Indianapolis

Indianapolis is a great city in many ways. Fans of automotive history (as we are) can always visit the Indianapolis Motor Speedway or the nearby Dallara IndyCar Factory. There are great new hotels built because the NCAA is headquartered (for now) in Indianapolis. And Indianapolis has a very nice airport when the airfare is right. But the members of the AutoSlash team who transit Indianapolis usually do so in our own cars, as we have an aversion to paying taxes that effectively add 50% to the "base" rate of our rentals. We also cringe a bit inside knowing that some of the sites best known in car culture excessively tax car culture! So how do the taxes in Indianapolis stack up and where do the funds go? And will we ever again have a sing along to Back Home Again in Indiana?


Jim Nabors was one of our reasons for watching the Indy 500 pre-race coverage.

Most of the Rental Taxes and Fees are Common

Governments and airports are not all that creative, and the rental car companies participate in the games set up by the governments and airports. It's a simple matter of self-preservation by the rental car companies, not always a sign of a willing conspirator. If a rental car company wants to operate at the airport, the rental car company will have to collect any taxes and fees that are mandated (and sometimes taxes and fees that are not mandated). The Enterprise example below shows how a renter with a two-day weekend rental can easily end up spending more than 45% above the base rate in taxes and fees.


There are a lot of percentages here (11.1, 7, 6, 4 ...).

Four of these taxes/fees are exceptionally common at airport locations. Those include the concession recovery fee, customer facility charge, vehicle licensing fee, and sales tax.

The Concession Recovery Fee is actually not required by the airport at all. However, the agreements at most airports state that rental car companies have to fork over 10% of their revenue just for the privilege of operating at the airport. The rental car companies don't want to give up 10% of their revenue. Instead, they add an 11.1% "Concession Recovery Fee". The rental car company keeps 100% of what they charge, the airport gets the 11.1% Concession Recovery Fee, and 10% of the rental car company's total revenue (100% + 11.1%) is ... precisely 11.1%. So a "Concession Recovery Fee" is a way to make the rental car company's commitment to the airport look more like a tax rather than a voluntary decision. Everyone does it.

The Customer Facility Charge (CFC) here of $4 per day is how the debt of the rental car facility is paid off. CFCs are indeed mandated by the airports, which have discovered an absolute racket. As a per-day fee, the CFC means a long-term renter pays far more for the consolidated rental car facility. The longer a renter is away from the site, not using the building, the more one pays for the building. We've joked in the past that this might be a way to save Amtrak and/or the U.S. Postal Service.

The Vehicle Licensing Fee (VLF) is the state allowing the rental car company to recoup part of the costs of licensing the rental car, even though licensing the rental car is a core function of a rental car company. At least this VLF is much smaller than in most states!

And Sales Tax is just a plain old sales tax. There's no way of getting around that 7%.

So What Are Excise Taxes, and Who is Marion? 

This is where the story of rental car taxes in Indianapolis diverges from most other cities. Before asking why there are two excise taxes on one purchase, it might be helpful to go back to an economics class and talk about excise taxes. Well, an excise tax is a tax that government(s) elect to put on specific goods or services. Two different government agencies have decided to explicitly tax rental cars, and that adds another question. Why? The airport's already taking their cut (Concession Recovery Fee and CFC), and the state's taking their cut (sales tax). 

The Marion Excise Tax

Some group of people in Indianapolis liked alliteration, butchered names, and non-parallel structure. That's how the "City-County Council Of Marion County And Indianapolis" came to exist. This is the group that raised their excise tax from 4 percent to 6 percent in 2013. Yet the funds go to another government entity, the Capital Improvement Board of Managers of Marion County, Indiana (CIB), which disburses the funds between the CIB and the City of Indianapolis. None of the revenue appears to go toward the CIB's black-and-white website, so what happens to the cash? Six percent on all rentals in Marion County (including Indianapolis) should be a decent pot of dough! And it is!

What does the Capital Improvement Board do? 

The CIB operates and/or owns the Indiana Convention Center, Lucas Oil Stadium, Bankers Life Fieldhouse, Victory Field, Virginia Avenue Parking Garage, and Capitol Commons, all located in downtown Indianapolis.

The corporate names of these facilities aren't the most widely known; the taxes help pay for the Indiana Convention Center plus the home stadiums of the Indianapolis Colts (NFL), Indiana Pacers (NBA), and the Indianapolis Indians (AAA affiliate of the Pittsburgh Pirates).

* Note: The massive Indianapolis Motor Speedway is a privately-owned facility, so not under the control of the government CIB.

Rent an Indy car (not an Indy Car) and you're helping to pay for the professional sports stadiums and Indiana Convention Center in the most stupidly convoluted tax scheme ever designed. The 6% Marion Excise Tax is more appropriately known as the "Marion County Supplemental Auto Rental Excise Tax" and is actually three separate taxes of 2% each. The tax originally started at 2% in 1997. Eight years later (2005), it was increased another 2%. Another eight years later (2013), it was increased another 2%. Rent a car in Indianapolis? We're willing to predict now that there will be another 2% increase in 2021!

And in the very special way of a "transparent" government agency, the tax is listed on the financial statements, with each 2% separated out for the "ease" of the reader:


The CIB reports the 6 percent tax as three different 2 percent taxes.

So what are these funds used for? Eleven-twelfths stay with the CIB, which has a mandate for how it "uses" each of the three taxes within its own budget and one-twelfth goes to the City of Indianapolis for public safety. But we're talking about a government agency. Have you ever seen the three-card Monte game in action? The CIB plays the legal game of three-tax Monte, and they are more than capable of ensuring all the proceeds of the rental car taxes disappear.

The first two percent can be used for anything except Lucas Oil Stadium and the Indiana Convention Center expansion:

The Original Marion County Innkeeper’s Tax, Original Marion County Food and Beverage Tax, Original Marion County Admissions Tax, Original Marion County Supplemental Auto Rental Excise Tax and the CIB’s Indiana Cigarette Tax receipts (collectively, the “Original Excise Tax Revenues”) are distributed to the CIB and are used to pay its outstanding obligations (other than those relating to LOS and the ICC Expansion) and otherwise further its operating purposes.

The second 2% pays for existing debt between 2005 and 2028 except Lucas Oil Stadium and the Indiana Convention Center expansion. After those 23 years, these taxes can only be spent toward Lucas Oil Stadium and the Indiana Convention Center expansion:

The 2005 Marion County Innkeeper’s Tax, 2005 Marion County Food and Beverage Tax, 2005 Marion County Admissions Tax, 2005 Marion County Supplemental Auto Rental Excise Tax and 2005 Regional County Food and Beverage Tax receipts and, starting in 2028 following retirement of the previously outstanding lease and bond obligations of the CIB, certain of the CIB’s original state and local assistance tax revenues (collectively, the “2005 New Tax Revenues”), are to be distributed to the CIB and used to pay obligations relating to LOS and the ICC Expansion. 

One-fourth of the third 2% goes to the City of Indianapolis for public safety, and three-fourths stay with the CIB for "operating expenses" at their facilities:

The new 2013 Marion County Admissions Tax and 2013 Marion County Supplemental Auto Rental Excise Tax receipts are to be distributed to the CIB and are restricted to paying operating expenses of the CIB facilities.
In connection with a Public Safety Support Agreement dated March 1, 2013, between the CIB and the Consolidated City of Indianapolis-Marion County, the CIB paid to the Consolidated City of Indianapolis-Marion County 100 percent of the revenue from these increases for the first twelve months the increases were in effect.  Thereafter, the CIB is to pay to the Consolidated City of Indianapolis-Marion County 25 percent of the revenue from these increases, but not to exceed $3,000,000 annually.  The term of the Public Safety Support Agreement extends to February 28, 2017 and thereafter automatically renews for additional four-year periods until terminated.

Once you're done with this carefully and confusingly constructed compilation (groups other than the City-County Council of Marion County and Indianapolis can use alliteration), there's the question of the other 4% Excise Tax!

The Other 4% Excise Tax

Oh, that? The final 4% excise tax is the State of Indiana's Motor Vehicle Rental Tax and goes directly to the Indiana Department of Revenue. And this tax -- while a smaller percentage of those Indy rentals -- is assessed across the entire state of Indiana. The purpose? This tax is a straight cash grab that doesn't really have any purpose other than being a cash grab. So when you visit Indiana, the residents should be very welcoming. Those who rent cars are paying a burden that those who don't rent cars get to escape.

Fees, facility charges, and taxes got you confused and/or down? The Fee Detective can explain. Send your query to feedetective@autoslash.com and we may feature your question in an upcoming post.

 

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