Menu
Tax Notes logo

Georgia Tribunal Says Uber Owes Millions in Unpaid Sales Tax

Posted on Nov. 14, 2022

Uber's fee to improve the safety of its platform should be included in the sales price of rides for tax purposes, according to the Georgia Tax Tribunal.

In a pair of orders posted the week of November 7 in Uber Technologies Inc. v. Crittenden, the Georgia Tax Tribunal determined that Uber’s safe rides fee is part of the sales price of its transportation services and should be included in the taxable base under state law, and that the company owes $8,926,728.44 in unpaid sales tax.

Starting in April 2014, riders who booked through the Uber app were charged a safe rides fee. Funds from the fee were used to improve platform safety through regulatory compliance, various record checks for drivers, additional app-safety features, driver education, and incident response. Uber charged riders a flat rate for the fee and included it as a separate line item on riders’ receipts. No part of the fee went to drivers nor was it part of the driver service fee or the company's service fee. After the audit period, the safe rides fee was renamed the booking fee.

The Georgia Department of Revenue audited Uber for July 2012 through June 2015 and discovered that the company did not collect sales tax when it collected fares from riders in the state. The DOR issued a notice of proposed assessment, and Uber filed a lawsuit challenging it.

In a May 5 order, the tribunal denied Uber’s motion for summary judgment and entered judgment regarding liability in favor of the department. The order did not address the amount due. The matter was remanded to the DOR to determine the amount of tax at issue, but the parties could not agree on whether the booking fee was taxable, and they submitted briefs on the issue to the tribunal.

Chief Judge Lawrence O’Neal Jr., writing the opinion for the tribunal, noted that under O.C.G.A. section 48-8-2(34), a sales price includes the full price charged for services sold, without a deduction for expenses.

Uber argued that Regulation 560-12-2-.84, which states that lessees of taxicabs “shall collect the tax on fares for transportation of persons in accordance with the uniform bracket system and pay such tax to the lessor for remittance to the State Revenue Commissioner,” did not apply to the booking fee because it was a nontaxable service fee rather than a transportation fare. But the tribunal determined that the statute required sales tax to be collected on the “total amount of consideration.”

Uber also argued that the fee should not be part of the sales price because it is a separate fee paid by riders to the company for recovery of costs of nontaxable services, including "regulatory compliance, insurance, Driver background checks, motor vehicle records checks, development of safety features in the Uber App, incident response, [and] other things." But the tribunal noted that "none of these costs are expressly excluded from the definition of 'Sales Price'" under section 48-8-2.

Representatives for Uber did not respond to a request for comment by press time.

The taxpayer in Uber Technologies Inc. v. Crittenden (No. 1834258) is represented by Eric Tresh, Alla Raykin, and Michele Borens of Eversheds Sutherland (US) LLP.

Copy RID