Saturday, February 28, 2009

That Rental Car Taxes Issue

First off, well done to all of you. The responses to my questions about the byzantine rental car tax structure were fascinating. There's a huge amount of discontent and confusion out there about this particular area of taxes. In fact, I can't think of another area of consumer taxes that is as hard to figure out (cell phone bills maybe?) as the rental car universe. Taxes on food, retail goods and even hotel rooms seem elementary and straight-forward in comparison. There's obviously a broader story to be done here and I'm going to get into it soon, I hope.

In the meantime, I received via email a few explanations for what's going on in the examples I provided. The most conclusive response came from Pamela Levins, who just heard of me last weekend (can you imagine!??!) when I appeared on a weekly local gay radio program for which, sadly, there is no podcast edition available.

Anyhow, Pam worked out a calculation that makes the figures in the screen shots of that earlier post make sense to the extent that anything so ridiculous can make sense. She also attached a PDF of her handwritten calculations for each of the five examples which do, in fact, show that it checks out. If you want to see that, I'll happily email it upon request.

Before we get to Pam's explainer, here's two of the screen shots -- this is National and then Avis -- I showed before so you don't have to go back and look:

And here's Pam's explanation and commentary:

I figured out how the rates are applied and then applied them in a consistent manner to all of the companies. Here are the steps:
  1. Take base rate
  2. Add 10.2% of the base rate - Concession Recovery Fee
  3. Add 2% of the subtotal of the base rate + 10.2% of the base rate (2% of (#1 + #2)) - Clark County Rental Fee
  4. Add 2% of the base rate (2% of just #1) - Registration Recovery Surcharge
  5. Add 2% of the base rate (2% of just #1) a second time - Nevada Recovery Surcharge
  6. Add 6% of the subtotal of the base rate + 10.2% of the base rate (2% of (#1 + #2)) - Nevada Government Service Fee
  7. Add 7.75% of the subtotal of the base rate + the Concession Recovery Fee + Clark County rental Fee (7.75% of (#1 + #2 + #3)) - Clark County Sales Tax
  8. Add $9.00 ($3.00/day) - Customer Facility Charge
It does appear that all five companies followed these steps, but it would have been nice if they presented their calculations in a manner in which a consumer could follow the math. So, I don't think the rates are different from company to company. When Avis said the Concession recovery Fee was 10%, they had to be rounding in language only (they didn't think you or I would actually question them) since it appears they used 10.2%.

Although the companies don't appear to be deliberately overcharging, a couple of them did collect a little more than they should have, but they would probably tell us it was due to rounding. If one company rounds at each subtotal (stopping between calculations) while another keeps a running total in their calculator and only rounds at the end, then there will be a discrepancy. I guess the question would be, are the "extra" taxes collected by the dissimilar rounding techniques kept by the rental car company or paid to the government agencies that are collecting the taxes?

This is exactly why I don't let my mortgage company pay my taxes and insurance. I do it myself. Even a small overcharge to a consumer can turn out to a great deal of money when you multiply by the total number of consumers.

"Oh well, it's just the tourists getting overcharged" is not true, because all of us are tourists at some point. This is a Consumer Affairs issue. The companies should have to present their figures in a set format ... like lending forms (APRs) and labelling formats. However, this might cost some of these companies a great deal of money to revamp their computer systems. What I'd like to know is if there are are random audits of these companies by the governmental agencies collecting the taxes to verify the figures?

Thanks to Pam for this. I do wonder if anyone can answer this question in the comments section from luckydonut:

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?

For all the talk in DC of a passenger's bill of rights for air travelers, I do wonder if there's enough confusion and outrage out there for someone to demand car rental companies provide better accounting for their charges and the taxes and fees they collect.


Charles in Richmond, VA said...

How about having them explain what exactly is a;

Concession Recovery Fee

Clark County Rental Fee

Registration Recovery Surcharge

Nevada Government Service Fee

Customer Facility Charge

I know there is a charge by the airport if you are picked up there versus going to off site rental office. But the rest of it is nickel and dimeing the tourists.

Anonymous said...

If you can . . . don't rent at the airport! I don't let my mom rent at the airport anymore; I pick her up and bring her to a local Enterprise location; and we save hundreds of dollars because she visits about 4 times a year.