Well, we’re back for more on car-sharing. And why wouldn’t we be? The main car-sharing app, Turo, has 14 million active users with about 450,000 vehicles. This amounts to over 30 active users for every car in the inventory.
The trouble is the states with the highest population densities tend to be the worst to deal with in terms of registering cars. They have higher taxes, with local taxes on top of state and county, sometimes pushing well over ten or eleven percent. Also, most larger states require draconian smog testing that can cut your bottom line. Let’s see if we can cut through the noise and see how we can help you avoid these hefty fees.
Back Story: What Are Car Sharing Services?
Turo is not a car rental service, so let’s get that out front and center. Instead, Turo is a peer-to-peer software service that facilitates two parties interacting in the interest of commerce. In this case, the commerce is a car owner (you) renting your vehicle to a rentee.
Of course, the idea for Turo stems from the OG sharing platforms eBay (1995) and Airbnb (2007).
Turo was not the original name for the service. No, the original name was RelayRides, which launched in Boston in 2010.
Fast forward a few years, and RelayRides rebrands itself to the shorter and more catchy name Turo which also marked a shift in its business strategy away from short-term rentals to focus on long-term rentals.
Do what you will with this information, but Turo forbids listing the exact vehicle across more than one car-sharing platform. It seems a little excessive, but it’s their company, so they can do with it what they will.
Anyway, there are a few other car-sharing apps out there, but Turo is the big one.
Using Your Car for Turo
So, the way Turo works is that you use your car (or cars) to make some money. And why not? Most of us have an underutilized car or truck (or two or three). Renting it out is a low-impact way of getting it to contribute or at least help balance the books. It’s also a good reason for us to keep our cars, you know, clean and running instead of sitting.
Turo has become a popular way to pay for dream cars.
Here’s the deal: it doesn’t matter if you want to Turo your daily driver or underutilized spare car or you want to build up a car-renting empire. Turo can help you with your goals no matter what they are. But, of course, how you title, tag, and register your cars is on you - and some options are far more expensive than others.
Owning a Fleet of Cars For Car Sharing
Returning to our statement about high population density locations and their price tags, let’s talk about the impact of owning and operating a fleet of cars in Los Angeles. LA has a giant target painted on it because of its size and because it is (or at least was) a major tourist destination. Despite its flaws, it will probably remain an epic tourist location for generations to come, along with the Bay Area.
These are obvious locations for sharing services, especially car-sharing. However, LA is very strict about emissions testing and has some of the highest sales tax rates in the nation, coming in over ten percent in much of the area.
It can get costly quickly if you want to cash in on this, especially in the long term when you inevitably need to spend extra money on new parts just to pass smog again.
But here is a more specific example: sports cars and exotic cars.
Turo is well-known for renting high-end sports cars that you can’t get from traditional rental services. In turn, many supercar owners use Turo to pay for their dream cars. But it's much harder to get enough rental income to offset those ancillary expenses if you're in a high-tax area like LA.
Say your dream car is a Corvette Z06. And why wouldn’t it be? For a domestic car, the Z06 is pretty spicy.
670 horsepower.
0-60 in 2.6 seconds.
And a starting price of $105,300, but more realistically, about $120,000 with a decent set of options.
If you live in LA and want to rent this hoss out on Turo, you’ll have a bill for about twelve grand from the state treasurer. Ouch. So basically, that is another twelve bands you’ve got to include in the total cost of the car, which is another twelve thousand dollars you need to account for in rentals. That is a lot of rentals just to make up for sales tax - and if you charge too much, nobody will rent from you.
Now granted, you get some amnesty from smog checks for a few years in Cali, but you still have to pay the smog abatement fee instead of getting a smog check for the first eight years. I’m happy this isn’t extortion because it sure sounds like extortion. The abatement fee is negligible compared to the sales tax, but it is still a hassle, and once that car hits eight years old, it’s got to be smog-checked annually.
The smog check and eight-year abatement cycle isn’t a big deal if you plan on buying a fleet of new cars and only renting them for 3-4 years because you’ll never deal with emissions on those. But a car like the Z06? Yeah, that’s one you’ll probably be holding onto for a while - easily long enough to replace smog parts. Or if you go with an older Z06, like the venerated C6 years, you'll need to deal with smog immediately.
If You Live In a High Sales Tax State, Should You Register in Montana?
Well, it’s totally up to you where you decide to register your vehicles. It’s a misnomer that you must title or register your car in one specific state. That’s not the truth at all. For example, and we have referenced this many times, Vermont outright states that there is no requirement for you to be a resident of the state to register or title your car there.
Personal anecdote: while, as a whole, including groceries, gas, and real estate, my home state of Kansas is relatively cheap. However, my sales tax, including local riders, is 9.15%. That is almost as high as Los Angeles county! You better believe that if I were registering an expensive truck, I’d do it in Montana.
The point of that anecdote is that it isn’t just California or New York that will gig you with exorbitant sales tax; there are super high taxes in places you’d least expect it. Our Montana LLC registration program is precisely what you’ve been looking for to lower your bottom line and put tax dollars back to work for you.
Can You Have A Whole Fleet In A Montana LLC?
Of course! The great thing about using a Montana LLC registration program is that the LLC itself is a holding company. This means that it is not intended for revenue production; it is only a place to park assets, which works for you. No matter what you plan to put in the LLC, whether a single car, or a mix of cars, RVs, motorcycles, and UTVs, you can keep them all in the LLC. We have a program designed specifically for adding more vehicles, and we can even handle all your annual renewals on your behalf.
Dirt Legal Can Help
It’s a challenging world out there, and we’re here to make it a little better. Car sharing is a great idea, and it can be a great entrepreneurial venture, but sales taxes can suck you dry as you expand your fleet. Also, if you live in a state with inspections and smog checks, you can get seriously set back with a flunked inspection
Think about it: if you’re building and only have three cars and one of them flunks a smog test, you could easily be out one or two grand for repairs, plus one-third of your fleet is now eating into your reserves instead of producing revenue.
When you register in Montana, you can kiss sales taxes and inspections to the curb.
The Dirt Legal Advantage
Dirt Legal is your best option to get your cars on the road with the lowest hassle and fees. Whether you have a single car to car share on the side or are building an empire, we can help you out.
Check out our entire suite of title and registration services; you may be missing out on something that we can help you with!
John McCoy is a lifelong car and truck enthusiast and has a strong mechanical background off the road. He spent over 13 years in the U.S. Air Force as a crew chief, assigned to the B-1B Lancer, affectionately known as the Bone to those in the community, and the KC-135R Stratotanker. He resides on a small farm in Eastern Kansas where he (sometimes) enjoys fixing ancient farm equipment.