SJC to consider if car-sharing differs from car rentals
Turo sued for operating at Logan Airport
A VISITOR ARRIVING at Logan Airport books a rental car through Turo, an online platform that lets private car owners share their cars, for a fee, with drivers. The owner drops the car off at the airport, where the visitor picks it up.
Does the exchange amount to Turo operating a car rental business out of the airport? That’s the question the state’s highest court will decide, in a case that could have broader implications for how, if at all, the state chooses to regulate yet another entry in the burgeoning gig economy — peer-to-peer car-sharing services.
Turo is one of several sites – others include Getaround and Maven – that provide platforms for car-sharing. Someone who owns a car but doesn’t often use it can list their car for rent to someone who needs a car for a vacation or business trip. Some larger commercial fleets also use car-sharing platforms like Turo to advertise their cars.
The model – like other aspects of the gig economy – raises questions about whether Turo should be treated similarly to established car rental companies, like Enterprise or Hertz. The current court case addresses the narrow question of how a car-sharing platform can be used at the airport.
In January 2020, a Superior Court judge concluded that Turo was effectively operating a car rental business out of Logan Airport and ordered it to stop. Under the court order, Turo has stopped offering cars for rent at the airport. But its appeal is still pending before the SJC, which will hear arguments in the case Friday.
Massport argues that Turo is more than just a listing platform; it is actively engaged in the rental process and provides services to owners and renters. It provides vehicle owners with liability insurance, offers roadside assistance, has standard rental policies, screens customers, and retains a portion of booking fees.
Before the court order, Turo had a strong airport-based business, facilitating 4,700 vehicle handoffs at Logan in 2019. The handoffs are coordinated between the parties and can take place curbside at a terminal, in a parking lot, or elsewhere.
Turo says it is more like eBay, a marketplace that connects buyers and sellers without offering any goods itself. The company notes that Turo has no physical presence at Logan. “Although Turo’s online marketplace has disrupted the traditional rental car industry by permitting users to connect directly with each other, peer-to-peer, Turo’s business model is fundamentally different from rental car companies,” attorneys for Turo wrote in a court brief.
Turo claims Massport is trying to impose hefty fees on the company. According to Turo’s brief, Turo offered to settle with Massport and pay $3.25 per rental – the rate the airport charges Uber and Lyft cars for trips to the airport – but Massport officials refused.
The court case revolves around several technical legal issues. One is whether the federal Communications Decency Act – a law meant to regulate internet pornography – provides immunity to a website or app like Turo from being held liable for content posted by its users. In this case, the content in question is advertising a car through what the Superior Court judge deemed to be an unauthorized rental agency at Logan Airport. The SJC also has to decide whether Turo – by doing things like booking reservations and processing payments – was “aiding and abetting trespass” by a fleet of cars that advertised airport rentals, and whether that justified ordering Turo to stop advertising those cars.
The case has potentially larger ramifications for internet-based marketplaces. A group of internet technology advocacy organizations led by TechNet and joined by the video-hosting platform Vimeo filed a court brief supporting Turo. The groups argue that if an internet platform can be held liable for facilitating illegal acts due to content posted by others, it “poses a serious threat to the online economy and the economy as a whole.” A spokesman for TechNet declined to comment further.
In the two-year legislative session that ended Tuesday, several car-sharing bills were introduced but almost nothing became law.
The House, in its transportation revenue bill, passed language that would have regulated car-sharing. The bill would have set safety, insurance, and inspection standards for cars; required decals identifying cars; required transparent disclosure of rental rates; imposed record-keeping requirements; and established liability rules. It would have charged a state fee on car-sharing transactions. The bill also would have eliminated a tax exemption that lets rental companies avoid paying sales tax when they buy their fleets.
The bill came in response to a long-standing fight between Enterprise and Turo, in which the car-sharing company had been pushing for the elimination of the sales tax exemption on rental car companies, while the rental car company had been asking for more regulation and fees on car-sharing.
But the revenue bill, which also included a gas tax increase and other taxes and fees, was passed before the pandemic broke out. The Senate never took it up, with some senators arguing that with COVID-19, it is the wrong time to raise taxes.
Several standalone bills – to eliminate the sales tax exemption on rental cars and to impose new regulations on car-sharing – were never passed out of committees. Lawmakers involved in the issue said with the COVID-19 outbreak, regulating car-sharing never became a top priority.
The economic development bill that passed early Wednesday did include one item clarifying how car-sharing hosts and platforms can obtain insurance.
Sen. Jason Lewis, a Winchester Democrat, said he plans to reintroduce his bill, which would have imposed similar regulations on car-sharing to those imposed on ride-hailing services like Uber and Lyft, in the 2021 legislative session. “The bill will authorize the creation of a regulatory framework so that Massachusetts consumers can enjoy fair and consistent access to peer-to-peer car sharing services,” Lewis said.
Lou Bertuca, Turo’s head of government relations, said his company was happy that the Massachusetts House became the first legislative body in the country to pass a bill eliminating the sales tax exemption for rental cars, what Bertuca called a “loophole” that is costing the state $100 million a year. “Massachusetts is the first state to take this ball and run with it,” Bertuca said.
Enterprise officials say the sales tax exemption is similar to any other business that does not pay sales tax on goods it buys wholesale.Turo plans to work with lawmakers to file the bill again next year and push for its passage in the Senate. Bertuca said the company is open to talking about broader regulations on the industry – around a dozen states have already passed regulations on car-sharing companies – but “that conversation starts with the giant tax loophole rental car companies have.”