Gov. Mike Dunleavy vetoes tax cut intended to settle Alaska’s long-running rental car dispute

Alaska Gov. Mike Dunleavy speaks to reporters during a news conference Wednesday, Feb. 7, 2024. (Photo by James Brooks/Alaska Beacon)

Alaska’s governor has vetoed a bill intended to clarify the rental car tax collection process for Alaskans who put up their vehicles for rent on Turo and similar car-sharing applications.

The Alaska Department of Revenue has said that Turo is subject to the state’s 10% sales tax on rental cars, but Turo has argued that users, not the company itself, is liable for collecting the tax.

The state unsuccessfully sued Turo six years ago in an attempt to find out how much tax revenue the state is owed. Since then, the state has occasionally garnished Turo proceeds from the bank accounts of Alaskans who rent their cars.

Senate Bill 127, from Sen. Matt Claman, D-Anchorage, would have resolved the dispute by placing Turo in charge of collections and cutting the tax rate to 8% for Turo-like rentals.

That bill passed the House and Senate by wide, bipartisan margins, but the legislative consensus did not sway the governor.

“Unnecessary taxation of a new and growing industry is bad public policy,” the governor wrote in his veto message, issued Tuesday. “Accordingly, I have vetoed the bill.”

The act means the long-running dispute between the state and Turo is unresolved. The Department of Revenue, expecting passage of the bill, had suspended tax collections from Turo users in 2023. The agency did not immediately respond to a question asking about the current status of the tax.

Claman, by phone on Thursday, said he was disappointed by the governor’s decision. So was Rep. Andy Josephson, D-Anchorage, who sponsored the bill in the House.

Claman said the bill had included a liability shield for back taxes owed by Turo users. With the veto, Alaskans are still liable for those unpaid taxes, and the state could go after them.

“The problem doesn’t go away, and so I’ll certainly be looking to reintroduce the legislation,” Claman said. “We worked with the Department of Revenue as well as Turo and local rental companies to reach an agreement that worked for everybody.”

The governor’s veto could be overridden if lawmakers called themselves into special session on the issue, but Claman, Josephson and other legislators said they don’t think that will happen. Forty of the 60 legislators would have to agree to hold a special session.

The veto was Dunleavy’s eighth for a policy bill in 2024 and 13th since being elected in 2018. On the same day as the Turo veto, he announced the veto of a birth control measure, for a total of 14 vetoes during his two terms in office. Those figures do not include his annual budget vetoes.

Since Dunleavy took office, legislators have never overridden one of his vetoes. 

Josephson said the governor’s string of vetoes is discouraging for legislators who want to solve the state’s problems.

“It makes it very hard for legislators to want to see problems, find solutions that are achievable, and invest energy in those solutions,” he said. “It just begs the question, ‘Why do we file bills? What’s this about? Why do we do this?’”