Then One/WIRED
The holidays are great and all, but for those of us living across the country or around the world from our friends and relatives, slogging over long distances quickly becomes a pain. Combine dealing with travelers who have seemingly never flown before, TSA security checks, and the pain that is renting a car, it’s enough to make one stick to FaceTime video chats. Especially when you take your finances into account.
We know airlines are making gobs of cash by charging extra for things like checked baggage and extra legroom, but take a look at your latest car rental receipt, and you’ll see you’re paying for a lot of things that aren’t related to, you know, getting a car. What, for example, is a concession recovery fee? Why does renting an Impala for three days come with a convention center surcharge? And why on Earth am I paying a daily facility charge when the whole point is that I’m taking the car out of the facility?
It turns out all those taxes and surcharges aren’t hard to decipher ways for the rental companies to wring more cash out of you. They’re hard to decipher ways for local governments and airports to wring more cash out of you. In addition to the standard sales taxes that states and municipalities apply to all purchases, special taxes are often levied on car rentals because politicians would rather tax visitors, who can’t boot them out of office, than their own constituents, who can.
“Politicians are reluctant to choose a sales tax,” says Sharon Faulkner, executive director of the American Car Rental Association, an industry lobbying group, because it immediately hits the wallet of all their constituents. Instead, “they try to hide it from the consumer and charge it on the car rentals.” City and state leaders “are always looking for money from whatever source they can.”
For a nearly two-week rental from Enterprise at Boston’s Logan Airport last month, we paid six different taxes and surcharges. Here’s what we forked over cash for, and where our money went:
– Convention Center Surcharge ($10 per rental)
All vehicle rental transactions in the City of Boston are subject to this $10 “surcharge”, meant to help pay for the construction and renovation of convention centers in five Massachusetts cities. Taxing car rentals to pay for civic projects like convention centers or stadiums is a frequent practice. “It has to do with tourism,” says Faulkner, so politicians are happy to make tourists and business travelers pay.
– Vehicle License Recovery Fee ($2 per day)
It’s common practice to charge rental companies much higher fees to register and title their vehicles to increase revenue for motor vehicle departments. Some state legislatures allow car rental companies to pass on some of those costs directly to the customer in the form of license recovery fees.
– Parking Surcharge ($0.60 per rental)
– Customer Facility Charge ($6 per day)
– Concession Recovery Fee (11.11 percent)
These three are all related to the airport itself. Airports are expensive places to build and operate, particularly with huge unified car rental facilities and shuttle buses to move passengers around. To pay for those expensive services and billion-dollar buildings, airports charge car renters a wide variety of fees to cover their expenses.
– Sales Tax (6.25 percent)
The standard sales tax on all purchases in the state.
The charges for civic projects like convention centers and stadiums, as well as the increased licensing fees for rental cars, are particularly galling to the American Car Rental Association. It views the taxes as “discriminatory”, applied unfairly to one group of taxpayers—in this case, car rental customers. All these fees are likely to deter some folks from renting, meaning their overall profits decrease.
To fight this trend, the major car rental agencies have formed a trade group called Curb Automobile Rental Taxes, to direct consumers’ anger toward local governments and away from the rental agencies themselves.
“Those are the ones that we don’t have control over,” says Faulkner. “We don’t have a choice but to collect it and pay it to the appropriate county or state.” Some of the fees are set up to pay for a particular project, and legislatures promise that the fee will be eliminated when the project is completed. However, that seems to rarely happen, and the money is instead directed to a different project. New York State, for example, has an additional 6 percent state-wide “special” sales tax on the rental cars, in place since 1990, with an additional 6 percent “special supplemental” tax added in 2009 on cars rented in New York City and several surrounding counties.
So why don’t car rental agencies roll all these fees into the cost of the car rental itself? According to Faulkner, it’s so governments can make sure they’re getting all the money to which they are entitled. “It makes it easier for the municipality to audit,” she says. “The airport has to know that you’re paying your concession fees correctly, that the rental agency is not keeping any of these funds.”
And for those entities, car rentals are an easy target, Faulkner says. It’s, “Oh look! We can fund this, we can fund that, and they add another tax.”
This is the biggest reason why renting a car off-site from the airport, from a neighborhood rental outlet for example, is so much cheaper than the rental desk at the airport—renters don’t have to pay all the concession and facility fees that an airport requires. But good luck getting there without a car.
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