BILL ANALYSIS
SENATE RULES COMMITTEE
Office of Senate Floor Analyses
1020 N Street, Suite 524
(916) 445-6614 Fax: (916) 327-4478
.
THIRD READING
.
Bill No: SB 1070
Author: Calderon (D)
Amended: 5/1/95
Vote: 21
.
SENATE JUDICIARY COMMITTEE: 7-0, 4/4/95
AYES: Campbell, Lockyer, Marks, Solis, Wright, Leslie,
Calderon
NOT VOTING: O'Connell, Petris
.
SUBJECT: Rental cars
SOURCE: Author
.
DIGEST: This bill provides that the types of taxes which
a rental car company may exclude from its advertised rate
be clearly defined and limited.
The bill also provides that the taxes excluded from the
advertised rate include a pro-rated portion of the vehicle
license fee.
Senate Floor Amendments of 5/1/95:
1. Require vehicle license fee to be clearly disclosed in
any printed advertisement, in-person quotation, computer
transmitted quotation or quote from a telephone
reservation center.
2. Make three clarifying changes.
CONTINUED
SB
1070
Page 2
ANALYSIS: The purpose of this bill is to clarify which
"taxes" rental car companies may exclude from their
advertised rental rate.
Under existing law, Section 1936 of the Civil Code:
"A rental company shall only advertise, quote, and
charge a rental rate that includes the entire amount
except taxes and a mileage charge, if any, which a
renter must pay to hire or lease the vehicle for the
period of time to which the rental rate applies."
Section 1936 does not define "taxes."
This bill defines "taxes" for the purposes of Section 1936
as:
1. Sales and use taxes imposed directly upon individual
rental transactions.
2. Vehicle license fees charged to the renter which do not
exceed the 1/365th of the annual vehicle license fee
actually paid on the particular vehicle being rented for
each full pr partial 24-hour rental day that the vehicle
is rented. The total of all vehicle license fees charged
to renters shall not exceed the annual vehicle license
fee actually paid for the particular vehicle rental.
3. Local taxes imposed directly upon individual rental
transactions. oTelephonic reservation centero means a
central facility maintained by a rental company through
which potential customers can reserve, by telephone only,
the use of a rental car at any location in this state
where the rental company conducts business.
4. Where a rental company quotes a rental rate by printed
advertisement, in-person quotation, quotation from a
telephonic reservation center, or computer-transmitted
quotation, it shall clearly disclose that taxes shall be
added and, if applicable, the average dollar amount or
range of dollar amounts of vehicle license fees for each
CONTINUED
SB
1070
Page 3
full or partial 24-hour rental day.
FISCAL EFFECT: Appropriation: No Fiscal Com.: No
Local: No
SUPPORT: (Verified 5/1/95)
The Hertz Corporation
Dollar Rent a Car
Thrifty Car Rental
Car & Truck Renting and Leasing Association of California
Avis Rent A Car Inc.
Budget
Enterprise Rent-A-Car/Leasing
OPPOSITION: (Verified 5/1/95)
California State Automobile Association
Department of Consumer Affairs
ARGUMENTS IN SUPPORT: The Senate Judiciary Committee
analysis states that , othis bill is an attempt to clarify
an ambiguity in existing law by enumerating in statute
three specific types of direct taxes on the rental
transaction or the rental vehicle. The reason for
including the first two types of taxes included in this
bill's definition of "taxes" is self-evident: sales and
use taxes and local taxes on the rental car transaction are
the types of taxes which are charged separately in almost
every type of consumer transaction.
As a result of California's extraordinarily high vehicle
license fees, rental companies in California are holding
cars for two and three times longer than they prefer. The
companies assert that this is the main reason that they are
often unable to meet demand for cars during peak seasons.
According to estimates from the Car and Truck Renting and
Leasing Association (CATRALA), there are over one million
"turndowns" per year -- instances when a prospective rental
car customer seeks to rent a car, and is told that there
are no cars available. The companies argue that if they
were able to charge separately for the vehicle license fee,
CONTINUED
SB
1070
Page 4
they would have the flexibility to buy the 25,000 extra
cars statewide which would be needed to end these million
turndowns.
ARGUMENTS IN OPPOSITION: The California State Automobile
Association states that, oour concern with allowing car
rental companies to advertise a daily rate which does not
include a charge which consumers will discover they have to
pay when they arrive at the rental counter. That charge
will be disguised as a state imposed tax--the vehicle
license fee (VLF) and allow car rental companies to escape
responsibility for inaccurate advertising by blaming the
State of California. Testimony at this weekos hearing
indicated this charge would be $.90 to $1.00 per day. In
earlier discussions I was told it would be approximately
$.50 per day. This escalation in price is a concern
because car rental companies are not regulated by any
agency or auditing authority. Thus, there is no way to
protect consumers from improper or excessive vehicle
license fee charges.
oMost importantly, however, may be the fact that as the car
rental companies have admitted, the cost associated with
the vehicle license fee is already built into the daily
rate currently charged to consumers. Yet, the companies
will not agree to deduct this charge from that rate before
they charge it again as a separate item. So, are consumers
being charged twice for the same business expense? What
other business is given state sanction to do this? For
instance, when insurers develop premiums for auto policies,
certain costs of doing business like premium taxes are
built into the rate charged the policyholder. What would
happen if insurers asked the Legislature if they could
separately charge for this tax but not agree to take it out
of their current rate structure? Further, what if there
were no audit controls or regulatory oversight on these
charges?
oWe also dispute the very premise for this bill which is
that California has the highest vehicle license fees in the
nation. This is simply not true. According to a survey
conducted by the Nevada Senate Transportation Committee,
CONTINUED
SB
1070
Page 5
out of the 28 states which assess in-lieu or personal
property taxes on motor vehicles, 24 states have fees which
range between $300 and $1,000. The car rental companies
have testified the average VLF in California is $370. This
is not high. Massachusetts has fees of $1,000, Indiana
$500, Maine $480, etc. Also, as is noted in the Judiciary
Committee analysis on this measure, the car rental
companies have sought and obtained fee relief in 21 states.
Doesnot this figure itself demonstrate that Californiaos
VLF is not the problem but, in fact, the car rental
companies simply want the State of California to remove an
expense item from their balance sheet.o
RJG:jk 5/2/95 Senate Floor Analyses
**** END ****
CONTINUED