Colorado: Platform required to collect taxes and rental fee on car sharing arrangements

The Colorado Department of Revenue recently issued a private letter ruling to a taxpayer that was considering entering the vehicle-sharing or peer-to-peer car sharing business as a platform operator.  The taxpayer planned to create a website or application listing vehicles whose owners were willing to rent them out. Drivers would use the site to find and reserve vehicles and remit payment. The taxpayer would enter into contracts with both vehicle owners and drivers and would be the party billing drivers and collecting payments, as well as reimbursing the vehicle owners. The company requested guidance on its obligations to collect sales tax and the state’s daily rental fee should it choose to become a platform operator.

The Department first explained that because the taxpayer, not the vehicle owners, would be transferring possession and use of the vehicle to drivers, it would be considered the lessor of those vehicles.  As the lessor, the taxpayer would be required to collect sales tax on its short-term leases/rentals because the company would not have paid Colorado sales or use tax on the original vehicle purchase.  Under Colorado law, a daily vehicle rental fee of $2 per day is imposed on the rental of certain motor vehicles for thirty days or less. Although there is no statutory definition of a “rental,” the Department concluded that when drivers acquired the right to possess and use the vehicle from the taxpayer, that would constitute a rental and therefore the taxpayer would also be required to collect the daily vehicle rental fee.  Please contact Stephen Metz at 303-382-7177 with questions on PLR 20-001.