Last week, Uber sued the city of San Francisco, demanding a hefty refund for taxes the company paid two years ago “under protest.”
According to the suit, filed Friday in San Francisco Superior Court and first reported by the San Francisco Business Times Monday afternoon, Uber wants a $18,750,433.49 refund on taxes it paid to the city in 2022. Uber claims that it should only be taxed on the service fees it receives, not the fares that it collects from users and distributes to drivers.
The gist of Uber’s argument goes something like this: Uber drivers and delivery workers are independent contractors, not Uber employees — a distinction upheld late last month by the California Supreme Court. Therefore, Uber itself “does not provide transportation or delivery service” and shouldn’t be treated as a transportation or delivery company. Its service, instead, helps drivers and couriers “get leads to potential Riders and Eaters,” according to the suit.
While it does collect fares for its drivers, Uber alleges that the entire sum is transferred into a separate account — independent of Uber’s coffers — that gets disbursed to drivers.
(One curious tidbit from the suit: In addition to identifying its drivers as contractors, Uber identifies all of its non-software engineers — including sales and marketing, legal, finance, IT, HR, and executive assistants — as “overhead” in the suit, since a vast majority of its operational expenses are for its engineering and design teams.)
As a result, the fares users pay for rides and food deliveries “are not income to Plaintiff for federal income tax purposes,” according to Uber’s legal team. (Uber doesn’t even report them as gross receipts for federal or state tax returns, it says.) The federal IRS and SEC, as well as the California Franchise Tax Board agree with the company, Uber claims, since both have allowed Uber to report service fees alone as gross income.
But San Francisco had Uber pay taxes on the full amount of both fares and service fees, according to the suit. Now, the company wants those taxes back.
City Attorney’s Office deputy press secretary Alex Barrett-Shorter told Gazetteer SF in a statement that their office has yet to be served with the lawsuit.
“Once we are served with the lawsuit, we will review the complaint and respond appropriately,” Barrett-Shorter told Gazetteer SF.
Uber spokesperson Zahid Arab declined to comment to Gazetteer SF.
