By REP. KEVIN MCCABE
HB 123 represents a critical reform to Alaska’s vehicle rental tax system, addressing years of confusion, legal disputes, and economic inefficiencies. Building on the intent of a previous Senate bill, this legislation introduces a smarter, fairer approach that benefits Alaskans, particularly in rural areas, while strengthening the state’s $4 billion tourism industry. With a history of outdated tax policies and the rise of rental scheduling platforms like Turo, the need for this change has long been evident.
Th 10% State excise tax on passenger vehicle rentals, originally designed to target tourists using Alaskan roads, has remained unchanged for years and failed to keep pace with a shifting market. The emergence of Turo, a peer-to-peer rental platform founded in 2009, created new income opportunities for Alaskans renting out personal vehicles. Yet the state’s tax framework lagged behind, leading to inconsistent enforcement and legal disputes between the Department of Revenue and platforms like Turo.
Alaskan vehicle hosts, especially in rural areas, faced retroactive penalties and even bank garnishments, while the state lost revenue due to unclear collection responsibilities. A Senate bill introduced last year proposed an 8% tax rate for platforms and protected hosts from past liabilities; though it had bipartisan support, its failure left the problem unresolved. HB 123 builds on that foundation and delivers a more effective solution.
This bill reduces the rental tax to 9% for traditional rental companies and 7% for platform-based rentals, delivering savings to both renters and small businesses.
The 3% tax cut for local vehicle “hosts”, many of which are family-run businesses in rural Alaska, improves tourist access to rental vehicles and supports economic opportunity. By requiring platforms like Turo to collect and remit the tax, HB 123 removes the compliance burden from individual hosts, especially those in remote communities with limited resources. It also shields those hosts from retroactive enforcement, ending an era of arbitrary penalties.
This legislation will significantly boost Alaska’s tourism industry, which relies heavily on vehicle rentals. With most of the projected $9 million in annual tax revenue coming from tourists, the burden on Alaska residents remains light.
In rural areas, where public transportation is scarce, greater vehicle availability through platforms like Turo will improve access to destinations such as Denali and McCarthy. Aligning state taxes with local rates, like Anchorage’s 8%, removes confusion and enhances our competitiveness. The bill’s subpoena provision gives the Department of Revenue the tools to pursue tax cheats without growing the size of government; this ensures fairness and compliance.
Rural Alaska, home to roughly 20% of our state’s population, is a cornerstone of our tourism economy. Attractions like wildlife viewing, fishing charters, and Alaska Native cultural experiences depend on vehicle rentals to bring visitors into remote communities. Historically, high operational costs and limited availability in these smaller markets have limited rental car access. HB 123 addresses these challenges by lowering taxes and encouraging participation from more local hosts, thereby increasing rental availability in places like Healy or even villages like Bethel. The 3% tax cut for local businesses fosters economic diversification, supports job creation, and boosts related industries such as lodging and retail. Revenue from the bill can support community initiatives, from cultural preservation to conservation, tying tourism growth to sustainable development. This long-delayed reform positions rural Alaska to meet increasing demand for authentic travel experiences.
Rental tax revenue in Alaska flows into the state’s general fund, helping support vital services like education, infrastructure, and public safety. Historically, this tax has served as a tourist levy, offsetting the costs that visitors impose without heavily taxing residents. Under HB 123, the $9 million in projected annual revenue, largely from out-of-state renters, will help maintain roads and services critical to rural tourism. This ensures that the economic gains from tourism are reinvested into the communities that host our visitors, striking a balanced and fiscally responsible approach.
Turo’s growth since 2009 has transformed the vehicle rental landscape, offering Alaskans a way to earn income while serving tourism demand. But the absence of clear tax guidelines created friction, penalizing hosts and costing the state lost revenue. HB 123 embraces innovation by integrating Turo and similar platforms into a structured tax system that ensures compliance without stifling entrepreneurship. The bill’s effective date allows time for a smooth transition, reflecting a forward-thinking, solution-oriented approach. It replaces decades of outdated policy, where the rigid 10% tax clashed with the rise of peer-to-peer rentals and created legal uncertainty.
The need for HB 123 has been clear for years. The old tax structure, poorly suited to the growth of platforms like Turo and indeed unknown by many Turo hosts, caused confusion and unfair penalties that hurt both tourism and rural Alaskans. The failure of prior legislation prolonged this uncertainty, costing local entrepreneurs and denying the state much-needed revenue. HB 123 rectifies these shortcomings with lower tax rates, streamlined compliance, and protections for small operators. This is not just a policy adjustment; it is a long-overdue correction to a system that has failed Alaskans for too long.
HB 123 is a win for affordability, competition, and fairness. It aligns with a limited-government philosophy while strengthening rural economies and bolstering our tourism sector. By resolving longstanding inefficiencies, supporting small businesses, and modernizing our tax framework, this legislation helps secure Alaska’s economic future. The time for reform is now, and HB 123 delivers the change Alaskans deserve.
Rep. Kevin McCabe serves in the Alaska Legislature on behalf of Big Lake.
McCabe – can you please do something to shine the “spotlight” on the fraud, misallocation, waste, misappropriation and abuse of state monies?
Are you allowed to do that – there is tremendous reluctance, it seems, from our state legislature to bring this up?
Unfortunately, although I’m generally aligned with Rep. McCabe’s views and actions, I have to disagree with this assessment of HB123 and will ask (however useless that request may be) the Governor to veto this bill. The “rise of Turo” or similar platforms doesn’t change the basic underlying concept: Mr. Smith is renting his personal vehicle to Ms. Jones. Mr. Smith pays taxes on that vehicle already at registration (which may include both State and LGB taxes) and the nefarious Ms. Jones (presumably a tourist) pays taxes when she fills up at the local gas pump. HB123 now adds additional tax burden to Mr. Smith, imposes recordkeeping requirements on Ms. Jones and Mr. Smith, increases the cost of renting Mr. Smith’s personal vehicle to Ms. Jones, and further encourages the seemingly unlimited appetite of state government for tax revenue.
The minimally valid concerns (clarifying tax responsibility, avoiding penalties,….and addressing subpoenas) could have been addressed by simply providing that no transaction tax is applicable to a rental or lease of a personally owned vehicle when rented between private parties, regardless of the facilitation of Turo or other platforms…and providing for the enforcement of subpoenas.
…and while I tend to view nomenclature and labels as very poor bases for decisions, the Senate co-sponsors are 3 liberals and a LICC (Liberal in conservative clothing). Not a good group for Rep. McCabe to align with.
McCabe exposes himself more with every article. (they are too long winded…)
I totally understand and agree with you. The problem is, if he vetoes it, the Turo hosts will be responsible to collect the tax and remit it to the state themselves. That tax is already in place. If the state does not collect it then they can expect a lawsuit from the other rental car agencies who are following the law. This gives them all a tax cut. Both sides of the industry. And has Turo collecting the tax for the host car owners, and remitting to the state. it is a win for all.
“It aligns with a limited government philosophy….”
Says Kevin McCabe about a NEW TAX on private people who want to help other private people out.
Classic.
Perhaps you should READ the article and maybe familiarize yourself with the bill. It is not a new tax. It is a tax cut. Turo owners (hosts) are responsible, right now, for a 10% excise tax. And they have been since a court ruled that Turo (the hosts) were similarly situated as rental car agencies. So we either put this in as legislation, to give Turo a 3% tax cut, and legacy rental car agencies a 1% tax cut, or we let the state take all those Turo owners to court over past due taxes. AND let the state charge both of them, going forward, a 10% rate. What part of that is confusing to you?
Turo will collect the tax from outsiders & send it to Juno.
Locals are not required to rent their vehicles on Turo (help other private people out) but if they do, Turo will do the tax paperwork for them. (a black market transportation opportunity in the Bush?)
Selling on Amazon or E-Bay is the same, the platforms collects the customer’s State sales taxes for the AK seller & sends it to the buyers home state government.
‘big tech’ tax collecting is a BIG win for us little guys …..imo.
There is no such thing as a tax that benefits people.
Paved roads don’t benefit you?
Making a mountain out of a molehill because they stole the PFD again.
Yup.
McCabe – grow a pair and write a long winded article on how the state legislature is VIOLATING THE STATE CONSTITUTION AND STEALING, WE RHE PEOPLE’S, PDF.
Are you allowed to do that?
Why not exempt private parties from the tax obligations? Simple as that. The entire HB 123 is about clarifying and streamlining (which it may well do) collection of an excise tax…but why not eliminate that tax for private parties, i.e. the non-commercial folks? Despite the assertions of how this will improve rental opportunities, etc, it should be noted that any of these revenues disappear into the bottomless pit of the general fund….no dedicated funds to any transportation sector.
Cap’n, how did we win when the damned tax is still there?
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The bill reduces the 10% rental tax to 9% for traditional rental companies and 7% for platform-based rentals and it’s a victory?
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We may be missing something here, seems like any way you look at it, we still lost.
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Where does the damned tax money actually go, Kev? What terrible thing happens to the State if the tax is repealed, how come you didn’t introduce a bill to repeal the thing or provide ways around it?
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Are nonprofits and Native corporations exempt from the tax, Kev? Can we beat the tax by turning B&B’s into nonprofits, signing up guests as fellow nonprofiteers?
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You still there, Kev?
Small baby steps. What we can get past the House and Senate Finance committees. At the end of the day, the rep sponsoring a bill has to get 21/11/1 to get it into law. It is a balancing act. The tax money, because of our constitution, goes to the general fund. It is supposed to be delegated 50% to DOT and 50% to state parks figuring that is where a good chunk of tourists (who would be actually paying the tax) are a drain on our infrastructure. I am interested in things I can do to eat the elephant one bite at a time. A repeal would not have made it out of the first committee, if it got a hearing at all. Remember this tax is paid, not by the hosts our business owner, it is an exsize tax paid by the consumer (renter). We win the war by fighting battles we can win.