WASHINGTON—A new policy report from NetChoice reveals how taxpayers and consumers are coughing up $7 billion per year in tax loopholes and sneaky fees to subsidize big rental car companies.
“Big Rental’s Rules of the Road: Tax Loopholes & Sneaky Subsidies” details how rental-car conglomerates avoid paying $6.3 billion in sales taxes annually while also misleading customers with a state-sanctioned “Vehicle License Fee” (VLF), adding another $757 million to their bottom line.
“Big Rental has manipulated state legislatures for decades, winning sweetheart tax deals, shifting business expenses onto their customers, and burdening taxpayers and consumers with $7 billion a year in subsidies,” said Steve DelBianco, NetChoice President & CEO. “This report describes how big rental car companies operate in a protected bubble of subsidies, using misleading fees to boost their profits while skirting billions in taxes that every other business pays.”
DelBianco concluded: “It’s time to stop letting Big Rental off the hook at the expense of hardworking Americans.”
MAIN POINTS OF BIG RENTAL’S RULES OF THE ROAD:
- The rental-car industry receives over $7 billion annually in tax breaks, subsidies and hidden fees.
- Rental companies do not pay state sales tax on their fleet purchases, unlike individual consumers who must pay sales tax when buying a car. This tax break costs taxpayers approximately $6.3 billion annually and helps rental giants maintain high profitability. The loophole is particularly egregious because rental companies replace their fleets annually, compounding the subsidy year after year.
- Rental companies charge customers a “Vehicle License Fee” (VLF) to cover their fleet registration and licensing costs. The fee is deceptively labeled to appear like a government-imposed charge, but the fees paid actually go directly to rental companies. This scheme adds $757 million annually to Big Rental’s bottom line while misleading their customers.
- Some states are admirably cracking down. In 2023, Delaware banned rental car companies from charging VLFs separately in rental agreements, ensuring price clarity. New York’s governor twice vetoed legislation that would have allowed rental companies to charge deceptive Vehicle License Fees, because it means “less price transparency for consumers and higher costs.”
- NetChoice urges lawmakers to eliminate the sales tax loophole for fleet purchases and ban misleading add-on fees for consumers. More states should follow Delaware and New York’s excellent examples in protecting taxpayers and consumers from these Big Rental scams.
Read the full report here.
Please contact press@netchoice.org with inquiries.
Big Rental’s Rules of the Road: Tax Loopholes & Sneaky Subsidies