Lyft has filed a lawsuit against San Francisco, accusing the city of unfairly overcharging $100 million in taxes over five years, raising broader questions about gig-economy regulations and worker classifications, Business Insider reported.
Lyft alleges it was overcharged $100 million in taxes between 2019 and 2023. The lawsuit, filed in California Superior Court, claims the city's tax calculations misrepresent Lyft's business model by including passenger payments in the ride-hailing firm's gross receipts.
According to the filing, San Francisco calculated Lyft's taxes based on the total amount passengers paid for rides. However, Lyft argues that its revenue is derived from the fees drivers pay to use the platform, not the payments passengers make to drivers.
On its website, Lyft states that drivers keep at least 70% of passenger payments, a structure the city failed to consider, according to the suit.
In its court complaint, the company said the U.S. Securities and Exchange Commission does not recognize passenger payments as Lyft's revenue, nor are they classified as income for federal or state tax purposes. As a result, Lyft is seeking a refund for the alleged overpayments and calling for a reassessment of its tax obligations.
"Lyft doesn't take operating in San Francisco for granted, and we love serving both riders and drivers in our hometown city," the company said in a statement to Bloomberg. "But we believe the city is incorrect with how it calculated our gross receipts tax for the years 2019-2023."
Like other gig-economy platforms such as Uber and DoorDash, Lyft maintains that drivers are independent contractors, not employees. Classifying drivers as employees would require companies to provide additional benefits such as paid leave, health insurance, and minimum-wage protections.
The issue of worker classification has been contentious for ride-hailing platforms. In California, however, Lyft and other gig-economy firms secured a major victory last year when a state appeals court upheld Proposition 22, a law allowing them to classify drivers as independent contractors.
The argument has faced resistance elsewhere. In 2021, the U.K. Supreme Court ruled that Uber drivers must be classified as employees, entitling them to benefits such as paid time off and minimum wages.
Jim Thomas ✉
Jim Thomas is a writer based in Indiana. He holds a bachelor's degree in Political Science, a law degree from U.I.C. Law School, and has practiced law for more than 20 years.
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