Lyft Has Sued San Francisco, Accusing It Of Overcharging $100 Million In Taxes

Lyft has sued San Francisco city for unfairly calculating its income taxes.

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• Lyft sued San Francisco, saying it was unfairly charged $100 million in taxes from 2019 to 2023.
• Lyft argues the city's tax formula unfairly includes passenger payments as revenue.
• The lawsuit highlights global gig economy debates over worker classification.

Lyft has accused the city of San Francisco in a lawsuit of overcharging it $100 million in taxes over five years, arguing that the city used a calculation that doesn't reflect the ride-hailing firm's business model.

The lawsuit, filed at the California Superior Court in San Francisco, said that the city calculated Lyft's 2019 to 2023 taxes based on the total amount passengers paid for rides. But Lyft said it makes money from what drivers pay to Lyft, not what passengers pay to the drivers. Drivers make at least 70% of what the passenger pays, according to Lyft's website.

Lyft considers drivers as customers who use its service and not employees, the company said in the state court complaint. The city's formula is "distortive and will grossly overstate Lyft's gross receipts attributable to Lyft's business activities in the city," the filing said.

The filing said that the US Securities and Exchange Commission does not consider driver's fees as part of Lyft's revenue. Driver fees are also not recognized as income for income tax purposes on a state or federal level. Lyft is seeking a refund for the amount it overpaid.

Lyft and the San Francisco City Attorney's representatives did not immediately respond to a request for comment.

"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 on Wednesday. "But, we believe the city is incorrect with how it calculated our gross receipts tax for the years 2019-2023."

The complaint is another example of ride-hailing and quick-delivery platforms like Lyft, Uber, and DoorDash making it clear that drivers on their US platforms are gig workers, not employees. Having drivers on a payroll would mean paying employment benefits such as vacation and overtime pay, minimum wage protection, and health insurance.

Last year, gig economy companies scored a big win after a California appeals court upheld a law that classified gig workers as independent contractors, not employees. But that argument has not always worked out for these companies in other markets: In 2021, the UK ruled that Uber drivers must be treated as company employees and not independent workers after a five-year legal battle.