The Canadian arm of Uber Technologies Inc. is fighting a tax reassessment that the ride-hailing company says incorrectly assumed it was responsible to account for sales tax on rides provided using the service.
In December, Uber Canada Inc. (UCI) filed a notice of appeal with the Tax Court of Canada over reassessments it says were issued by the Canada Revenue Agency in December 2014, which covered periods from October 2012 to the end of June 2013.
The company claims the CRA’s “assumption” supporting the reassessments was that Uber Canada was responsible to account for sales tax on rides provided to passengers.
Not so, claims Uber, which said it should only be on the hook for its own “taxable supplies.”
“However, UCI did not supply transportation services to riders during the Reporting Periods, or at any other time,” the notice of appeal said.
“At all time (sic), only the driver-partners supplied the transportation services to the riders, not UCI.”
During the periods in question, Uber Canada claims, it was instead providing “marketing and support services.”
It says it provided those services to its non-Canadian-based corporate owners, which automatically bill riders’ credit cards, collect fares on behalf of driver-partners, and then remit drivers the fares, minus fees for using the Uber app.
Uber Canada says it properly charged, collected and remitted the necessary sales tax. It is now asking the tax court to vacate the CRA’s reassessments.
An Uber spokesperson said in an email that the company “pays its taxes in all jurisdictions as required.”
The amounts in dispute in the tax case total $672,997.35 in “net tax” changes, penalties and interest, the notice of appeal shows, a relatively small sum given reports privately held Uber could be worth as much as US$120 billion in an initial public offering that may come this year.
Uber’s business in Canada has grown since 2013 as well, as the company introduced its popular UberX service to this country in 2014. Prior to that, the Financial Post reported at the time, Uber had run a cab-hailing service in certain Canadian cities that partnered with municipally licensed taxi and limo drivers.
The claims in Uber’s notice of appeal have not been proven in tax court. The federal government has yet to file a reply.
However, the federal government said in its 2017 budget that it would amend the definition of a taxi business under the Excise Tax Act “to level the playing field and ensure that ride-sharing businesses are subject to the same GST/HST rules as taxis.”
According to the government, those changes, which came into effect on July 1, 2017, mean that a “self-employed commercial ride-sharing driver” providing taxable supplies of ride-sharing services is required to register for a sales-tax account regardless of the amount of money they bring in. The driver is also responsible for charging, collecting, reporting and remitting the sales tax on rides.
What (Uber is) basically saying is, ‘You’re taxing us on the basis of what our company is not’
Jonathan Garbutt, Moodys Gartner Tax Law
“As an Uber partner, you’re an independent contractor,” the company says on its website. “When you work for yourself, you’re responsible to collect, remit, and file your sales tax — HST in Ontario, GST in Alberta — on all your ridesharing trips to the Canada Revenue Agency (CRA).”
A spokesperson for the CRA said in an email that they could not comment on the details of the tax case as it is still before the courts and because of the confidentiality provisions of the Excise Tax Act.
“The Government of Canada is committed to ensuring that Canada’s tax system is fair and supports an innovative economy,” they said.
Uber Canada is part of a group of companies ultimately owned by San Francisco, Calif.-based Uber Technologies, the appeal noted, with the Canadian unit beginning operations in March 2012.
Jonathan Garbutt, a lawyer at Moodys Gartner Tax Law LLP, said the tax-court notice of appeal (which is just two pages long, not counting the cover) appears to revolve around the issue of how to define Uber.
“What (Uber is) basically saying is, ‘You’re taxing us on the basis of what our company is not,’” Garbutt said.
The tax case is separate from a proposed class-action lawsuit in Ontario, which is attempting to classify drivers as employees, not independent contractors.
The Court of Appeal for Ontario issued a decision involving the case last week, ruling an arbitration clause in Uber’s driver services agreement was “invalid,” and opening a door to the class-action proceeding through the province’s courts.
Uber Canada has said it was reviewing the decision, which noted the proposed class-action would be on behalf of anyone who, since 2012, “worked or continues to work for Uber in Ontario as a Partner and/or independent contractor.”
The lawsuit also claims damages of $400 million.