Ride-hailing company Lyft has filed a lawsuit against the city of San Francisco, alleging that it was unfairly charged $100 million in taxes from 2019 to 2023. The lawsuit claims that the city's tax formula includes passenger payments as revenue, which Lyft argues is not an accurate reflection of its business model.
According to Lyft, the city's calculation method for determining taxes does not take into account that drivers make at least 70% of what passengers pay for rides. Lyft considers drivers to be customers who use its service rather than employees, and therefore believes that the city's formula is "distortive" and overstates its gross receipts.
The filing also points out that the US Securities and Exchange Commission does not consider driver fees as part of Lyft's revenue, and that driver fees are not recognized as income for income-tax purposes at the state or federal level. Lyft is seeking a refund for the amount it believes it overpaid in taxes.
Both Lyft and the San Francisco City Attorney's representatives have not yet commented on the lawsuit.
This lawsuit highlights the ongoing global debate over the classification of workers in the gig economy. Companies like Lyft, Uber, and DoorDash have consistently argued that their drivers are independent contractors rather than employees, in order to avoid costs associated with employment benefits such as vacation and overtime pay, minimum-wage protection, and health insurance.
While gig-economy companies have had some success in classifying their workers as independent contractors, as seen in a recent California appeals court ruling, they have faced challenges in other markets. In 2021, the UK ruled that Uber drivers must be treated as employees rather than independent workers after a lengthy legal battle. This ongoing debate underscores the complexities and challenges of regulating the gig economy and determining the rights and protections of workers in this sector.