$19 Million Tax Refund: Uber Sues San Francisco Over Gross Receipts Tax – Check it Out!

Uber Seeks $19 Million Tax Refund, Disputes Classification as Transportation Company

November Ballot Measure Looms as Uber Challenges San Francisco‘s Tax Policies

According to The Business Journals, Uber Technologies Inc. is challenging the city of San Francisco in court aiming to recover nearly $19 million in taxes it paid in 2022. The ride-hailing and delivery giant filed a lawsuit on August 2 arguing that it should be classified as an “information” company for tax purposes rather than a transportation company. Uber believes this classification would mean that only a smaller portion of each fare it charges should count toward its gross receipts significantly reducing its tax burden. The lawsuit comes at a critical time as San Francisco residents prepare to vote in November on a measure that could reshape the city’s gross receipts tax. Uber‘s dispute highlights ongoing debates about how modern tech companies should be taxed especially when their business models do not fit neatly into traditional categories.

In 2022 Uber paid a substantial amount in taxes including the gross receipts tax and the Homelessness Gross Receipts Tax. The company is now seeking a refund of $9.8 million for the gross receipts tax and $8.9 million for the homelessness tax. Uber argues that only the service fees it earns on rides and deliveries should be counted as gross receipts not the entire fare paid by customers. This argument hinges on the fact that Uber‘s revenue margin—the portion of the fare it keeps after paying drivers and other expenses—is much smaller than the total amount charged to customers. In the first quarter of 2024 Uber‘s revenue margin was 30.2% on rides and 18.2% on deliveries. The company claims that the remaining money which goes to drivers or is paid as taxes or fees should not be taxable.

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$19 Million Tax Refund: Uber Sues San Francisco Over Gross Receipts Tax – Check it Out! (PHOTO: Patriot Software)

IRS and SEC Acceptance Bolsters Uber‘s Tax Argument, But Annual Report Reveals Complications

Uber further notes that its practice of reporting solely service fees as gross income has been approved by the Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS). Uber‘s claim is complicated by the fact that its annual report for 2022 recognized that the firm is accountable for delivering mobility services in some locations. The office of San Francisco’s City Attorney, David Chiu has said that after the lawsuit is served they will study it and adjust their response. The verdict in this case may have a big impact on other businesses with comparable business strategies in addition to Uber. With potential changes to the tax system looming, the discussion over how businesses like Uber should be taxed is expected to heat up as the November ballot item draws near.

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