Uber, Lyft could pay sales taxes under Ohio budget proposal

(Jeenah Moon/The New York Times)

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(Jeenah Moon/The New York Times)

A provision in the Ohio budget would mean ride sharing services like Uber and Lyft would have to pay a sales tax.

The language requires “transportation network companies” such as Uber and Lyft to collect sales taxes on behalf of drivers, and is part of a two-year state budget that just cleared the Ohio House.

While the amendment was being considered by a House committee, Lyft submitted testimony stating "the new sales tax will have a significant and negative impact on riders and drivers who depend on Lyft as a crucial transportation service in their lives."

PREVIOUS REPORTING: Ohio wants Uber to pay $1.6M in sales taxes

Ohio is among other state and local governments trying to tax the companies, which have pushed back against the efforts.

Big cities like New York and Chicago have added ride hailing services to the list of services they tax, and public transit advocates have supported the taxes, pointing to research that the rail hailing services actually increase congestion and draw customers who might otherwise take public transit.

The dispute reflects the growing effort to figure out how to tax and regulate the “gig economy,” as tech-driven startups like AirBnb and Uber are grabbing market share from other more heavily taxed industries like taxis and hotels.

Regulators are asserting that the states are being cheated on revenue by these startups, which look a lot like businesses the state is already collecting millions of dollars in taxes on.

Even before the budget was introduced, the Ohio Department of Taxation was trying to collect $1.6 million in sales taxes and penalties from Uber, arguing that the company fits the definition of a “vendor of transportation services,” meaning it should have been paying sales taxes.

Uber said it is not a transportation service provider, but rather a “transportation network company.” The changes proposed in the state budget, however, would define a “transportation network company” as subject to a tax.

The Ohio Department of Taxation has issued a “final determination” that Uber services are subject to sales tax, though the case is still pending before the Ohio Board of Tax Appeals.

A spokesman for the Office of Ohio Attorney General Dave Yost said a hearing for the case has been postponed and a new date for a hearing has not been set, with both parties needing more time to complete discovery and prepare.

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