentiating between them.

“We welcome new innovations into the marketplace,” said the ACRA in a February letter to Gary Collins, who chairs Idaho House Committee on Revenue & Taxation. “It is critical, however, that government policies take into account the underlying service being provided and ensure that there is consistency as to how the law is applied to all competitors providing that service.”

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