RALEIGH, N.C. — Cathryn Parsons has given a lift to a young woman on the way to her first day of work and rented her spare bedroom to honeymooners.
Parsons, the mother of a 7-year-old and three grown children, says applications like Lyft and airbnb provide her with an easy way to connect with people looking for a spare seat in her car or a spare room.
As such, she is a prime example of someone participating in “the sharing economy,” a market segment that is posing big questions for lawmakers as participants are frequently falling through cracks in tax, insurance and health and safety laws.
“I’m not trying to skirt the system. I’m just trying to make a few bucks,” Parsons said after a meeting of the General Assembly’s Revenue Laws Study Committee heard testimony Tuesday on ride-sharing and home-sharing services.
North Carolina has not yet made a run at regulating ride-sharing services such as Lyft or its main competitor, Uber, or apps such as airbnb and HomeAway. But senior lawmakers present at the committee hearing said they expected legislation to be filed in the session that begins in January.
That seems all the more likely because hotel owners, bed and breakfast inns, taxi companies and insurers are asking lawmakers to craft rules and regulations that level the playing field for those in legacy industries and those using new sharing-economy services.
There also seems to be a push from government entities, such as Raleigh-Durham International Airport, to clarify how they should treat the companies.
Taxi drivers, cities raise insurance, safety questions
People can use an app, a computer or a telephone to call for a ride from Taxi Taxi, a company the provides what many would think of as traditional taxi cab service. Michael Solomon, president of Taxi Taxi, said his fleet of Prius hybrids and minivans go through the same safety inspections that any other cab would.
“We believe the for-hire vehicle and the for-hire driver should meet the standards of the current code,” Solomon said.
Those standards include carrying commercial insurance and having commercial plates on their cars, standards he said that drivers for Lyft and Uber currently don’t have to meet.
“There’s clearly a double-standard, some might say selective enforcement,” he said.
The result, Solomon argues, is that drivers for ride-sharing companies can undercut the cost of drivers for traditional cab companies.
Representatives for the ride-sharing companies say they do provide insurance for their drivers. For example, when an Uber driver is ready to accept a customer, they turn on an application on their smartphones, said Rachel Holt, regional general manager for Uber.
“There is insurance from the time a driver turns on their app to the time their turn off their app,” Holt said.
That’s true up to a point, said Oyango Snell, state government relations counsel for the Property Casualty Insurers Association of America. While both Uber and Lyft provide coverage after a driver accepts a client, there is a gray area between the time the driver turns on the app and accepts a job. The companies, he said, provide contingency coverage that kicks in only in the case that a driver’s normal insurance coverage denies a claim.
He urged lawmakers to look to California as a model for how to write an insurance law that would alleviate those gaps.
Thomas Powers, a city attorney from Charlotte, said his city was concerned about safety issues related to the ride-sharing programs versus cabs. For example, he said, Charlotte had higher standards for background checks that could preclude someone from being a taxi driver. The city conducts special safety inspections for cabs, while most ride-sharing companies deem a car to be inspected if they get camera phone pictures and evidence of an annual state inspection, which is not as thorough as a cab inspection.
Some companies that are in the business of providing rides full time are beginning to use the cover of offering rides through the ride-sharing transportation network companies, TNCs, to avoid city regulations.
“What we’re seeing in Charlotte is companies that are traditional passenger vehicle-for-hire companies are claiming now to have pass and be exempt from all of our regulations,” Powers said.
Talk of having to carry commercial insurance or submit to expensive inspections worries Parsons, who says she’ll sometimes park after dropping her youngest child off at school and crochet while seeing if the Lyft app can find her a match.
“If you over-legislative this, if you make it difficult for me to do this kind of things, if you make it expensive … I just won’t do it,” she said.
Hotel owners worry about unfair competition
Doris Jurkiewicz, who owns The Oakwood Inn Bed & Breakfast in Raleigh, told the committee about having a former guest drop by to chat. The guest mentioned that she had thought about staying at the bed and breakfast again but couldn’t turn down the cheaper rate she found on a home-sharing service.
“What really got to me is she was holding a visitors guide from the City of Raleigh,” Jurkiewicz said. “As you probably know, the occupancy taxes that I collect from my customers fund the printing of that guide.”
In addition to collecting sales tax, she has to get health and fire inspections and pay property taxes on furnishings. Those added costs and requirements don’t necessarily attach to someone who rents a room through airbnb or a similar service.
“For all intents and purposes, these folks are in the same business as me, but they can easily undercut my prices,” Jurkiewicz said.
Under current North Carolina laws, homeowners who rent all or part of their home for more than 15 days are supposed to collect occupancy taxes. Enforcement is spotty to non-existent in most communities, however, legislative staff told lawmakers, and there’s a question as to whether the state can force a company such as airbnb to collect sales taxes because the company itself doesn’t have a physical presence in North Carolina.
Other questions arise for cities and towns that are responsible for regulating traffic and noise. When private homes begin to act like hotels, Trina Griffin of the legislature’s research division said, towns can have problems with increased calls for police or more cars overwhelming residential streets.
“They’ve created a gray area in the economy between hotels and private homes, cabs and private cars, even businesses and hobbies,” Griffin said.
Another potential problem revolves around basic health and sanitation standards. While someone who rents a hotel room can complain to the health department about unsanitary conditions, the health department has no way of inspecting or regulating private homes.
“There is no proposed legislation today, not from this committee for certain,” Rep. Julia Howard, R-Davie, said near the end of the hearing. “I would anticipate that a member might likely want to file said bill.”
It’s unclear what form that bill might take or which industries it might cover. Sen. Bill Rabon, R-Brunswick, said he was most concerned with making sure taxes were collected equitably across the various industries. Rep. Andy Wells, R-Catawba, suggested the state ought to lower taxes and regulations on hotels so there would be less of a difference between private home rentals and professional lodging establishments.
Meanwhile, different states and cities have used different approaches. For example, San Francisco recently passed a relatively permissive law to govern room-sharing services, while New York has placed very tight controls on them.
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