WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers To view the archives of the Tax Foundation of Hawaii's commentary click here. MEDIA ADVISORY
For Further Information Contact: Tom Yamachika (808) 536-4587 Supreme Court of Hawaii to Hear Rail Skim Lawsuit on July 6, 2017 HONOLULU, HAWAII—July 4, 2017—The Supreme Court of Hawaii will hear oral argument in the case of Tax Foundation of Hawaii v. State of Hawaii on Thursday, July 6, 2017, at 11:15 AM at the Supreme Court Courtroom, Ali’iolani Hale, 417 South King Street, Honolulu, HI 96813. The Foundation filed suit to halt the State’s practice of skimming 10% of the gross amounts collected for the Honolulu rail surcharge. It alleges that although the law authorizing the diversion allows the State to retain the costs of administering the surcharge, the amount actually taken is many times those costs, amounting to a hidden State tax of $25 million a year unwittingly paid by Oahu residents and businesses. The First Circuit Court, which initially considered the suit, dismissed the Foundation’s complaint and the Foundation appealed. “This year, both the House and Senate advanced bills that would have reduced the skim prospectively to 1% from 10%,” said Tom Yamachika, President of the Tax Foundation of Hawaii. “It seems that lawmakers realized that they were diverting far too much money. Unfortunately, unless both sides can agree on a bill without delay, taxpayers in Honolulu will continue to be cheated because of the 10% skim. We will press forward in our efforts to demonstrate that the skim unconstitutionally burdens hard-working taxpayers and businesses in the City and County of Honolulu.” The Foundation is represented by Paul Alston, of Alston Hunt Floyd & Ing, which is now affiliated with Dentons. Mr. Alston said, "We are very pleased that the Court accepted this case for direct review and scheduled oral argument so quickly. This is a matter of great importance, especially since the legislature has taken no action, despite recognizing the unfairness of taking such a large portion of the surcharge." At the upcoming oral argument, Supreme Court justices typically will have tough questions for both sides. A written decision will be issued after the oral argument. About the Tax Foundation of Hawaii: The Tax Foundation of Hawaii, a private nonprofit, nonpartisan, educational organization has, for the past 60 years, encouraged efficiency and economy in government and has promoted an equitable tax system that encourages and maintains economic growth and stability in Hawaii. Read more about us at tfhawaii.org. WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers To view the archives of the Tax Foundation of Hawaii's commentary click here. Weekly Commentary For the Week of July 2, 2017 Carving Up the Price of Car Rentals By Tom Yamachika, President One of the legislative bills that is now being considered by Gov. David Ige is a curious bill, HB 735, involving the car rental industry. The bill doesn’t seek to impose new taxes or fees upon rental cars. Instead, it affects how car rental businesses can show these fees on rental car invoices as separate line items. Hawaii Revised Statutes section 437D-8.4 states that motor vehicle lessors may visibly pass on certain charges to a lessee. These charges are the general excise tax (GET); county surcharge; rental motor vehicle and tour vehicle surcharge tax; rents or fees paid to the Department of Transportation; and 1/365 (per day rented) of the annual vehicle license and registration fee, and annual weight taxes. This is already quite a bit more than most businesses, which customarily pass on to the consumer only the GET and county surcharge. The bill would allow the per-day amount of the annual fees to be increased to 1/292, on the theory that most vehicles are only rented 80% of the time (365 times 80% is 292, the expected number of days rented in a year), would include more annual fees such as license renewal fees and safety check costs, and would allow one-time fees such as license plate fees and use taxes to be recovered, apparently on the same basis as annual fees. Some industry testifiers in support of the bill said that the changes would allow rental car companies to recover all government fees they pay for their cars, rather than the fraction of the fees that they are currently collecting under existing law. Even under current law, there are quite a bit of costs being passed on. I tried to reserve a car on Maui and was quoted a base daily rate of $32 with $14.14 (44% of the base price) in additional fees and taxes, some of which are not charged by the government: Concessionaire fee (11.11%) $ 3.64 per day Customer Facility Charge 4.50 Frequent Travel Program 0.75 Highway Surcharge 3.00 Vehicle License Fee Recoupment 0.52 Total Tax 1.73 Total Fees and Taxes $ 14.14 Actual Per-Day Charge $ 46.14 What happens if there are other government charges besides those listed here? The companies indeed recover those costs, but as part of the car rental price. That’s what most businesses do when they have any expenses, whether charged by the government or anyone else – they consider and include those costs in the price of their product or service. This legislative bill doesn’t change these costs, but allows them to be included on a separate line item so they can blame the big bad government for the charges, rather than the poor innocent car rental company. The Office of Consumer Protection, which is part of our Department of Commerce and Consumer Affairs, opposed the bill. OCP observed that the addition of one-time fees to the list of passed-on fees is not consistent with the current law, which only allows the pass-on of recurring costs. It also complained that the bill “unnecessarily complicates” the calculation of the pass on. As consumers, it’s important to understand that additional taxes and fees apply. If you are quoted a base rate, like $32 in the example above, know that you will be paying somewhat more than the $32 in the end. If you are shopping for a rental car, you should understand what your bottom line is going to be before you hit the “reserve” button. |
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