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@NCCapitol

Ride-sharing, home-rental services on lawmakers' radar

Posted November 18, 2014

— Cathryn Parsons has given a lift to a young woman on the way to her first day of work and rented her spare bedroom to honeymooners. 

Parsons, the mother of a 7-year-old and three grown children, says applications like Lyft and airbnb provide her with an easy way to connect with people looking for a spare seat in her car or a spare room.

As such, she is a prime example of someone participating in "the sharing economy," a market segment that is posing big questions for lawmakers as participants are frequently falling through cracks in tax, insurance and health and safety laws.  

"I'm not trying to skirt the system. I'm just trying to make a few bucks," Parsons said after a meeting of the General Assembly's Revenue Laws Study Committee heard testimony Tuesday on ride-sharing and home-sharing services. 

North Carolina has not yet made a run at regulating ride-sharing services such as Lyft or its main competitor, Uber, or apps such as airbnb and HomeAway. But senior lawmakers present at the committee hearing said they expected legislation to be filed in the session that begins in January.  

That seems all the more likely because hotel owners, bed and breakfast inns, taxi companies and insurers are asking lawmakers to craft rules and regulations that level the playing field for those in legacy industries and those using new sharing-economy services. 

There also seems to be a push from government entities, such as Raleigh-Durham International Airport, to clarify how they should treat the companies. 

Taxi drivers, cities raise insurance, safety questions 

People can use an app, a computer or a telephone to call for a ride from Taxi Taxi, a company the provides what many would think of as traditional taxi cab service. Michael Solomon, president of Taxi Taxi, said his fleet of Prius hybrids and minivans go through the same safety inspections that any other cab would. 

"We believe the for-hire vehicle and the for-hire driver should meet the standards of the current code," Solomon said.

Those standards include carrying commercial insurance and having commercial plates on their cars, standards he said that drivers for Lyft and Uber currently don't have to meet. 

"There's clearly a double-standard, some might say selective enforcement," he said. 

The result, Solomon argues, is that drivers for ride-sharing companies can undercut the cost of drivers for traditional cab companies.

Representatives for the ride-sharing companies say they do provide insurance for their drivers. For example, when an Uber driver is ready to accept a customer, they turn on an application on their smartphones, said Rachel Holt, regional general manager for Uber. 

"There is insurance from the time a driver turns on their app to the time their turn off their app," Holt said. 

That's true up to a point, said Oyango Snell, state government relations counsel for the Property Casualty Insurers Association of America. While both Uber and Lyft provide coverage after a driver accepts a client, there is a gray area between the time the driver turns on the app and accepts a job. The companies, he said, provide contingency coverage that kicks in only in the case that a driver's normal insurance coverage denies a claim. 

He urged lawmakers to look to California as a model for how to write an insurance law that would alleviate those gaps. 

Thomas Powers, a city attorney from Charlotte, said his city was concerned about safety issues related to the ride-sharing programs versus cabs. For example, he said, Charlotte had higher standards for background checks that could preclude someone from being a taxi driver. The city conducts special safety inspections for cabs, while most ride-sharing companies deem a car to be inspected if they get camera phone pictures and evidence of an annual state inspection, which is not as thorough as a cab inspection. 

Some companies that are in the business of providing rides full time are beginning to use the cover of offering rides through the ride-sharing transportation network companies, TNCs, to avoid city regulations.  

"What we're seeing in Charlotte is companies that are traditional passenger vehicle-for-hire companies are claiming now to have pass and be exempt from all of our regulations," Powers said. 

Talk of having to carry commercial insurance or submit to expensive inspections worries Parsons, who says she'll sometimes park after dropping her youngest child off at school and crochet while seeing if the Lyft app can find her a match. 

"If you over-legislative this, if you make it difficult for me to do this kind of things, if you make it expensive ... I just won't do it," she said. 

Hotel owners worry about unfair competition

Doris Jurkiewicz, who owns The Oakwood Inn Bed & Breakfast in Raleigh, told the committee about having a former guest drop by to chat. The guest mentioned that she had thought about staying at the bed and breakfast again but couldn't turn down the cheaper rate she found on a home-sharing service. 

"What really got to me is she was holding a visitors guide from the City of Raleigh," Jurkiewicz said. "As you probably know, the occupancy taxes that I collect from my customers fund the printing of that guide." 

In addition to collecting sales tax, she has to get health and fire inspections and pay property taxes on furnishings. Those added costs and requirements don't necessarily attach to someone who rents a room through airbnb or a similar service. 

"For all intents and purposes, these folks are in the same business as me, but they can easily undercut my prices," Jurkiewicz said. 

Under current North Carolina laws, homeowners who rent all or part of their home for more than 15 days are supposed to collect occupancy taxes. Enforcement is spotty to non-existent in most communities, however, legislative staff told lawmakers, and there's a question as to whether the state can force a company such as airbnb to collect sales taxes because the company itself doesn't have a physical presence in North Carolina.

Other questions arise for cities and towns that are responsible for regulating traffic and noise. When private homes begin to act like hotels, Trina Griffin of the legislature's research division said, towns can have problems with increased calls for police or more cars overwhelming residential streets.

"They've created a gray area in the economy between hotels and private homes, cabs and private cars, even businesses and hobbies," Griffin said. 

Another potential problem revolves around basic health and sanitation standards. While someone who rents a hotel room can complain to the health department about unsanitary conditions, the health department has no way of inspecting or regulating private homes. 

"There is no proposed legislation today, not from this committee for certain," Rep. Julia Howard, R-Davie, said near the end of the hearing. "I would anticipate that a member might likely want to file said bill."

It's unclear what form that bill might take or which industries it might cover. Sen. Bill Rabon, R-Brunswick, said he was most concerned with making sure taxes were collected equitably across the various industries. Rep. Andy Wells, R-Catawba, suggested the state ought to lower taxes and regulations on hotels so there would be less of a difference between private home rentals and professional lodging establishments. 

Meanwhile, different states and cities have used different approaches. For example, San Francisco recently passed a relatively permissive law to govern room-sharing services, while New York has placed very tight controls on them.

12 Comments

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  • miseem Nov 19, 2014

    Right. Let's keep whittling away at the tax system until the few regular businesses give up and leave. Because everyone knows that 90% of our tax money is wasted. Let's allow a farmer to collect trash and dump it on his land, with no regulations, fees or taxes. Let the people decide if they want to risk staying in an uninspected and unlicensed non-taxpaying residence. Then let the people load up on guns even more because we can't fund police, grab their shovel and wheelbarrow when we can't fix the potholes in their roads, quit their job so they can home school their kids, gripe about the guy next door with 10 junked cars, dumping oil and antifreeze in the ditch from his part time mechanics job, close down the museums and parks, and wonder why no one wants to stay in the back room of their house despite those great rates they charge. Them regulations and taxes will be the death of us yet.

  • Wheelman Nov 19, 2014

    View quoted thread



    The free market is supposed to be a level playing field. If one party is subject to taxes and fees and the other isn't, then that is not a level playing field.

  • Eq Videri Nov 19, 2014
    user avatar

    This is an issue of fair treatment for established businesses that follow the laws and rules.

    If the clever entrepreneurs aren't regulated, then deregulate everyone -- and let consumers suffer the consequences.

  • sww Nov 19, 2014

    Isn't it buyer beware? If you use an unregulated service then you can't really complain when or if it's not up to the standards of the regulated ones. People may prefer to take their chances and not have the providers regulated and end up costing more.

  • Sally Bethune Nov 19, 2014
    user avatar

    I think airb&b does send the federal government what you make and the federal tax rate is 25%. People are financially hurting. If they have a resource, such as their home, why not use it to make ends meet.
    I love it that hotels and taxi services want a level plying field. They HAVE it, it's called lobbyist. Must the average citizen pay taxes for everything while big corporations and rich people get tax breaks. NC government makes me sick. We now have to pay taxes on charity tickets. Maple View Ice Cream in Orange Co. now has to pay taxes for their annual Christmas hay ride which is designed to collect toy for the Toys for Tots program. First Night in Raleigh now has to charge taxes for their tickets. Is there any where that a middle class person has a tax free opportunity?!

  • Rebelyell55 Nov 19, 2014

    It's all about money, they got it and the goverment wants it.

  • Jim Frei Nov 19, 2014
    user avatar

    I thought repubs wanted LESS government.

  • unaffiliatedvoter2 Nov 19, 2014

    Just say NO to more regulations! BandB owners can cut their prices to match the competition! That's the FREE MARKET at work...STRIVE to be SMARTER than the democrats WANT you to BE !!!

  • SmarnyPants Nov 18, 2014

    more government, more regulation, big business wins again

  • less_govt_is_better_govt Nov 18, 2014

    I like the comment about lowering the tax burden on these businesses but I am sure the government would turn up their nose at that idea.

    They should just create more laws and tax codes because that always fixes the problem right?

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