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.

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.