Taxing the New Economy, Starting With Uber, Lyft

First in an occasional series of stories on how states are overhauling tax codes to adapt to a new economy.

If any service best reflects the new economy, it may be hailing rides on demand from big companies like Uber and Lyft. They let riders avoid the hassle of flagging down a taxicab by simply tapping a mobile application on a smartphone. A driver arrives within minutes to take them to their destination.

But unlike old-economy taxicab companies, the new ride-hailing services often pay little to none of the license fees or taxes that taxi businesses hand over to cities, counties and states for the right to operate. If anything, their appearance on the scene reduces the taxes and fees that government counts on by taking customers away from the old-economy taxis.

That’s changing. Some states and localities are starting to tax the ride-hailing services. It’s not just an attempt to replace the revenue they’ve lost from the taxicab industry as a result of the new competition. Taxing the transportation network companies also is a sign of how governments are seeking to overhaul their tax structures in response to a rapidly changing economy that relies more on internet-based services than manufacturing and traditional bricks-and mortar retail shopping.

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