Instead of renting a vehicle from a traditional rental company, consumers can now book privately owned vehicles through digital platforms. This business model, commonly known as peer-to-peer (P2P) vehicle sharing, has blurred the traditional distinction between private vehicle rentals, commercial car rental businesses, and marketplace-facilitated transactions.

Consequently, US state tax authorities have faced a new challenge: how should these services be taxed? In response, states have introduced or clarified specific tax rules for vehicle-sharing transactions. The result is a more complex environment in which the applicable tax may depend on the state, rental duration, vehicle ownership and tax history, and the platform’s role in the transaction.

The Rise of Peer-to-Peer Vehicle Sharing

P2P vehicle sharing allows private vehicle owners to rent their underused cars directly to other individuals through digital platforms and mobile apps. Instead of purchasing and maintaining a vehicle, users can access cars when needed, whether for a few hours, a day, or longer. As such, this model is particularly attractive in cities where vehicle ownership is expensive, and parking, congestion, and traffic are major problems.

The market is expanding rapidly, driven by changing attitudes toward car ownership, urban congestion, technological innovation, and the growth of the sharing economy. The global market was valued at approximately USD 2.5 billion in 2024 and is expected to reach USD 7 billion by 2030.

Technology is integral to this business model, as platforms increasingly use GPS tracking, telematics, IoT-enabled keyless entry, digital identity verification, automated payments, user ratings, and AI-powered pricing systems to make vehicle sharing more convenient and secure. Connected-car technology also enables real-time mileage tracking, remote diagnostics, theft prevention, and automated access, reducing administrative work for both vehicle owners and renters.

Regulatory and policy developments have followed the industry’s growth. Incentives such as dedicated parking spaces, tax benefits, or exemptions from congestion charges to encourage shared mobility are accompanied by increasing legislation regulating P2P vehicle-sharing facilitators.

Marketplace Facilitator Laws and Vehicle Sharing

The development of P2P vehicle-sharing regulations in the US has been influenced by two main factors: the success of sharing-economy businesses such as Uber, Lime, Bird, and Airbnb, and the US Supreme Court’s 2018 South Dakota v. Wayfair decision.

Uber, Lime, Bird, and Airbnb introduced new business models that did not fit neatly within existing legal and tax frameworks, forcing state regulators to adapt. In addition, the 2018 Wayfair decision changed the rules for sales tax collection. More specifically, the Supreme Court confirmed that states can require businesses to collect sales tax even when they have no physical presence in the state, provided they have sufficient economic nexus, such as reaching a certain level of sales or transactions.

While the Wayfair ruling focused on remote sellers rather than vehicle sharing specifically, its principles have supported the expansion of marketplace facilitator laws. Under these laws, platforms may become responsible for collecting and remitting taxes on transactions conducted through their marketplaces. Because P2P vehicle-sharing platforms can establish economic nexus in states where their users and transactions are located, they may be classified as marketplace facilitators. 

Sales Tax, Rental Tax, and Motor Vehicle Lease Taxes

More than half of US state legislatures have introduced or changed regulations in these areas. However, states have adopted different approaches to taxing P2P vehicle sharing, reflecting the fact that these services do not always fit neatly into traditional vehicle rental tax systems.

While some states regulate these transactions under sales and use tax rules, others classify them under miscellaneous or excise taxes. Essentially, there are three main approaches: establishing a separate tax regime, applying the same tax as traditional rental cars, or subjecting P2P vehicle sharing to sales and use tax rules.

A Separate Regime

In 2020, Virginia introduced specific Vehicle Sharing Tax rules for P2P vehicle-sharing platforms, making them responsible for collecting and remitting tax when they meet the state’s marketplace facilitator thresholds. This connects the Vehicle Sharing Tax with the state's sales and use tax and marketplace facilitator rules and regulations. The legislation also introduced several other responsibilities, including requiring vehicle owners to provide the necessary certification and explaining how owners can become certified.

Notably, the Vehicle Sharing Tax is distinct from Virginia’s traditional Motor Vehicle Rental Tax and Fee, under which vehicle sharing had previously been treated. The tax rate was initially set at 6.5% from October 1, 2020, before increasing to 7.0% on July 1, 2021. 

Same Tax as Traditional Rental Cars

Supporters of this approach argue that rental car excise taxes can generate additional government revenue while disproportionately affecting visitors and non-residents rather than residents. This is similar to the rationale behind hotel occupancy, tourism, and certain commuter taxes. Applying the same tax to P2P vehicle sharing can also create a level playing field between traditional rental companies and digital vehicle-sharing platforms.

Notable examples include Oklahoma with a 6% vehicle rental tax that matches the rate imposed on traditional rental cars; New Hampshire, which includes these services within its meals and rentals tax framework; and Arkansas, which requires P2P vehicle sharing platforms to collect a 10% rental car tax. 

Subjecting P2P Vehicle Sharing to Sales Tax

Opponents of applying traditional rental car excise taxes, on the other hand, argue that the two markets have significantly different customer bases. Conventional rental car companies primarily serve tourists and other out-of-town visitors, while residents heavily use P2P vehicle-sharing platforms.

Critics also question the broader economic justification for rental car excise taxes. By their nature, excise taxes are sometimes introduced either to discourage activities considered socially harmful, such as smoking or gambling, or to raise revenue for particular public expenditures. As a result, some policymakers and observers argue that including P2P vehicle sharing within the general sales tax system may be preferable to imposing a separate rental car excise tax.

Washington is a notable example of a state that subjects P2P vehicle sharing to sales and use tax provisions. Connecticut is another US state that applies sales and use tax rules and regulations on P2P vehicle-sharing facilitators. In 2021, Arizona amended its rules to require P2P vehicle-sharing platforms to charge, collect, and remit transaction privilege tax (TPT), a type of sales tax.

Recent US Tax Changes Affecting Vehicle Sharing Platforms

Louisiana’s Department of Revenue (LDR) issued a Revenue Ruling stating that P2P vehicle-sharing platforms are treated as “dealers” for sales tax purposes. As a result, platforms are responsible for collecting and remitting applicable taxes on transactions they facilitate, including state sales tax, local sales tax, and automobile rental tax, where applicable.

Moreover, platforms that facilitate more than USD 100,000 in gross sales sourced from Louisiana customers may qualify for marketplace facilitator treatment and may have the option to remit state sales tax directly through the Louisiana Sales and Use Tax Commission for Remote Sellers.

On July 23, 2026, the North Carolina Department of Revenue (NCDOR) issued a Sales and Use Tax Directive clarifying North Carolina P2P vehicle rental tax rules. Starting October 1, 2026, P2P vehicle-sharing providers will be required to collect and remit tax on the gross receipts generated from vehicle rentals, leases, and subscriptions.

Future Outlook and Compliance Issues

In recent years, many US states have proposed or adopted regulations specifically addressing P2P vehicle sharing, indicating that this regulatory trend is likely to continue. As P2P vehicle-sharing platforms become more established, additional states and local jurisdictions are expected to introduce platform-level rules governing their taxation.

A unified approach is unlikely to emerge any time soon. While the distinction between sales tax and rental car excise tax may not be particularly important to consumers, digital platforms facilitating these services may need to allocate additional resources to understanding and complying with these rules. The key issues for vehicle-sharing platforms are determining which tax applies, who is responsible for collecting it, when registration is required, and how state-specific rules affect each transaction.