Study: Car sharing stalls under tax burdens, competition

Zipcar
A new study from DePaul University finds that car sharing companies, including Zipcar, are heavily taxed, which may be deterring drivers from buying memberships. (iStock/Susan Montgomery)
CHICAGO — Hefty taxes on car-sharing services, such as Zipcar, may be stopping some drivers from getting behind the wheel. Researchers at DePaul University found that car rental taxes originally aimed at tourists and business travelers are hurting the car-sharing sector.

The new study, “When Sharing is Taxing: Comparing Tax Burdens on Car Sharing in Major U.S. Cities,” details how taxes on car sharing have spiked nationwide. Competition from ride-sharing services, such as Uber and Lyft, are also blamed for the downturn in car-sharing memberships.

“The tax burden facing people who car share is a case of unintended consequences," said Joseph Schwieterman, lead researcher and director of the Chaddick Institute for Metropolitan Development at DePaul University. “No one expected that these taxes, which were added years ago to car rentals, would suddenly apply to thousands of people who merely want to use a car for a quick neighborhood trip."

Schwieterman and co-author Heather Spray found:

  • Average tax rates rose from 15.6 percent in 2011 to 17 percent in 2016, making the burden higher than those on hotel rooms and airline tickets. Competing services, including Lyft and Uber, face a much lower retail tax.
  • Car sharing's status as a highly taxed sector is largely the result of the once-prevalent notion that taxes on car rentals would fall almost entirely on out-of-towners, including tourists, business travelers and conference-goers.
  • Municipal taxation policies can add several dollars to even the shortest trip. This is affecting the growth of a sector that has long been recognized to bring significant benefits to communities. 
  • Nearly a quarter of the country‘s 40 largest cities impose retail taxes that increase the costs of a one-hour car share by more than 30 percent. Many impose $2 to $4 transaction fees, which were originally created to generate revenue from conventional car rentals.
​​“There is a need for a more level playing field as new mobility options, particularly Lyft and Uber, grow more prominent,” said Schwieterman. Researchers call for “more coherent taxation policies,” including reduced transaction fees on reservations under eight hours.

The study can be found at http://bit.ly/chaddickresearch.

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Source:
Joseph Schwieterman
jschwiet@depaul.edu​
312-362-5732

Media Contact:
Kristin Claes Mathews
kristin.mathews@depaul.edu​
312-241-9856

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