Wednesday, February 25, 2009

Can Someone Explain This To Me?

I was looking to rent a car at McCarran for a visiting friend and went to various websites for prices. For some reason -- and I never do this -- I looked carefully at what the taxes are that people coming to Las Vegas pay for their car rentals.

The numbers don't add up. Would somebody with a good math brain help me out? The guiding figure here is supposed to be the base rate, right? You don't pay taxes on other taxes, do you?

Take National, for instance. The base rate for this reservation is $145.77. Here's the tax breakdown that they provide:

See the Sales Tax line? It says it's 7.75 percent, but $12.68 on $145.77 is actually 8.70 percent. And why are three 2 percent taxes listed here but the third one is different and actually works out to 2.2 percent? And how about that 6 percent "Nv Gvt Svc Fee"? At $9.64, you're being charged 6.6 percent.

This also seems to be the case for Alamo, owned by the same company. Here's their breakdown on a base rate of $125.70.

Again, the amount charged for sales tax is actually 8.7 percent of the base rate, the third 2 percent tax is actually a 2.2 percent tax and the Nv Gvt Svc Fee listed as 6 percent is actually 6.6 percent of the base rate.

In neither case does the breakdown indicate what percentage the Concession Recovery Fee is supposed to be. Yet on this breakout from Avis, It says it's 10 percent.

Going back to do that math on National and Avis, then, we see that those companies are charging 10.2 percent. And although the list of taxes looks a little different here, in both the Alamo/National and Avis cases, assuming a 10 percent rate for the Concession Recovery Fee, the total rate in both cases comes to 29.75. (This does not include the $3/day "facility charge" because that is based per day and not as a percentage.)

But take another look at what Avis charges for the only thing it breaks out alone, the 9.75 percent "tax." They charge $18.89 on a base rate of $167.97. But that's actually 11.25 percent, not 9.75 percent.

How about Hertz? Here's their breakdown, which omits any indication of any percentages. The base rate here is $208.47.

What do we see? Well the good news is that the "Gov Service Fee" that we were told in the other breakdowns is supposed to be 6 percent turns out to be... 6 percent of the base rate. But other than that, Hertz' breakdowns are baffling and vague. The "Airport Concession Fee Recovery" fee is 10.4 percent of the base rate and the undefined "Taxes" line comes to 11.2 percent of the base. These figures have no evident relation to any specific taxes.

I tried Thrifty. Here's what happened over there:

Once again, the numbers are off. A 4 percent charge on a $124.05 base charge, for instance, ought to come to $4.96, not $5.32. A 7.75 percent state tax ought to come to $9.61, not $10.31.

In fact, the only tax in Thrifty's summary that is accurate is the 10 percent "APT Access Rec Fee" -- it really is $12.40 on a $124.05 charge. (Actually, if we were rounding up, it would've been $12.41, but they gave us the penny.) I'm starting to think that's because most people can actually calculate a 10 percent charge in their head and they wouldn't want us to spot these overcharges too easily.

What all five have in common is that their stated taxes, which in some cases are bunched together and called different things, comes to a total tax rate of 29.75 percent plus the $3/day facility charge.

And yet, here are the actual percentages of the base rate charged in each case, again leaving off the $3/day facility charge:

Avis: 32.25 percent
Hertz: 31.6 percent
National: 31.7 percent
Alamo: 31.7 percent
Thrifty: 31.98 percent

What am I missing here? How can these rates be different from one company to the next?

Anybody out there have any thoughts? Are these companies deliberately overcharging taxes and keeping the extra? The fact that that 10 percent charge in the Thrifty computation works out correctly when applied to the base rate would seem to kill the theory that the percentages aren't based on the base rate. And, anyway, what else would they be based upon?

Don't know about you, but my head hurts.


Ray said...

The difference you're seeing is that some of the extras are subject to sales tax too, above and beyond the base rate. E.g., the concession recovery fee, which is just them gouging you for the costs charged them by the airport authority to have a facility there on the grounds. Same with licensing fees, facility charges, access fees, etc. It's a fairly deceptive practice, since it lets them *appear* to have a lower base rate. I expect if you plug those extras into the calculator, then calculate the sales tax, you'll see numbers that look correct.


Ray - I tried your theory. Here's the problem. Take the Thrifty example. They're charging $10.31 and saying that's 7.75 percent of the taxable charges. Which means the base rate would actually be $133.03. That's $8.98 more than the stated base rate. But there isn't anything in the rest of the figures that makes any sense of that difference, either. For a moment I thought it was the $3/day facility charge, which is $9. But then I tried that with Alamo and it didn't work out so neatly.

Also, how would one explain the three 2 percent taxes in which one of those 2 percents is actually 2.2 percent? What "extra" would bump up the outcome by 0.2 percent?

Anonymous said...

Could rounding account for some of the differences?
If two companies each round in the opposite direction on each charge by the time it totals up at the end they could show different results, especially the ones that are within a couple tenths of a percentage point.
There's not much difference between 31.6, 31.7 and even 31.98. 32.25 is a bit of an outlier, but not by all that much.

James in Tokyo said...

Rounding errors shouldn't account for more than a penny or two of each charge. Computers are supposed to be good at this.

I think Ray is onto something, since if you multiply the 29.75% supposed total tax rate by the 7.75% state tax rate, you get around a 32% rate. But the numbers still don't match the way they should.

Steve, this is very interesting. I think you should use/abuse your authority to get to the bottom of this. I bet if you call them up and say you're a writer for the NYT covering LV stories and it appears that their online reservation systems are significantly overcharging vegas rental cars, you'll eventually get someone on the line who will be more than happy to go through all the charges and how they are figured.

Maybe the BBB might be worth asking? It might be a semi-FAQ that they will have a definitive answer ready for.

matt said...

I bet it has to do with the "fees" like Ray is saying are taxable items. These fees may not even be required, so they might have different amounts (ie each company can charge a range for the type of fee they are charging). I smell a good investigative story and possibly lawsuit.

Anonymous said...

renting a car from the airport, hotel taxes, taxi surcharges to/from the airport are all tagged to hit the tourist/businessperson visiting cause they're not usually hitting the people living in the area. it's the same no matter where you go. if you want to try other cities, try renting from LAX or MCO (Orlando). Taxes are out of control.

Anonymous said...

Ironically, you had a post the other day about the effects of tacking on an additional 3% tax for hotel rooms. What's the big deal here? It's just more of the same, isn't it?

Try Phoenix sometime those taxes and fees add up to a third to the base rate. It's robbery.


dutchvegas said...

Steve, your head hurts?? Well i tried to calculate al the numbers and hoped i would find a match for the tax numbers. But no, it seems very strange. I hope they (read car rental company) have a good story. Pretty strange..

Daniel said...

I just rented/reserved a car from Thrifty for two days in April and the taxes added up to almost 50% on top of the base rate. Couldn't believe it. Part of the reason is that by renting the cheapest car they offered, the $3 per day license fee figures to be a higher percentage than it would be on a more expensive car. Grrrrr!

Anonymous said...

It is interesting that the stated tax dollar amount ALWAYS favors the car rental company. This is not randum or chance. The amounts are always more, not less than the % that it should be... just another way to get a few extra dollars out of you....

Jinx said...

I can't add anything to the discussion besides the agreement that the taxes for rentals is insane everywhere. In Vegas alone, with low rates per day, taxes seem high, but it's only because the tax adds an extreme percentage in comparison due to their low rates. I'll be very interested in hearing what the explanations of it are though.

Anonymous said...

I live in Austin, Texas, and these rental agreements look like my cable/phone/computer bill from Time-Warner...about ten lines with various fees and taxes added on. My old AT&T phone bill looked the same as well. Simply out of control...

Bob Bradley said...

If these base rates had a discount attached that could affect the sales tax numbers. If the rental franchise gets reimbursed by the national company for the discount, I believe they have to charge sales tax on the full non discounted amount. If the local franchise is discounting on their own, they would have to charge sales tax on the net amount after discount.

On the first two examples the recovery charges are 2% of base. The Clark County Rental Fee is 2% of base plus facility charge. The Govt Service fee is 6% of base plus facility charge plus 2 recovery charges.

luckydonut said...

Hertz recently tried to sting me on a "Location Service Charge", which was listed as included in a prepaid rental and then charged to my credit card again after I returned the car.

I got this refunded but as I queried the bill in detail, this was also part of their response:

"The remaining charge on your invoice is $57.88USD. This charge is for the Additional Driver and also 15.75% Tax on top of the charge."

15.75% - any guesses?

Anonymous said...

The ACRF was introduced in L.A. as a way to generate income for the LAWA projects. It was an agreement to that allowed the rental companies to advertise cheaper prices in exchange for this money and the cheaper prices would provide higher volume. Previously L.A. prices appeared much higher than other places. the fee is 10% but the normal "add on" is 11%. however I cant remember the exact math to do that but I saw it somewhere and then the 2% tourism fee is sometimes added and it is usually 11-13% charged. Only the 10 companies at LAX are charged because they are provided direct access and a location for pickup these fees other are not.

However there is one company "Deluxe Rent A Car" who does not pay this charge... yet charged customers 11-27% in these bogus charges on up to 450 cars per day for almost 2 years.

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