(The Center Square) – Lyft has sued the city of San Francisco, claiming the city overcharged the ride-share company $100 million in taxes between 2019 and 2023.
The ride-share company said in the lawsuit that the city’s estimation mischaracterizes its business model.
As a company, Lyft says it makes its money by taking a percentage of the fee the riders pay. The ride-sharing company’s website says that drivers will make at least 70% of the passenger payments.
“Lyft recognizes revenue from rideshare as being comprised of fees paid to Lyft by Drivers, not charges paid by Riders to Drivers. Lyft does not treat Drivers as employees for any purpose,” the lawsuit says.
“Without including amounts paid to Drivers in the payroll factor, the apportionment formula is distortive and will grossly overstate Lyft’s gross receipts attributable to Lyft’s business activities in the City,” the lawsuit continues.
Also, in the lawsuit, Lyft says that San Francisco “inconsistently” classifies “Lyft’s business activity for purposes” of city taxes.
According to Lyft’s lawsuit, these taxes are the Gross Receipts Tax, Homelessness Gross Receipts Tax, Traffic Congestion Mitigation Tax and business registration fees.
Lyft’s lawsuit comes after California passed AB 5, which reclassified how independent contractors and employees were taxed and classified.
In a letter written to California Assembly members before this became law, Gov. Gavin Newsom said it would help “reduce worker misclassification.”
“Workers being wrongly classified as ‘independent contractors,’ rather than employees, which erodes basic worker protections like the minimum wage, paid sick days and health insurance benefits,” he said in 2019.
The law categorized ride-share companies as employers who need to provide health insurance.
In 2020, California voters passed California Proposition 22 with 59% of the vote. This proposition returned ride-sharing apps and delivery drivers to independent contractors.
According to Ballotpedia, Lyft spent $47.5 million promoting passage of the ballot referendum.
The proposition spent years in legal battles until July 2024, when the California Supreme Court ruled that gig workers could work as independent contractors and not employees, The Center Square reported.
San Francisco has a nearly $1 billion budget gap, The Center Square previously reported. S&P Global Ratings lowered the city’s credit rating in December 2024.