Taxation committee hears bill to end 3.5% vehicle rental excise tax and subject rental fleets to property tax

The House Committee on Taxation heard House Bill 2154, which would discontinue a 3.5% excise tax on vehicle rentals lasting less than 20 days and, beginning July 1, 2025, subject rental vehicles owned by car rental companies to property tax.

Adam, the reviser, told the committee the bill “would discontinue the excise tax that is currently imposed on the rental or lease of vehicles…commencing 07/01/2025, the 3.5% excise tax…would no longer be imposed.” He said the change would remove the current special property tax exemption that applies to rental fleets.

Kathleen Smith of the Department of Revenue said the fiscal effect would fall to local governments but could not be estimated because rental companies can choose where to register vehicles. “We can tell you the number of vehicles in the rental fleet system, which is around 15,000,” Smith said, and added, “The amount that was collected in calendar year '23 was around $6,500,000.”

Ryan Cagney, senior government relations manager for Turo (a peer-to-peer car-sharing company), testified as a proponent. He said the 1991 legislative change (SB 14) created a swap — an excise tax collected at point of rental in lieu of property tax — and argued the swap no longer matches current revenue flows: he cited Department of Revenue figures that the excise generates about $6.5 million annually while the property-tax exemption imposes an estimated $15 million annual loss to local governments. “HB 2,154 will hit a fair and level playing field by eliminating the excise tax placed on those renting vehicles in Kansas while reinstating the property tax on rental vehicles purchased and operated here in Kansas,” Cagney said.

Opponents, represented by Sean Miller, an industry witness, urged caution. Miller said a 1984 audit and later legislative decision led to the current excise approach because rental fleets often registered vehicles in low–property-tax states. He warned that reinstating property tax could prompt companies to register more vehicles out of state and could create auditing and administrative burdens, potentially reducing state and local revenue rather than increasing it.

Committee members pressed on practical effects. Representative Sanders asked whether rental companies are required to register vehicles in Kansas; Kathleen Smith said there is no such requirement unless the company has a bona fide place of business in Kansas. Representative Kessler and Representative Corbett asked about registration and insurance implications; Cagney said insurance questions depend on the owner’s insurer and described Turo’s coverage model for on-platform rentals.

The committee took no immediate vote on HB 2154; the hearing closed after testimony.