The bumpy road to taxing transportation services in Georgia – Wacky Tax Wednesday

At the start of 2020, Georgia sales tax applied to taxi and limousine services but not rideshare services provided by Lyft, Uber, or similar companies. Today, all transportation services in Georgia are exempt from sales tax but subject to the same flat excise tax.

The road to this point was far from straight.

Although charges by their more traditional taxi counterparts were subject to sales tax, services provided by Lyft, Uber, and other rideshare platforms were exempt from sales and excise taxes in Georgia until April 1, 2020. As of that date, rideshare services became subject to sales tax under Georgia’s marketplace facilitator law, which requires marketplace facilitators to collect and remit sales tax on behalf of third parties.

Not surprisingly, rideshare networks were against the tax, and Uber’s Evangeline George warned it would be one of the highest taxes of its kind in the country. They backed House Bill 105, which would replace the sales tax with a flat fee. Yet before the bill could be signed into law, the coronavirus (COVID-19) put a premature end to the legislative session and the sales tax on rideshare services took effect as required under the marketplace law.

Undaunted, rideshare companies continued to push for the flat fee. HB 105 was waiting when lawmakers reconvened June 15, and it was signed into law in early August. 

Ready? Set? Collect!

HB 105 repeals “all laws and parts of laws in conflict with this Act,” meaning it eliminates the sales tax on for-hire ground transport services. These include limousine carriers, rideshare network services, taxi services, and transportation referral services as defined in Code Section 40-1-190. 

The measure also imposes a 50-cent flat excise tax on “any for-hire ground transport trip” and a 25-cent flat excise tax on “any shared for-hire ground transport trip.” Marketplaces like Lyft and Uber are still responsible for collecting and remitting the fees on behalf of their drivers.

According to the Georgia Department of Revenue, for-hire ground transport service providers had to start collecting the tax on August 5, 2020 — the day HB 105 was signed into law. 

According to the bill, the law took effect April 1, 2020. Fortunately, the department isn't making companies collect the back taxes. And although there was some talk of refunding passengers the sales taxes paid between April 1 and August 4, that's not mentioned in the final version of the bill or the department's guidelines.

Shared vs. private transportation

To help transportation service providers understand which fee applies, the 50-cent fee or the 25-cent fee for “shared for-hire ground transport,” the Department of Revenue provides numerous examples. They boil down to this: Any trip intentionally coordinated by a group of people who know one another is considered a single trip subject to the 50-cent fee, even if they’re not picked up or dropped off at the same spot.

The 25-cent fee applies to “any for-hire ground transport trip in which an individual has been matched with another individual by a for-hire ground transport service provider for purposes of such journey.” The 25-cent fee is charged to each individual charged for the shared ride. See the Georgia Department of Revenue for additional details.

Changes in taxability laws always create stress and work for affected businesses. That stress and work is amplified when new requirements are changed shortly after taking effect. Tax automation software helps ease the burden of tax compliance in all states.