New York Car Rental Tax? What it is and why it is charged

When you rent a car in New York your reservation is subject to a special car rental tax that is imposed by New York legislature. This car rental tax is in addition to the New York sales tax that applies to all car rentals. One can avoid the sales tax on car rentals as well as the car rental tax imposed by New York if you can provide the car rental company with a valid tax exempt form. The current sales tax on car rentals in New York City is 8.375% and the New York State car rental tax is presently 11%. The car rental tax was formerly 5%. The car rental tax was raised from 5% to 11% in June 2009 by the State of New York.

Assumptions about car rental customers

In the past several years, various cities and states have imposed taxes on car rentals. This additional charge was created under the assumption that people who rent cars are often tourists or visitors from outside New York City and the state, and therefore would not affect voters or residents of New York. Another assumption by many of the legislative officials in New York is that car rental customers are business people who rent a car under their company expense account and are thus not as sensitive to the car rental taxes which are imposed. However, most of the car rental transactions that take place in cities like New York are performed by local residents for local purposes, such as the result of a collision and a replacement vehicle is needed. Other purposes are people renting a car for a vacation, to run errands, or to transport school children, family members, or a sporting team. The car rental tax is imposed on car rentals, 15 passenger van rentals, and cargo van rentals at the same rate.

Many times, when legislatures such as New York pass a car rental tax, the monies generated from the charge are used to fund projects which do not benefit New York car rental customers or drivers of any kind. The recent increase of the car rental tax by New York was to help close a general budget deficit in 2009; the increase was for a full one percent. The car rental tax was increased another five percent as the New York legislature was looking for ways to fund the MTA - the Mass Transit Authority of New York. As a result, the current New York car rental tax is 11%.

Other states affected by car rental taxes

New York isn the only city suffering from high car rental taxes. Many other states and cities have imposed a car rental tax in order to fund various civic projects, including sports stadiums. In Dallas, a 5% tax was placed on car rentals, including 15 passenger van rentals, in order to help fund the construction of a basketball arena, the American Airlines Arena. In Arkansas, a portion of the 10% car rental tax is used to pay for teacher salaries. In Las Vegas, a car rental tax of 2% was imposed to help fund a performing arts center.

The tax on New York car rentals is unfair for many reasons. Firstly, the car rental tax doesn benefit the customer, nor does it benefit the segment of the local population that regularly rent a vehicle. The New York car rental tax certainly doesn benefit the rent a car industry, or even the car manufacturers that build and sell rental cars to rental car agencies. Unfortunately, the car rental industry does not have a nationwide organization to challenge the imposition of car rental taxes, which raise the cost to rent a car but do not provide any benefit to the public who rely on rental vehicles. In New York, there used to be a car rental association named the New York Vehicle Rental Association; however, this organization, which acted on behalf of car rental agencies in New York, disbanded in the early part of the last decade.

Many economists feel that the taxes imposed on New York car rentals are not fair as the tax on car rentals singles out a specific industry, and provides no correlation to where the monies raised by the tax are actually spent. Economists have a termed which they call the "benefit principle," whereby the tax on an industry provides a benefit to that industry. The tax on gasoline is a good example ?this money is used to fund the building of roads or to clean up oil spills, and is a direct benefit to the individuals who are being taxed. However, the car rental tax does not fund any road related expenditure in New York, nor does the car rental tax specifically serve the public who use rental vehicles in New York, or anywhere else for the that matter.

With states such as New York experiencing significant budget shortfalls, it is not likely that the car rental tax will be reduced anytime in the near future. We support our customers and hope that New York does not increase the rent a car tax again or that regional areas of New York or local New York districts do not impose a separate or local car rental tax.

Check out the Manhattan car rental All Car Rent a Car location at 415 West 45 Street New York, NY 10036

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