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Uber Technologies Inc. will appeal its failed challenge to San Francisco’s efforts to determine who is cruising the city streets amid a larger fight over regulation and taxation of the growing ride-sharing industry.
California’s Superior Court ruled June 22 that the company must comply with a Treasurer & Tax Collector subpoena seeking driver information. Dueling lawsuits filed by Uber and the city battled over the scope and legality of the requests ( Uber Technologies, Inc. v. City and Cty. of San Francisco Office of the Treasurer-Tax Collector , Cal. Super. Ct., No. CPF-17-515627, order denying motion to quash subpoena 6/22/17 ; City and Cty. of San Francisco v. Uber Technologies, Inc. , Cal. Super. Ct., No. CPF-17-515663, order requiring Uber disclose driver information 6/22/17 ).
San Francisco has asked hometown transportation network companies Uber and Lyft Inc. for driver and trip information to assess how much business is derived from city trips with an eye toward regulation and business taxes.
The court rejected Uber’s motion to deny the subpoena. The company told Bloomberg BNA it will appeal.
“We agree with the City’s assessment that driver partners are independent contractors and therefore are required to obtain a business license. But the Tax Collector’s office is asking us to give them personal information of drivers—including their home address—without their consent and will put that information on a public website,” Wayne Ting, San Francisco general manager for the company, said in an emailed statement. “We’ve asked the city to allow us to get the consent of drivers and to remove their personal information from the public website, but they have refused.”
Aside from the Treasurer & Tax Collector subpoena, the company has also declined to provide information that the City Attorney’s office requested in a separate June 5 administrative subpoena. The subpoena seeks data that includes Uber guidance to drivers, contracts, actual number of miles driven, and hours logged.
“Stop me if you’ve heard this one before: Uber thumbs its nose at the law,” John Coté, spokesman for City Attorney Dennis Herrera, said in a June 20 email to Bloomberg BNA. “We are going to use the legal remedies at our disposal to ensure that the law is followed so that San Francisco’s streets, crosswalks and bike lanes are safe and accessible for everyone. Lyft, however, has contacted our office, and we are in discussions about their response.
Allison A. Davis, an attorney with Davis Wright Tremaine LLP representing Uber, said in a June 20 letter that the City Attorney’s subpoena isn’t “relevant to any investigation within the City Attorney’s scope of authority,”
The subpoena appears “to be an attempt to assert additional regulations beyond those promulgated” by the California Public Utilities Commission and “demand broad swaths of information that would be burdensome and unproductive to produce,” Davis wrote.
However, in a June 22 statement, the City Attorney’s Office said the June 5 subpoena is seeking information on driving practices, disability access, and service in San Francisco. “In that action, [the office] is seeking to ensure that the two companies’ estimated 45,000 vehicles in San Francisco comply with local and state laws, including ensuring equality of access, and do not jeopardize public safety or create a public nuisance.”
The city estimates that 45,000 Uber and Lyft drivers may operate in San Francisco. And the same draft report indicates that TNCs drive 570,000 vehicle miles within San Francisco on a typical weekday.
San Francisco’s business license is indeed a tax that applies to drivers, Amanda Fried, policy and legislative manager for the Treasurer & Tax Collector’s office, told Bloomberg BNA.
“It has to be cost recovery if it’s a fee, and because it’s a revenue measure, it’s considered a tax,” Fried said June 19. “It’s very clear to us in the law this is a tax on folks that needs to be collected.”
More than 130,000 San Francisco businesses must get a business license, and TNC drivers aren’t exempt, she added.
“The business license fee is a good tool to find businesses and track whether you owe taxes. The Uber driver is never going to owe us taxes,” Jim Lazarus, San Francisco Chamber of Commerce’s senior vice president of public policy, said June 19.
Businesses with $1 million or less in receipts don’t have to pay a gross receipts tax, Lazarus said.
“Uber and Lyft are taxed,” Lazarus told Bloomberg BNA.
San Francisco last year collected more than $600 million in payroll or gross receipts taxes. “That’s up 50 percent in five years,” in part due to the growth of the tech economy in San Francisco, Lazarus said.
“But Uber and Lyft, they’re paying. The money that comes on that credit card that goes in the system of Uber and Lyft is part of the gross receipts of those companies,” he added.
Jane Kim, a member of the city’s Board of Supervisors, specifically called on Uber to voluntarily pay an impact fee to reduce congestion, suggesting a 20 cent per-ride TNC fee similar to what Massachusetts enacted last year.
“Here in San Francisco, we’re happy to host the sharing economy, but we also expect that those companies benefiting greatly from that economy share the costs associated from their business,” Kim said at a June 14 board meeting.
The San Francisco fee “specifically seems like an attempt by the government to try and levy additional taxes for no good reason,” Harry Campbell, who writes the RideShare Guy Blog, told Bloomberg BNA in a June 16 email.
“There may be a legitimate reason to tax TNCs extra for each ride but without clear guidance on where this additional revenue would be allocated it seems like just another money grab by the city,” Campbell said.
“I think one trend that may be emerging, but it is still early to tell, is states are beginning to preempt local authority from prohibiting some of these nascent business models,” Christopher T. Lutz, a Washington-based state and local tax attorney at Eversheds Sutherland (US) LLP, told Bloomberg BNA in a June 21 email.
Texas is the most recent state to pass legislation stating TNC regulation is the state’s exclusive power and function, Lutz said.
TNCs are looking to S.B. 182 pending in the California Legislature that would prohibit local governments from requiring business licenses from drivers for ride-hailing services who don’t reside in their jurisdiction. S.B. 182 passed the Senate on May 22 and is pending in the Assembly.
Lyft supports S.B. 182, which “will allow California rideshare drivers to hold one streamlined business license recognized across multiple jurisdictions with predictable costs and reasonable privacy protections,” spokeswoman Chelsea Harrison told Bloomberg BNA in a June 19 statement Bloomberg BNA.
“The myriad of local regulations that vary widely by jurisdiction are difficult for entrepreneurs to navigate,” Mike Montgomery, trade group CALinnovates executive director, told Bloomberg BNA June 19.The group’s members include Uber and Airbnb Inc.
San Francisco opposes the bill, as does the California League of Cities.
S.B. 182 “really just guts local authority and doesn’t give an ability for local jurisdictions to capture information they need to regulate and operate cities and counties,” Fried said.
The league “will lobby very hard to stop it, as it does contravene local control and threatens a revenue source for cities,” said Michael Conneran, an attorney with Hanson Bridgett LLP who represents public agencies.
Gov. Jerry Brown (D) “may well sign it on the basis that is promotes efficiency” and doesn’t upend a long-standing allocation of regulatory control, Conneran told Bloomberg BNA in a June 20 email.
To contact the reporter on this story: Joyce E. Cutler in San Francisco at JCutler@bna.com
To contact the editor responsible for this story: Ryan C. Tuck at email@example.com
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