Texas has nation’s 3rd highest rental car tax rates

Texas finished in a tie for third in a Tax Foundation analysis of effective car rental excise taxes – ranked from highest to lowest.

Of the 44 states that have rental car excise taxes, Texas levies an effective tax rate of 10 percent on such rentals.

State and local government agencies have used rental car excise taxes to generate funds for projects such as sports stadiums, according to the Tax Foundation analysis. Because these rental car taxes are placed on top of other taxes and fees, including sales taxes and airport concession fees, consumers can pay taxes on their rentals of more than 30 percent, the study says.

Such levies represent an unstable taxation policy, since they allow a state to focus solely on a single industry and place most of the burden on out-of-state residents, according to the study. States that tax rental cars can also experience lower economic growth as travelers look to other strategies to avoid the excise tax, the foundation reported

Six states – Oregon, California, Idaho, Nebraska, Georgia and Ohio – do not levy excise taxes on rental cars.

Rental Car Excise Taxes by State

Rank State Effective Car Rental Excise Tax Rate
1 Minnesota 14.2%
2 Maryland 11.5%
3 (tie) Nevada 10.0%
3 (tie) Texas 10.0%
3 (tie) Arkansas 10.0%
3 (tie) New Jersey 10.0%
3 (tie) Maine 10.0%
3 (tie) Alaska 10.0%
9 (tie) New Mexico 9.0%
9 (tie) Vermont 9.0%
9 (tie) New Hampshire 9.0%
12 (tie) North Carolina 8.0%
12 (tie) Rhode Island 8.0%
14 (tie) South Dakota 6.0%
14 (tie) Oklahoma 6.0%
14 (tie) Kentucky 6.0%
14 (tie) Mississippi 6.0%
18 (tie) Virginia 6.0%
18 (tie) Michigan 6.0%
18 (tie) Pennsylvania 6.0%
18 (tie) New York 6.0%
18 (tie) Hawaii 6.0%
23 Washington 5.9%
24 (tie) Arizona 5.0%
24 (tie) Iowa 5.0%
24 (tie) Wisconsin 5.0%
24 (tie) Illinois 5.0%
24 (tie) South Carolina 5.0%
24 (tie) Connecticut 5.0%
30 (tie) Wyoming 4.0%
30 (tie) Montana 4.0%
30 (tie) Colorado 4.0%
30 (tie) Missouri 4.0%
30 (tie) Florida 4.0%
30 (tie) Indiana 4.0%
36 Kansas 3.5%
37 (tie) North Dakota 3.0%
37 (tie) Tennessee 3.0%
39 (tie) Utah 2.5%
39 (tie) Louisiana 2.5%
41 (tie) West Virginia 2.0%
41 (tie) Massachusetts 2.0%
41 (tie) Delaware 2.0%
44 Alabama 1.50%
45 (tie) Oregon 0.0%
45 (tie) California 0.0%
45 (tie) Idaho 0.0%
45 (tie) Nebraska 0.0%
45 (tie) Georgia 0.0%
45 (tie) Ohio 0.0%

Source: Tax Foundation

This article was first published by The Center Square.

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