Massachusetts taxicab drivers have a new subsidy hailing for them to battle the rapidly growing ride-sharing market.
On Aug. 5, 2016, Gov. Charlie Baker (R) signed H.B. 4570, a law that imposes an assessment on transportation network companies (TNCs), such as Uber Technologies Inc. and Lyft Inc., on all trips that begin and end within Massachusetts. This assessment is the first state tax of its kind directly imposed on TNCs.
The total amount of the assessment is $0.20 per ride. From these proceeds, $0.10 will be distributed to cities and towns to improve transportation infrastructure, $0.05 to the Commonwealth Transportation Fund and the remaining $0.05 to the Massachusetts Finance Agency to provide assistance to taxi businesses. By Feb. 1 each year, TNCs must report the number of rides that originated within each municipality from the previous year and pay the assessment for the next ten years.
The idea behind the assessment is that it will address the competitive market between the traditional taxicab industry and TNCs to improve taxi ridership. According to H.B. 4570, the $0.05 Finance Agency subsidy will “provide financial assistance to small businesses operating in the taxicab, livery or hackney industries to encourage the adoption of new technologies and advanced service, safety and operational capabilities and support workforce development.” Yet the law does not provide any language on how the money will be used to meet these goals. TNCs will be subject to the same requirements as the traditional livery rules regarding driver background checks, motor vehicle inspections, insurance policy requirements, fare estimates and other safety requirements. The law also prohibits TNCs from charging surge pricing during federal or state-declared emergencies. The law does not address fully automated driverless vehicles, which Uber launched in Pittsburgh this week.
The law prohibits TNCs from charging riders and drivers the assessment, but it is safe to assume that the assessment will be paid by lower payments to drivers or higher fares.
Other state lawmakers have also modernized their state regulations to address TNCs. Delaware recently passed S.B. 262 that will regulate TNCs and prohibit local government entities from imposing a tax on TNCs and TNC drivers.
Rhode Island and Nevada have also adopted legislation applicable to TNCs, according to an article by Martha W. Kessler in Bloomberg BNA’s Daily Tax Report. Rhode Island requires Uber to collect a 7 percent sales tax on the gross fare on all trips within the state. Nevada clarified that its 3 percent passenger carrier excise tax applies to taxicab and TNC fares. However, Iowa has determined that TNCs are not providing a taxable service and are not subject to tax.
If other states plan to stiffen the competition for taxicab drivers, with respect to tax regulation in particular, this may mean that lawmakers will hail higher TNC fares to your state soon.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Is a state-subsidized tax a fair way to level the playing field for the traditional taxicab industry?
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