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leading independent tax policy
research organization. Since 1937,
our research, analysis, and experts
have informed smarter tax policy
at the federal, state, and global
levels. We are a 501(c)(3) nonprofit
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Modernizing Rental Car and Peer-to-
Peer Car Sharing Taxes for a Post-
• As the travel and hospitality industries recover from the coronavirus
pandemic, policymakers have an opportunity to reevaluate and repeal
discriminatory excise taxes imposed on rental car transactions.
• Unlike other excise taxes, rental car excise taxes are not imposed to reduce
a harm or ensure drivers are paying for infrastructure. Rather, the revenue
is used for unrelated purposes and the taxes create a byzantine structure of
taxes and fees that dissuade travelers from using rental cars. States relying on
these taxes experience lower economic growth when travelers adjust their
behavior to avoid the tax.
• Efforts to impose rental car excise taxes onto peer-to-peer car sharing
arrangements increases the harm of these taxes and will make it harder for
the travel industry to recover from the pandemic.
• Rather than extending rental car excise taxes, policymakers should ensure
rental car and peer-to-peer car sharing services are within the state and
local sales tax base and refine ways to reimburse sales tax paid on a vehicle
purchased for personal use but also used for business purposes, such as car
sharing or ridesharing.
Senior Policy Analyst
TAX FOUNDATION | 2
The coronavirus pandemic and related economic downturn impacted the travel, tourism, and
hospitality industries hard in 2020. As demand fell for in-person services and government restrictions
reduced the f