The Georgia Tax Tribunal issued a pair of orders in the case of Uber Technologies Inc. v. Crittenden, determining that Uber underpaid its sales tax liability by several million dollars by not including its Safe Rider Fee in its taxable basis. Uber argued that its Safe Rider Fee, which has been renamed to a Booking Fee since the audit period at question, was a separate and distinct charge from the transportation charge paid by users for the service of the car ride. The Safe Rider fee was not included in the base cost of a ride, but was a separate fee on top of the ride that covered the costs of Uber’s regulatory compliance, insurance, Driver background checks, motor vehicle records checks, development of safety features in the Uber App, incident response, and Driver safety education. Because the state of Georgia taxes “fares of transportation”, and not services generally, Uber argued that this fee was not able to be taxed under Georgia’s laws.
The Tax Tribunal concluded that the fee was included in the “sales price” of the transportation service that was subject to tax, saying that the fee did not meet the definition of any of the items specifically excluded from the sales price. The second of the two rulings used this fact pattern to assess tax on all Safe Rider fees that were not taxed during the audit period, and finalized the amount due at $8.9 million.
Defining the taxable price of a service can be difficult, especially in states where only specifically enumerated services are taxable, and bundling rules, the true object test, and the state’s definition of a sales price can pull services that are not specifically enumerated into the tax basis when they are sold alongside taxable services. Not only do you need to understand the taxability of services your company sells, but also how they are being packaged together, to avoid underreporting. (Uber Technologies Inc. v. Crittenden, Georgia Tax Tribunal, No. 1834258)