Mileage tax: Are there alternatives to plug-in devices?

September 29, 2020

Many people today have grown used to automatic location services, Internet cookies, and other tracking services on their smartphones. It’s become the “norm” in the background of life’s bustling activity. Yet, despite today’s commonplace smart devices that track the how, who, and where of individual consumerism, many people have strong feelings about rights to privacy. Understandably so.

Meanwhile, many state governments are testing road usage charging (RUC) programs, also known as pay-per-mile tax systems, in an effort to replace the revenues barely trickling in from antiquated fuel taxes. These RUC programs require reliable, secure mileage reporting options (MROs) to accurately calculate road charges. In-state miles driven must be differentiated from miles driven out-of-state and taxable miles should be tallied on a regular and timely basis. 

So, should an RUC program come into effect, how could we go about efficiently and privately reporting mileage?

Devices win First Place but people want choices

To date, the mileage reporting option showing the most efficacy is the onboard diagnostic device (OBDII) that plugs into a cars’ existing diagnostic port. OBD devices are popular because third party technology providers (like Azuga) ensure complete privacy from government eyes, the technology is reliable, has a low overhead cost, and is compatible with most vehicles. However, some vehicle owners are resistant to the idea of having a device, no matter how secure and non-invasive, attached to their vehicles.

It is prudent for road user programs to consider additional MROs. Here is why:

  • Some electric vehicles (EVs) are not OBD-compatible. Although OBD ports are required to support emissions compliance on traditional fuel- and diesel-powered engines, EV manufacturers will probably start seeking exemptions. Tesla 3, for example, is manufactured without an OBD port.
  • For a few vehicles, the physical presence of an OBDII device can make driving uncomfortable or, in a few cases, hazardous. In some instances, an OBD port is located near the driver’s legs and having a device sticking out of it may prove troublesome to the driver. In other cases, the port is in a compartment covered by a small door that cannot fully close after the device is plugged in—again, less-than-ideal for the driver.
  • There is only one OBD port. Car insurance companies are offering discounts to drivers who opt to have an OBDII device in their car to track driving behavior and mileage. Unfortunately, two devices cannot be plugged in at the same time, forcing the vehicle owner to choose between the usage-based insurance and the road usage charging program.
  • Some people are resistant to plug-in devices for aesthetic, safety, or personal preference reasons. Although OBD devices are secure and small, some vehicle owners prefer a no-frills, non-device option. 

As a technology provider at the forefront of testing and operating road usage charge programs across the country, Azuga has tested a number of MROs and we believe there are a couple alternatives these programs should offer. Odometer-based options, for example, are essential.

Variety and simplicity are key

In addition to the time-tested OBDII device option, Azuga advocates for implementing a variety of mileage reporting options to meet the individual needs and preferences of a diverse population. Odometer-based MROs are paramount for the privacy-conscious segment of the population. A couple of these alternatives include odometer image capture (OIC) and manual odometer entry. Although they’re not as seamless nor as engaging as the device MROs that come with a variety of premium features, OIC and manual entry have several advantages such as the following:

  • Enhanced feeling of privacy. A small percentage of drivers simply prefer the “off-the-grid” feel that comes with OIC and manual entry. Programs could offer a user-certified version, where the driver electronically confirms the odometer value is accurate at the time of submission under penalty of law and subject to audit (just like annual tax filing, for example).
  • Simplicity. On a periodic basis, the Azuga Insight mobile app alerts a driver to submit his odometer reading. He can easily type in his current odometer reading and submit it, virtually signing to its accuracy. Or, with OIC, he can use the on-screen guide to quickly snap a photo of his car’s odometer and tap “Submit”. Done!
  • The hardware is already in the driver’s pocket (or unnecessary), making it perfect for vehicles that cannot (or owners who prefer not) to accept an OBDII device. There’s no need for an aftermarket device and no waiting period for device shipment. Just download, type in miles or snap a photo, and go.
  • They’re just as effective as plug-in technology options. OIC and manual entry are based on the actual value of the odometer. No matter when the driver submits the photo or types in the odometer reading, the total miles driven is reflected in the billing statement.

Although attractive options for drivers weary of plug-in technology, OIC and manual entry have a few drawbacks. For example, getting drivers to submit odometer readings or pictures in a correct and timely fashion can be difficult, and supplementary fraud prevention measures are necessary to weed out erroneous or counterfeit photos. 

Neither of these options can differentiate between in-state and out-of-state miles, thereby automatically invoicing all miles as taxable; however, a driver may submit paperwork to the state department of transportation for a refund on miles driven outside of state borders. Additional forms and/or fee are required if the motorist accidentally sells his vehicle before submitting the final odometer reading. (Should this happen, the Department of Motor Vehicles would need to be involved in obtaining a verified reading.)

Despite these drawbacks, odometer-based MROs are safe, reliable, and comfortable solutions for road usage charge programs. Be that as it may, if a state or region ever decided to implement a multi-layered congestion pricing model (e.g. corridor pricing), manual refund management would become impossible and OIC would no longer be feasible.

Are other mileage reporting options available?

Yes, but many alternatives have been tested and only a few have shown promise. In addition to OBDII devices and odometer-based options, a viable solution is vehicle onboard telematics (VOT). VOT allows owners of vehicles with native connected car systems (e.g. Ford Sync, GM OnStar) to utilize technology already built in to their vehicles for mileage reporting. Although convenient and efficient, drawbacks include the inability to differentiate in-state vs. out-of-state miles and a paid subscription to the car manufacturer is required. And, if the owner was to lose the subscription, mileage would be lost.

The bottom line

The provision of privacy and a variety of mileage reporting options are paramount to healthy public perception and acceptance of state-sanctioned road usage charging systems. There is no one-size-fits-all solution and we must be both creative and conscious of future applications of these technology systems. Many innovative ideas have come to the table and there just isn’t enough time to discuss them all in detail here. 

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