Tech firm sues S.F. over rental car status
Turo says it shouldn’t be covered by city’s airport taxes, rules
Turo, which arranges rentals of people’s personal cars, is suing San Francisco for trying to classify it as a traditional rental car company.
Like many disruptive startups, Turo, a selfstyled “peer-to-peer car-sharing company” headquartered in San Francisco, says its business is in a new category that doesn’t fit existing regulations. It says that just as Uber and Lyft aren’t taxi operators, Skype is not a telecom and eBay isn’t a retailer, Turo should not be burdened by an irrelevant label.
“We are not a rental car company; we are a tech company creating a platform to connect hosts (private car owners) to travelers,” said CEO Andre Haddad. “We don’t own, operate or maintain cars. The cars belong to our hosts.”
San Francisco City Attorney Dennis Herrera sued Turo last month for not heeding San Francisco International Airport’s fees and rules for
rental car companies, such as ones that ban curbside deliveries of rental cars. He’s seeking a court order to stop it from operating at SFO, as well as big penalties.
Turo’s countersuit, filed Friday in San Francisco Superior Court, says the city’s stance is unconstitutional and anticompetitive. It points to a 2010 California law that recognizes “personal vehicle sharing programs” as a new entity as long as car owners don’t make more money than their expenses, such as loan or lease payments, fuel and maintenance.
John Coté, a spokesman for Herrera, dismissed that argument. “You don’t get a special set of rules just because your business includes a Web platform,” he said in an email. “You still have to play by the same rules as everybody else.”
Coté pointed to Turo’s promotional materials, also referenced in the city’s lawsuit, touting its SFO rentals.
“Turo is trying to have its cake and eat it too,” he wrote. “They market themselves to customers as a superior form of rental car company and then turn around in court and say they’re not a rental car company. They advertise SFO service and then turn around and say they don’t operate at the airport. Turo’s goal in these tactics is simply to avoid paying their share of the fees their competitors pay.”
But Turo says that its airport use is far more minimal than that of traditional rental car companies, which pay $18 per rental for the AirTrain people mover, plus 10 percent of receipts (as well as rental fees for airport space they occupy). “Our renters don’t use the AirTrain and aren’t at the (rental car) counters, so I don’t think that price is fair,” Haddad said. Turo wants to pay a per-rental fee of a few dollars, similar to the $3.80 per trip that Uber and Lyft drivers pay.
Turo contends that San Francisco’s lawsuit, as well as dozens of pending statehouse bills to classify it as a rental car company, stem from a conspiracy by Enterprise, the nation’s largest car rental company. Although Turo and similar peer-to-peer rental companies such as Getaround are still small by comparison, Turo says Enterprise wants to crush the nascent industry now before it becomes a competitive threat.
Enterprise, which owns the Alamo and National car rental brands, said that’s not so, and Coté, the spokesman for Herrera, dismissed Turo’s claim as “fiction.”
“We were an industry disrupter ourselves 60 years ago when Enterprise began renting cars in neighborhoods while our competitors remained at the airport,” said Enterprise spokeswoman Laura Bryant in an email. “So we intuitively understand and appreciate the challenges of being a startup in a highly competitive marketplace . ... However, we believe the playing field should be level and fair for everyone involved in ground transportation — and that is especially true when it comes to safety issues like designated pickup airport locations as well as any legal restrictions concerning manufacturer vehicle recalls.”
If Turo were deemed equivalent to Enterprise and its ilk, it would have to add taxes on top of the rental fees that travelers pay, thus driving up the costs of its rentals, which generally are cheaper than those from traditional rental companies.
But Turo says that Enterprise and the like enjoy several tax benefits that Turo and the people who rent out their vehicles do not have. When rental companies buy cars, and when they resell them, they are excused from some taxes, which add up to billions of dollars a year for the industry, according to Michelle Fang, Turo general counsel.
But the private individuals whose cars comprise Turo’s “fleet” must pay these taxes when they buy or sell a car, the company said. Turo gives car owners in its network 1099 tax forms so they can pay income taxes on their rental earnings.
Alameda resident David Chu, a car enthusiast, first discovered Turo as a way to rent nice cars — a Maserati Ghibli, a Mercedes-Benz AMG GT S and an Alfa Romeo 4C — for special occasions. In December, he bought a new 2018 Suburu WRX STI and has since rented it out via Turo for about six weekends, helping cover its expenses.
“Turo doesn’t use the airport facilities such as the AirTrain or car rental counters” like rental car companies, he said. “I don’t think it’s fair to charge them as much; eventually it would affect us, the hosts. I’m receptive to lesser fees as a compromise to the solution.”