ARIZONA STATE SENATE
Fifty-Fifth Legislature, First Regular Session
AMENDED
peer-to-peer car sharing
Purpose
Establishes guidelines for insurance requirements, safety recalls, taxation and surcharge collection for vehicle sharing transactions that occur on a peer-to-peer car sharing program (P2P Program).
Background
Peer-to-peer car sharing is a relatively new sector of the sharing economy which involves the activity of acquiring, providing or sharing access to goods and services that are facilitated by a community-based online platform. The premise of car sharing is similar to that of an online lodging marketplace in which the owner of a vehicle registers their vehicle with an online program, thereby making their vehicle available for use by a renter when the owner is not using it. The renter uses the vehicle for a predetermined amount of time and pays an hourly or daily fee, which is then transmitted to the owner of the vehicle with a percentage of proceeds withheld by the online provider.
Currently, a person engaged in the business of renting motor vehicles without drivers is required to collect a five percent surcharge on each rental contract that is for a period of fewer than 180 days. The surcharge is computed on the total amount stated in the contract less any applicable taxes, and is a reimbursement for the amount of the vehicle license tax imposed on the vehicle (A.R.S. 28-5810). Rental car surcharges are also levied and collected by the Arizona Sports and Tourism Authority (AZSTA) and stadium districts (A.R.S. 5-839; and 48-4234).
According to the National Conference of State Legislatures, at least nine states have passed legislation relating to peer-to-peer car sharing since 2010. (NCSL). Peer-to-peer car sharing legislation passed so far generally addresses: 1) insurance requirements and liability for peer-to-peer programs; 2) consumer disclosure agreements; 3) safety recalls and consumer protection; and 4) concession agreements with airport authorities. At least Maryland, Florida and Hawaii have introduced legislation in 2021 to address the taxation of peer-to-peer car sharing programs. Maryland originally passed legislation in 2018 that sunset on July 1, 2020 that, in part, required the Maryland Motor Vehicle Division and the Maryland Office of the Comptroller to compile certain information that could assist the Maryland Legislature in determining fair and equitable taxation on peer-to-peer transactions.
S.B. 1720 may have an impact on the state General Fund (GF) if the taxation of peer-to-peer car sharing transactions and surcharges collected from these transactions result in greater revenues for the GF.
Provisions
Transaction Privilege Tax and Surcharges
1. Subjects a shared vehicle transaction to Transaction Privilege Tax (TPT) and affiliated excise taxes.
2. Specifies that a P2P Program that accepts payment for a shared vehicle transaction in Arizona is subject to TPT and affiliated excise taxes.
3. Exempts a shared vehicle transaction from the vehicle license surcharge.
4. Exempts a shared vehicle transaction from the AZSTA surcharge and the stadium district surcharge if the shared vehicle owner (owner) certifies to the Arizona Department of Revenue (ADOR) on a prescribed form that the vehicle is an individual-owned shared vehicle.
5. Specifies that an owner's certification is required only once for the duration of the time that the owner owns the shared vehicle.
6. States that if a shared vehicle is an individual-owned shared vehicle, a P2P program is not subject to AZSTA or stadium district surcharges.
7. Requires ADOR to verify that the vehicle is an individual-owned shared vehicle by determining whether TPT or use tax was paid for the acquisition of the vehicle.
8. Allows a P2P Program to rely in good faith on an owner's representation that the shared vehicle is an individual-owned shared vehicle certified with ADOR.
9. Exempts a P2P Program from liability for any tax, penalty, fee or other sanction imposed on an owner if a P2P Program relied in good faith on an owner's representation of a vehicle being am individual-owned shared vehicle.
10. Prohibits a county, city, town or political subdivision of Arizona from imposing any additional taxes, fees or charges on the gross proceeds or gross income of a shared vehicle transaction that are not imposed by a jurisdiction on every other transaction involving motor vehicles for hire without drivers.
11. Requires a P2P Program to register with ADOR for a license to pay taxes levied in Arizona and one or more counties, cities, towns or special taxing districts that are due from a shared vehicle transaction, subject to outlined limitations.
12. Requires a P2P Program to remit AZSTA and stadium district surcharges that involve a vehicle that has not been certified with ADOR as an individual-owned shared vehicle.
13. Provides an owner with an exclusion from any applicable taxes levied on shared vehicle transactions for which the P2P Program has collected and remitted applicable taxes.
14. Requires a P2P Program licensed by ADOR to:
a) electronically remit applicable TPT and local excise taxes to ADOR as well as any surcharges due for transactions involving vehicles that are not individual-owned shared vehicles; and
b) electronically report the taxes monthly and remit the aggregate total amounts for each respective taxing jurisdiction.
15. Requires a P2P Program to retain surcharge and tax information for each vehicle sharing transaction and provide the information to ADOT upon request.
16. Specifies that a P2P Program is not required to list or otherwise identify an individual-owned shared vehicle on any return or any attachment to a return.
17. Specifies that the remittance of TPT or any other tax applicable to shared vehicle transactions by a P2P Program fully satisfies any obligation of an owner to remit taxes applicable to the transaction.
18. Requires a shared vehicle transaction to be sourced as follows:
a) to the permanent address of the registered owner if the owner is registered in Arizona;
b) to the street address in Arizona where the owner resides while in Arizona if the shared vehicle is registered in another state or country; or
c) to the location of the car sharing start time if the owner does not reside in Arizona and the shared vehicle is registered in another state or country.
19. Specifies that the personal property rental tax classification includes peer-to-peer car sharing and does not include the gross proceeds or gross income received by an owner from a P2P program.
Airports
20. States that a public airport is not prohibited or restricted from implementing rules or licensing requirements or from assessing fees or charges to shared vehicle transactions that either:
a) are conducted at a pubic airport; or
b) use an off-airport shuttle service provider contracted with the airport to access a shared vehicle off the public airport premises.
Insurance Liability
21. Requires a P2P Program to assume liability of an owner for bodily injury or property damage during the car sharing period in an amount stated in the program agreement but not less than statutorily prescribed minimums.
22. Negates assumed liability for bodily injury or property damage to a third party in an amount greater than minimum required insurance coverage if:
a) an owner makes an intentional or fraudulent material misrepresentation or omission to the P2P Program before the car sharing period in which the loss occurs; or
b) an owner acts in concert with a shared vehicle driver (driver) who fails to return the shared vehicle pursuant to the P2P Program agreement.
23. Specifies that the assumption of liability applies to bodily injury and property damage to third parties notwithstanding the car sharing termination time.
24. Requires a P2P Program to ensure that an owner and driver both have insurance policies that provide minimum required insurance coverage during a car sharing period in statutorily prescribed minimum amounts.
25. Specifies that the insurance policies must either:
a) recognize that the shared vehicle insured under the policy is made available and used through a P2P Program; or
b) not exclude the use of a shared vehicle by a driver.
26. Allows insurance requirements during a car sharing period to be met by an owner, driver or P2P Program, or a combination of all three.
27. States that the insurance required during a car sharing period is primary during each sharing period.
28. Requires a P2P Program to assume primary liability for a claim if:
a) the P2P Program provides the required insurance in whole or in part;
b) a dispute exists as to who was in control of the shared vehicle at the time of the loss; and
c) the P2P Program for any reason fails to provide information related to a shared vehicle transaction that are required to be retained as specified.
29. Requires insurance maintained by a P2P Program to provide coverage for the car sharing period beginning with the first dollar of a claim if insurance held by either the owner or driver has lapsed or does not provide the required coverage.
30. Specifies that if insurance held by either an owner or driver has lapsed or does not provide required coverage, a P2P Program has a duty to defend a claim unless an intentional fraudulent misrepresentation or other outlined exception has occurred.
31. Requires a shared vehicle's insurer to indemnify a P2P Program to the extent of the P2P Program's obligation if the owner was in control of a shared vehicle at the time of a loss.
32. Specifies that insurance maintained by a P2P Program is not dependent on a motor vehicle liability insurer first denying a claim under any other motor vehicle insurance policy.
33. Prohibits a P2P Program from:
a) offering or selling insurance except in conjunction with and incidental to car sharing agreements;
b) advertising, representing or otherwise portraying itself or any of its employees or agents as licensed insurers or insurance producers, unless the P2P Program is a licensed insurer or insurance producer;
c) paying a person any compensation, fee or commission that is dependent on the placement of insurance under a P2P Program's license; and
d) requiring an owner or driver to purchase personal motor vehicle liability insurance through the P2P Program as a condition of using the P2P Program.
34. Specifies that a P2P Program is not prohibited from recovering its insurance costs incurred in satisfying its obligations from an owner or driver.
35. Specifies that production or incentive payments to an employee are not prohibited if the payments are not dependent on the sale of insurance.
36. States that the liability of a P2P Program for any act or omission resulting in injury to any person as a result of the use of a shared vehicle is not limited by the provisions of this legislation.
37. States that the ability of a P2P Program to seek indemnification from an owner or driver for economic losses due to a breach in an agreement by the owner or driver is not limited by the provisions of this legislation.
Sharing a Vehicle with a Lien
38. Requires a P2P Program to notify an owner who registers a vehicle on a P2P Program prior to the vehicle becoming available on the P2P Program of both of the following:
a) that sharing a vehicle that has a lien may violate the terms of the contract with the lienholder; and
b) that the contract with the lienholder may impose specific requirements for physical damage coverage.
Authorized Insurer Exclusions
39. Allows an insurer that writes motor vehicle liability insurance to exclude any and all coverage and the duty to defend or indemnify any claim against an owner's personal liability insurance policy, including:
a) bodily injury coverage;
b) property damage coverage;
c) uninsured and underinsured motorist coverage;
d) medical payments coverage;
e) comprehensive coverage; and
f) collision coverage.
40. Specifies that exclusions in policies for motor vehicles, including policies that exclude coverage for vehicles made available for rent, sharing, hire or for any business use, are not invalidated or limited by this legislation.
Records Retention
41. Requires a P2P Program to collect records relating to a shared vehicle, including times used, fees paid by a driver and monies received by an owner, to be made available on request of the owner, owner's insurer or driver's insurer in order to facilitate a claim investigation.
42. Requires such records to be retained for at least six years.
Vicarious Liability
43. Exempts a P2P Program and an owner from vicarious liability under any state or local law that imposes liability solely based on vehicle ownership.
Insurance Indemnification
44. Allows an insurer to seek indemnification from a P2P Program's insurer for a claim involving a shared vehicle excluded from the insurer's polic