American and Texas state flags flying on the dome of the Texas State Capitol building in Austin

Talk of Texas and taxes often focuses on the Lone Star State’s lack of an income tax or the state’s low overall tax burden. Yet some Texas legislators are now uncharacteristically seeking to impose a tax hike at the behest of a massive corporation seeking to hamper its competitors with new costs. 

Under consideration right now in Austin is Senate Bill 1498, legislation that would raise taxes on Texans who earn income by lending out their cars on peer-to-peer car-sharing platforms. The Senate Finance Committee took up SB 1498 last week during a hearing in which proponents of this tax hike spread misinformation and also unwittingly acknowledged a key point made by bill critics. 

Rental car companies are now urging Texas lawmakers to charge rental car taxes to Texans who offer the use of their personal vehicle on peer-to-peer platforms. Proponents of SB 1498 claim it will “level the playing field” by forcing rental car taxes to be charged to those who offer the use of their cars on peer-to-peer platforms. Yet the playing field is already “un-level” in rental car companies’ favor. That’s because rental car companies pay no sales tax on their vehicles, whereas sales tax is paid by Texans who lend their cars out using peer-to-peer platforms. 

During last week’s Senate Finance Committee hearing, a lobbyist for the rental car industry acknowledged that their vehicles are exempt from state sales tax. That lobbyist argued, however, that even though rental cars are exempt from sales tax, the rental car industry satisfies its taxpaying obligation through its collection and remittance of rental car taxes. Opponents of SB 1498 contend that car-sharing hosts have already satisfied their taxpaying obligation by paying the motor vehicle sales tax. They don’t need to collect and remit rental car taxes because the playing field is already level. There is no need to tilt it towards a multibillion dollar company.

During last week’s hearing on SB 1498, the bill actually got worse when another tax appeared in the committee substitute. The additional tax added to SB 1498 is a local tax whose proceeds will be used to pay for sports venues. The committee substitute states that “if a motor vehicle subject to the tax imposed under this subchapter is rented through a marketplace rental provider, the marketplace rental provider shall collect the tax for the benefit of the municipality or county.” 

Alleviating the costs imposed by profligate local governments is a top priority for Texas lawmakers this session. As such, it would be an odd move to also pass legislation granting new local taxing authority. Texas legislators are pursuing the largest property tax cut in state history. Americans for Tax Reform applauds that effort and encourages them to get it done. But while they’re at it, ATR also urges Texas lawmakers to avoid partially counteracting that relief by raising taxes and expanding local taxing authority with SB 1498.