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Accounting and Tax Tips Blog

Do Turo Owners Need to Pay Sales Tax?

Turo is a sharing economy service that allows you to list your car for rent. Renters can select travel dates and the location in order to rent your locally-owned car. However, if you plan to turn Turo into a serious business or even just to earn some extra income, you need to consider which taxes you might be responsible for before you begin. Here are a few questions and answers about to help you better understand your tax liabilities with regard to sales tax.

Do I Need to Pay Sales Tax?

If you live in a location that assess sales tax on renting activities, you will be required to pay sales tax from your earnings on Turo. However, if you are wondering if you will need to pay sales tax on a new vehicle that you purchase exclusively for business, then the answer is generally no.

How Much Sales Tax?

The amount of sales tax that you will pay will depend on the city or town in which you operate your Turo business. These rates can range from 0% in states that do not charge sales tax to as much as nearly 10% in other states that charge both state and local taxes. A breakdown of the states that charge rental car taxes and the departments that are responsible for collecting these taxes can be found here.

Where Do I Pay the Sales Tax?

Sales taxes are state and sometimes county and local taxes are paid to the appropriate revenue office based on where you live and operate your Turo business. Most states offer web file services that you can use to pay the sales tax owed from your Turo earnings.

If you do not expect to pay or collect any sales or use tax because you haven’t started to operate your Turo business yet or you have no earnings for a specific period, you may still be required to file a zero return.

What Happens If I Own 5 or More Cars? Can I Use Standard Mileage Deduction?

Whether you can use the standard mileage deduction depends on how the cars are used in your business. If you own 5 or more cars but you alternate using the cars at different times for business without all of them being in use at the same time by you and renters, you are not considered as using 5 or more cars and you may use the standard mileage deduction.

In this case, it doesn’t really matter how many vehicles you have as long as you keep clear records of the total number of miles driven for business. For 2016, the IRS standard mileage rate is 54 cents per mile for business miles driven.

That said, if you are using all of the vehicles that you own by driving one while the rest are rented out, you are not permitted to use the standard mileage rate deduction. However, you may be allowed to deduct your actual car expenses for that year, including depreciation, lease payments, maintenance and repairs, insurance, gas and oil, or vehicle registration fees.