Extras on Excise: By Taxing Uber and Other TNCs, Alabama Joins the Club

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Recently enacted legislation, H.B. 190, requires transportation network companies (TNCs) operating in Alabama to collect a local assessment fee equal to one percent of the gross trip fare from each prearranged ride that originates in the state. With this new requirement, Alabama joins the growing list of states to impose taxes or fees on TNC ride fares.

TNCs must remit assessment fees to the Alabama Public Service Commission on a quarterly basis. They must also submit a report setting forth the percentage of gross trip fare that originated in each municipality wherein the TNC originated rides as well as the percentage of gross trip fare that originated in the unincorporated portion of each county wherein the TNC originated rides. This information will enable the commission to properly distribute the local assessment fee to municipalities and counties when the new tax goes into effect on Aug. 1, 2018.

TNCs are also required to obtain a permit from the commission prior to beginning operations in Alabama. Those that are already operating under a municipal ordinance may continue to operate until either the TNC’s application for a state permit is approved or denied or until the 30th day after the permit process is adopted by the commission, whichever is later. Beginning July 1, 2018, municipalities and counties will be prohibited from imposing separate taxes, fees, or regulatory requirements on TNCs, TNC drivers, or TNC vehicles; however, they can, by ordinance, prohibit TNCs from providing rides that originate within their corporate limits.

TNC drivers will not be classified as common carriers, contract carriers, or motor carriers, and therefore are not required to register their vehicle as a commercial vehicle under the Alabama Motor Carrier Act. However, Alabama does require TNCs to obtain a local and national criminal background check on all driver applicants and to reject applicants with certain driving violations and criminal history. TNCs must also ensure that drivers have a valid driver’s license, motor vehicle registration, and proof of automobile insurance.

Other states that impose tax or fee similar to the new Alabama local assessment fee include New York, Massachusetts, Nevada, South Carolina, and Pennsylvania. New York imposes an assessment of four percent of the gross trip fare on certain trips originating in the state. Massachusetts imposes a surcharge of $0.20 on each prearranged ride originating in the state, while Nevada imposes an excise tax of three percent of the total fare charged. South Carolina imposes a local assessment fee of one percent of the gross trip fare that is very similar to the Alabama tax, while Pennsylvania imposes an assessment of 1.4 percent only on fares originating in Philadelphia.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should states enact new taxes in response to the popularity of transportation network companies?

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