SN 96(11)

Motor Vehicle Rental Surcharge

This publication has been modified and superseded by PS 98(7)

PURPOSE:  The purpose of this Special Notice is to describe the surcharge that is imposed on each private passenger motor vehicle rented in Connecticut to a lessee by a rental company for a period of less than 31 days.

BACKGROUND:  The Connecticut General Assembly, during its 1995 session, enacted a motor vehicle rental surcharge that was to be administered, in part, by the Office of Policy and Management and, in part, by the Office of the Comptroller.  On December 26, 1995, the Secretary of the Office of Policy and Management and the Comptroller sent written notification describing the motor vehicle rental surcharge to every company that was licensed to lease or rent motor vehicles pursuant to Conn. Gen. Stat. §14-15.   The Office of  Policy and Management and the Office of the Comptroller have entered into an agreement with the Department of Revenue Services, under which agreement the duties and responsibilities that the General Assembly assigned to either the Office of Policy and Management or the Comptroller with respect to the motor vehicle surcharge have been assumed by the Commissioner of Revenue Services.

STATUTORY AUTHORITY:  1995 Conn. Pub. Acts 294, as amended by 1996 Conn. Pub. Acts 129.

EFFECTIVE DATE:  1995 Conn. Pub. Acts 294 is effective January 1, 1996 and is applicable to every private passenger motor vehicle rental for which the rental  period commences on or after January 1, 1996. 1996 Conn. Pub. Acts 129 is effective July 1, 1996 and is applicable to every private passenger motor vehicle rental for which the rental period commences on or after July 1, 1996.

DEFINITIONS:  For purposes of this surcharge:

Private passenger motor vehicle means every vehicle that is a "passenger motor vehicle," as defined in Conn. Gen. Stat. §14-1(a)(59), provided, "passenger motor vehicle" also includes any passenger motor vehicle that is designed to carry more than ten passengers including the operator but not more than fifteen passengers including the operator.  A private passenger motor vehicle may be registered either with the Connecticut Department of Motor Vehicles or with a similar department of another state.

Rental company means every company which is engaged in the business of renting (without a driver) motor vehicles in Connecticut and which maintains a motor vehicle fleet of five or more passenger vehicles that are available for rental purposes, but does not include a motor vehicle repair shop, as defined in Conn. Gen. Stat.§14-65e.  onn. Gen. Stat.§14-65e defines "motor vehicle repair shop" as meaning "a new car dealer, a used car dealer, a repairer, or a limited repairer, as defined in section 14-51, or their agents or employees."  Therefore, for every private passenger motor vehicle rental for which the rental period commences on or after July 1, 1996, any person, firm or corporation that is licensed, or required to be licensed, pursuant to Conn. Gen. Stat. §14-52 as a new car dealer, a used car dealer, a repairer or a limited repairer, is not a rental company for purposes of the motor vehicle rental surcharge, and shall not charge or collect the surcharge on any motor vehicle that it rents, even if the vehicle is not being rented in connection with a motor vehicle repair.  (This exclusion from the definition of "rental companies" of new car dealers, used car dealers, repairers or limited repairers does not extend to affiliated or related persons, firms or corporations that are otherwise rental companies but that are not themselves licensed, or required to be licensed, pursuant to Conn. Gen. Stat. §14-52 as new car dealers, used car dealers, repairers or limited repairers.)

A SECOND SURCHARGE TO BE IMPOSED ON RENTALS OF MOTOR VEHICLES:  A 3% rental surcharge is imposed on each private passenger motor vehicle rented in Connecticut by a rental company for a period of less than 31 days.  The surcharge is imposed on the total amount that the rental company charges the lessee for the rental of the vehicle. Every rental company is required to collect the motor vehicle surcharge from the lessee.  The rental contract must separately state the amount of the motor vehicle rental surcharge.  The 3% rental surcharge is subject to sales tax.  The rental surcharge must be added to the total amount the rental company charges the lessee for the rental of the vehicle, and the 6% Connecticut sales tax must be charged and collected on that sum.  The tourism account surcharge ($1 per day) is not included in the amount on which either the sales tax or the motor vehicle rental surcharge must be charged or collected.

EXAMPLE: A rental company leases a private passenger motor vehicle to a lessee for five days.  The total amount that the rental company charges the lessee for the rental of the motor vehicle is $40 per day.

Amount on which motor vehicle rental surcharge must be collected:

($40 multiplied by 5 days)                                                          $200.00
Motor vehicle rental surcharge (3%, or .03 multiplied by $200)            + 6.00
Amount on which sales tax must be charged and collected               $206.00
Sales tax (6%, or .06 multiplied by $206)                                        +12.36
        Subtotal                                                                          $218.36
Tourism account surcharge ($1 multiplied by 5 days)                          +5.00
            Total                                                                           $223.36

MOTOR VEHICLE RENTAL SURCHARGE IN ADDITION TO, AND NOT IN LIEU OF, TOURISM ACCOUNT SURCHARGE:  The motor vehicle rental surcharge is in addition to, and not in replacement of, the tourism account surcharge.

A new car dealer, used car dealer, repairer or limited repairer that is licensed or required to be licensed pursuant to Conn. Gen. Stat. §14-52 and, thus, that is not required to charge and collect the motor vehicle rental surcharge must nevertheless continue to charge and collect the tourism account surcharge on its motor vehicle rentals, if it is also licensed to lease or rent motor vehicles pursuant to Conn. Gen. Stat. §14-15.

ANNUAL REPORT BY RENTAL COMPANY OTHER THAN A NEW CAR DEALER, USED CAR DEALER, REPAIRER OR LIMITED REPAIRER:  Each rental company (other than a person, firm or corporation that is licensed or required to be licensed pursuant to Conn. Gen. Stat. §14-52 as a new car dealer, used car dealer, repairer or limited repairer) is empowered under 1995 Conn. Pub. Acts 294, as amended by 1996 Conn. Pub. Acts 129, to retain such portion of the motor vehicle rental surcharge actually collected, in the aggregate, on the rental of private passenger motor vehicles by the rental company to others during the calendar year that is less than or equal to the sum of (1) the amount of personal property tax actually paid, in the aggregate, to a Connecticut municipality or municipalities by the rental company on private passenger motor vehicles that were rented by it to others during such year and (2) the licensing, titling and registration fees actually paid, in the aggregate, to the Connecticut Department of Motor Vehicles by the rental company on private passenger motor vehicles that were rented by it to others during such year.

On or before February 15, 1997, and on every February 15 thereafter, each rental company must file a Form OP-383, Motor Vehicle Rental Surcharge Report, with the Department of Revenue Services, and pay over to the Department the portion of the motor vehicle rental surcharge actually collected, in the aggregate, on the rental of private passenger motor vehicles by the rental company to others during the preceding calendar year that exceeds the sum of (1) the amount of personal property tax actually paid, in the aggregate, to a Connecticut municipality or municipalities by the rental company on private passenger motor vehicles that were rented by it to others during such year and (2) the licensing, titling and registration fees actually paid, in the aggregate, to the Connecticut Department of Motor Vehicles by the rental company on private passenger motor vehicles that were rented by it to others during such year.

ANNUAL REPORT BY NEW CAR DEALER, USED CAR DEALER, REPAIRER OR LIMITED REPAIRER:  A person, firm or corporation that is licensed or required to be licensed pursuant to Conn. Gen. Stat. §14-52 as a new car dealer, used car dealer, repairer or limited repairer and, thus, that is not required to charge and collect the motor vehicle rental surcharge after June 30, 1996 may retain such portion of the motor vehicle rental surcharge that is actually collected, in the aggregate, on the rental of private passenger motor vehicles by the rental company to others during the first six months of calendar year 1996 that is less than or equal to the sum of (1) the amount of personal property tax actually paid, in the aggregate, to a Connecticut municipality or municipalities by the rental company on private passenger vehicles that were rented by it to others during the first six months of calendar year 1996 and (2) the licensing, titling and registration fees actually paid, in the aggregate, to the Connecticut Department of Motor Vehicles by the rental company on private passenger motor vehicles that were rented by it to others during the first six months of calendar year 1996.

On or before February 15, 1997, such new car dealer, used car dealer, repairer or limited repairer must file a Form OP-383, Motor Vehicle Rental Surcharge Report, with the Department of Revenue Services, and pay over to the Department the portion of the motor vehicle rental surcharge actually collected, in the aggregate, on the rental of private passenger motor vehicles by the rental company to others during the first six months of calendar year 1996 that exceeds the sum of:

1. the amount of personal property tax actually paid, in the aggregate, to a Connecticut municipality or municipalities by the rental company on private passenger motor vehicles that were rented by it to others during the first six months of calendar year 1996 and
2. the licensing, titling and registration fees actually paid, in the aggregate, to the Connecticut Department of Motor Vehicles by the rental company on private passenger motor vehicles that were rented by it to others during the first six months of calendar year 1996.

Such new car dealer, used car dealer, repairer or limited repairer must notify the Department of Revenue Services that such dealer or repairer is not required to charge and collect the motor vehicle rental surcharge after June 30, 1996 by checking the appropriate box on the Form OP-383.

RENTALS NOT SUBJECT TO SURCHARGE:  If a private passenger motor vehicle is delivered outside Connecticut to a lessee by a rental company, the rental is not subject to the motor vehicle rental surcharge even if the lessee ultimately drops off the vehicle in Connecticut. However, a rental is subject to the surcharge whenever a private passenger motor vehicle is delivered in Connecticut to a lessee, even if the lessee ultimately drops off the vehicle outside Connecticut.

A rental of a private passenger motor vehicle by an agency of the United States Government is not subject to the motor vehicle rental surcharge as long as the agency (and not one of its employees) is the lessee.  A rental  by an employee of an agency of the United States Government is subject to the surcharge, unless the rental company directly invoices and charges the United States Government agency for the rental, and the agency directly pays the rental company for such rental with a check drawn on its own account or with a credit card issued in the agency's name (not in the name of one of its employees).  Cash payment will not satisfy this condition.  (These rules with respect to motor vehicle rentals by the United States Government apply as well for tourism account surcharge purposes.)

If a private passenger motor vehicle is rented to a lessee for a period of 31 days or more, the rental is not subject to the motor vehicle rental surcharge.

If a motor vehicle other than a private passenger motor vehicle is rented to a lessee, the rental is not subject to the motor vehicle rental surcharge.

If a private passenger motor vehicle is rented to a lessee by a person that is not a rental company, the rental is not subject to the motor vehicle rental surcharge.  Therefore, if a private passenger motor vehicle is rented to a lessee for a rental period commencing on or after July 1, 1996 by a person, firm or corporation that is licensed or required to be licensed pursuant to Conn. Gen. Stat. §14-52 as a new car dealer, used car dealer, repairer or limited repairer, the rental is not subject to the motor vehicle surcharge.  However, a rental will be considered to be a rental by a person, firm or corporation that is licensed or required to be licensed pursuant to Conn. Gen. Stat. §14-52 as a new car dealer, used car dealer, repairer or limited repairer if and only if such person, firm or corporation is itself a party to the rental agreement, but will not be considered to be such a rental if such person, firm or corporation merely facilitates the rental of the private passenger vehicle by a lessee (whether or not its customer) from a third party that is itself a rental company.  For example, if a person that is licensed or required to be licensed pursuant to Conn. Gen. Stat. §14-52 as a repairer arranges for its customer to rent a private passenger motor vehicle from a third party rental company, and the rental agreement is between the customer and the third party, the rental will not be considered to be a rental by such repairer.

USE OF U.S. GOVERNMENT "I.M.P.A.C." CREDIT CARDS UNAFFECTED:  Subject to the conditions set out in PS 95(2), Retailer's Acceptance of U.S. Government "I.M.P.A.C." Credit Card for Purchases Exempt under Conn. Gen. Stat. §12-412(1), a rental of a private passenger vehicle by an employee or an agency of the United States Government using the I.M.P.A.C. credit card that is issued in the name of such employee is not subject to the motor vehicle rental surcharge.  However, a rental by an employee of an agency of the United States Government using an American Express or any other credit card issued in the name of such employee is subject to the surcharge.

DIPLOMATS UNAFFECTED:  Subject to the conditions set out in PS 93(2), Sales and Use Tax Exemptions for Diplomatic Personnel, a rental of a private passenger motor vehicle by a diplomat is not subject to the motor vehicle rental surcharge.

RENTALS SUBJECT TO SURCHARGE:  A rental of a private passenger motor vehicle by an agency of the State of Connecticut (or an employee of such agency) or a Connecticut municipality (or an employee of such municipality) is subject to the motor vehicle rental surcharge.  A rental by an agency of a state other than Connecticut or a municipality other than a Connecticut municipality is also subject to the motor vehicle rental surcharge.

Furthermore, a rental of a private passenger motor vehicle by an exempt organization is subject to the motor vehicle rental surcharge.  (An exempt organization means any organization that was either issued an exemption permit before July 1, 1995 by the Department of Revenue Services under Conn. Agencies Regs. §12-426-15, or any organization that is exempt from federal income tax under section 501(a) of the Internal Revenue Code and that has been determined, by a determination letter issued by the United States Treasury Department, to be an organization described under section 501(c)(3) or (13) of the Internal Revenue Code.)

EFFECT ON OTHER DOCUMENTS:  SN 93(10) and PS 93(2) are amplified.

EFFECT OF THIS DOCUMENT: A Special Notice is a document that announces a new policy or practice in response to changes in State or federal laws or regulations or to judicial decisions. A Special Notice indicates the Department's informal interpretation of Connecticut tax law and may be referred to for general guidance by taxpayers or tax practitioners. 

SN 96(11)
Motor vehicle rental surcharge
Issued: 8/1/96