OPINION: Gov. Dunleavy’s vehicle rental bill veto displays his administration’s dysfunction

Gov. Mike Dunleavy’s September veto of Senate Bill 127 demonstrates disorganization in the executive branch, lack of competent leadership, and disservice to all Alaskans by undermining a valuable tax cut.

Senate Bill 127 cleaned up how we tax vehicle rentals in Alaska. Since 2006, all rental car owners have been required to collect a 10% sales tax from their renters. But the car-sharing websites and apps, such as Turo, have refused to collect the tax on behalf of their owners. Senate Bill 127 fixed the problem; it reduced the tax owed by Turo vehicle owners and protected them from back taxes.

In every committee hearing for this bill, from the Senate Transportation Committee to Senate Finance to House Transportation, Alaska’s Department of Revenue always supported the bill. The governor’s revenue commissioner, Adam Crum, testified in support. So did the governor’s deputy revenue commissioner and the governor’s deputy director of the Tax Division. In every single committee and at every step of the process, the Department of Revenue argued strongly for this bill. So did Turo corporate and traditional car rental companies like Avis and Enterprise.

And the bill made good sense. It accounted for the rapid growth in online vehicle rental platforms like Turo, where individual owners can rent out their cars via the car-sharing website or app. Since approval of the vehicle rental tax in 2006, these platforms have always been subject to the 10% tax on rental cars. But the Turo vehicle owners haven’t been collecting the tax from the renters, either because many didn’t know about it or because Turo refused to collect it for them. Meanwhile, traditional car rental companies like Enterprise, Avis and Midnight Sun have been collecting the tax as Turo vehicle owners accrue back-tax liability.

Alaska had an evolving mess on our hands. As the Department of Revenue explained, Senate Bill 127 cleaned up the mess by putting the responsibility of collecting the tax on Turo and other vehicle rental platform companies. It took the onus of collecting and paying the tax off of individual Alaskans and it lowered the rental rate for vehicle platform renters to 8%, recognizing that Turo vehicle owners are small businesses. Finally, it protected Alaska Turo vehicle owners from their back-tax liability, helping countless people. It passed both the House and the Senate by wide, bipartisan margins.

Then Gov. Dunleavy vetoed Senate Bill 127.

Why? There is no good reason for the veto. The Alaska Department of Revenue is an executive agency. The governor appointed Adam Crum as revenue commissioner, and he sits on the governor’s cabinet. In theory, and in good practice, the governor and his commissioners should agree on the executive team’s priorities for statewide legislative action. If Gov. Dunleavy was so opposed to SB 127 that he would veto it, why did he allow his own Department of Revenue — members of his team — to support the bill in committee after committee after committee? Frankly, it appears the governor has no team.

The fact is, Gov. Dunleavy’s administration is plagued by miscommunication, incompetence, and discord. Gov. Dunleavy’s veto of this revenue commissioner-supported bill is evidence of this problem. The bill was not a new tax — it was a tax reduction. And critically, passing the bill would have protected the state from potential liability in a lawsuit for many years of failing to collect the tax from Turo vehicle owners. With the governor’s veto, Alaska small businesses are still exposed to unpaid back taxes.

The governor made a bad veto that exposes a failure to communicate and work together in the executive branch. We need all hands on deck, working together as an organized team for the benefit of Alaska businesses and to grow our economy. This level of dysfunction is an embarrassment — and it will come at the expense of Alaska taxpayers.

Nicole Stewart is a lifelong Alaskan currently residing in Fairbanks. She has operated a small fleet of rental cars on the Turo platform since 2015.

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