§ 12.45.055. Security for fiduciary performance.

A.

Guarantee required. To ensure that a rental agency performs its fiduciary responsibility to timely collect, account for, safeguard, and remit taxes levied by this chapter, the rental agency shall provide a guarantee by one or more of the methods specified in this section. The amount of the guarantee shall be in an amount that the chief fiscal officer determines to be eight percent of the estimated average annual gross fees and costs earned by the rental agency, or $5,000.00, whichever is higher. Except as specified in subsection C. of this section, the requirement for a guarantee shall remain in force for the entire period the applicant is registered as a rental agency in accordance with section 12.45.050. In the event the municipality exercises a claim against the guarantee, the rental agency shall provide an additional guarantee, in an amount equal to the amount of the paid claim, no later than 30 days after the date such claim was paid.

B.

Methods. The rental agency shall include one or more of the following methods to guarantee performance of its fiduciary responsibilities at the time of application for a certificate of registration:

1.

Surety bond. The rental agency may elect to provide a surety bond, in an amount defined in subsection A. of this section, from a company authorized to do such business in the state. The bond shall be in a form acceptable to the municipal attorney. The bond shall be payable to the municipality and shall be conditioned upon payment in full of the tax, including penalties and interest due and to become due and owing to the municipality by said rental agency during the effective period of the bond under the provisions of this chapter. The surety may terminate this bond, except as to any liability already incurred or accrued, and may do so upon giving the rental agency and the chief fiscal officer written notice to that effect. The surety shall provide written notice to the chief fiscal officer not less than 30 days before the expiration, non-renewal, lapse, termination, or other similar event affecting such surety bond. Thirty days after receipt by the chief fiscal officer of such notice or upon a later date specified in the notice, or upon the filing and acceptance of a new bond, the existing bond shall terminate and be of no more force and effect, except as to any liabilities or indebtedness incurred or accrued thereunder as of the date of termination.

2.

Deposit in escrow. The rental agency may elect to deposit a cash sum, in an amount defined in subsection A. of this section, either with the municipality or in escrow with a responsible financial institution authorized to do such business in the state. In the case of an escrow account, the rental agency shall file with the municipality an escrow agreement which includes the following terms:

a.

Funds of the escrow account shall be held in trust until released by the municipality and may not be used or pledged by the rental agency as security in any matter during that period other than payment of the tax, penalties, and interest due and to become due and owing to the municipality under this chapter.

b.

In the case of a failure on the part of the rental agency to remit taxes due under this chapter by the required due date, the institution shall immediately make all funds in such account available to the municipality for use in satisfying those taxes due, along with any related penalties and interest as provided for in this chapter.

3.

Letter of credit. The rental agency may elect to provide, from a bank or other responsible financial institution authorized to do such business in the state, a letter of credit in a form acceptable to the municipal attorney. Such letter shall be filed with the municipality and shall certify the following:

a.

That the financial institution irrevocably guarantees funds in an amount defined in subsection A. of this section.

b.

That in the case of failure on the part of the rental agency to remit taxes due under this chapter by the required due date, the financial institution shall pay to the municipality immediately and without further action such funds as are necessary to satisfy those taxes due, along with any related penalties and interest as provided for in this chapter, up to the limit of credit stated in the letter.

C.

Once a rental agency has filed a tax return and remitted the full amount of taxes due under this chapter, by the due date prescribed by this chapter, for each of eight consecutive calendar quarters, the rental agency may submit a written request to the chief fiscal officer for a waiver of the requirement for the rental agency to post a guarantee. The request must include information demonstrating the rental agency has sufficient capital to conduct normal business operations. Except as listed below, the chief fiscal officer shall provide written approval of such request, stating the date the requirement for a guarantee shall expire.

1.

The chief fiscal officer shall not approve the rental agency's request and the requirement for a guarantee shall not expire when the rental agency has had any certificate of registration previously issued under this chapter revoked by the department.

2.

The chief fiscal officer shall not approve the rental agency's request and the requirement for a guarantee shall not expire when the department has reasonable cause to believe that the rental agency is a related party or related entity to another rental agency or prior rental agency whose certificate of registration has previously been revoked under this chapter.

3.

The chief fiscal officer shall not approve the rental agency's request unless the rental agency has sufficient capital to conduct normal business operations, timely and fully paying all financial obligations. Evidence of sufficient capitalization includes but is not limited to a debt-to-equity ratio less than 9 or a debt ratio less than 0.9.

D.

The agreement or contract and other evidence of a guarantee under this section is subject to inspection by the department.

E.

Security for fiduciary performance under this section may be waived for a rental agency having three or fewer motor vehicles for rent provided the rental agency files a tax return and remits the full amount of tax due by the due dates prescribed in this chapter.

F.

The chief fiscal officer may require the rental agency to provide a financial guarantee that is double the amount established by subsection A. of this section, when:

1.

A responsible party was ineligible for a five-year period under a limitation in subsections 12.45.045A.1.a. or A.1.b., and the five-year period has passed;

2.

The rental agency has incurred penalties under this chapter in at least two consecutive calendar quarters; or

3.

The rental agency has incurred penalties under this chapter in at least two quarters of any three consecutive calendar quarter period.

(AO No. 2003-107, § 4, 7-1-03; AO No. 2009-78, § 1, 7-7-09; AO No. 2015-48, § 6, 5-14-15 )