Harry here. There’s been a lot of talk about business licenses lately with cities like San Francisco now requiring drivers to get one, but Lyft and Uber have remained quiet on the issue. Today, new RSG contributor Ryan King walks us through the situation and what drivers need to know. Even if you’re not in SF, this will likely be an issue you have to deal with at some point, so make sure you brush up on the rules now.
Like many drivers here in the San Francisco Bay Area, I received an official letter from the City & County of San Francisco Treasurer and Tax Collector in late April. Well, I actually received two copies of the letter. I assume this is because I drive for both Uber and Lyft. The letter basically told me I owe the city an annual business license fee for operating a business in SF.
The first thing I did was to try and gather information on this requirement. I read emails from Uber and Lyft about it, I found this article on our blog. But I couldn’t find much information about the requirement, and the more I looked, the more questions I had about it. Do I have to pay for two licenses because I got two letters (one for Lyft and one for Uber)? (No). Do I have to pay for previous years? (Yes). What will happen if I don’t pay? (I don’t know).
The whole thing seemed strange. I felt like I didn’t get support from Uber or Lyft about this unexpected bill, and I needed more information to make an informed decision about what to do in this situation.
Related Reading: SF to Require Lyft, Uber Drivers to Obtain Business Licenses
The requirement of a business license is not unique to San Francisco. The U.S. Small Business Administration states: “virtually every business needs some form of license or permit to operate legally.” However, these requirements vary by state and city. You can find information for each state listed on the SBA website.
Uber complies with several cities and states about their business license requirements. In New York, drivers are required to get a TNC license, among other strict requirements. The state of Nevada requires rideshare drivers to obtain a business license, and the official Las Vegas Uber site (on UberMovement) lists it as a requirement. Portland, Oregon requires a (free) business license, and Uber even shows drivers how to obtain one with step by step directions. These are cities and states in which Uber requires drivers to obtain a business license.
The Case Of San Francisco
The actual language of the letter drivers in SF received was “if you drive on San Francisco streets seven days or more a year and work as an independent contractor rather than an employee of your TNC, you are required to obtain a Business Registration Certificate.” It gave me 30 days to either register for “both the current registration period and the 2016-2017 registration period.” Or I could to go to a different website and declare I do not need to register.
For those of you who are interested, here is the full letter that drivers received from the SF Office of the Treasurer & Tax Collector, along with the response that Uber and Lyft gave to drivers:
As you can see, there isn’t much information in the city’s letter. It does not even tell drivers how much the registration fee is. Uber quickly sent drivers an email which provided little information, stating “we will be in touch when we have more information.” Both companies state they are against the new requirement and will continue to fight it.
I think it’s important to stress that both Uber and Lyft have not changed their policy on business license requirements. They do not require a business license to get started or continue driving in San Francisco, or any other Bay Area city. That means we can be sure there are thousands of drivers out here who are not complying with this city requirement. RSG contributor and SF driver Christian Perea told the SF Chronicle “most drivers will ignore the letters until they start getting ticketed.” I agree with him.
These letters were sent out shortly after the announcement of two settlements, which, if approved, will maintain drivers’ current status as independent contractors in California. It seems to me that SF is trying to use the classification of drivers as independent contractors against Uber and Lyft. The spokeswoman for the SF treasury said “we don’t intend to treat these (ride-hailing) businesses any differently than we’ve been treating all other businesses in San Francisco.”
They are using the fact that Uber and Lyft insist drivers are independent contractors, not employees, against the companies. As if the city is saying “oh, you insist all your drivers are independent contractors? Fine, they all have to pay for individual business licenses then.” The intention may have been to punish Uber and Lyft for not playing by the rules, but drivers are the ones who are actually hurt by this requirement since they are the ones who have to pay the fees, and it is their privacy that is at risk.
The Issue Of Privacy
There are two points I’d like to make about privacy. First, how did the City of San Francisco obtain the personal information of drivers operating in San Francisco? Lyft has said it released the tax information on its drivers in 2014 and 2015 because it was legally required to do so. While Uber told drivers in San Francisco they don’t know how the city obtained our names and addresses (see image above), we can assume that Uber was required to also provide the information to the city, just like Lyft. The city has stated that it requested this information and it took almost two years of enforcement to get it.
On to my second point: registering as a business in San Francisco requires the owner to put their physical address in a publicly available directory. This directory presents some security risks. Insurance companies could use this information to figure out which drivers haven’t disclosed their rideshare activity and drop those drivers from their plans (not the worst thing, though, since you should probably have rideshare insurance).
There are also some people who dislike Uber and could use this information maliciously. Making a driver’s personal information publicly available puts them at risk of harassment or even property damage by disgruntled taxi drivers or maybe even an angry passenger. As you can tell, I am against my information being publicly available.
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Fees, Fees And More Fees
Many of you may be wondering: how much is an SF business license anyway? Well, it’s an annual fee of $91. However, drivers are also getting penalized for past years registration, plus late fees, plus next year’s fee. There is a late filling fee of up to $100, a late payment penalty of up to 40%, interest of 1% per month, and a $55 administration fee:
One driver wrote into TheRideshareGuy.com reported to the city that he began driving on January 1st, 2016 and he was required to pay $240. And those fees would have grown had he waited.
However, the deadline for drivers receiving this notice has actually come and gone. So, what happens to the drivers who ignored it? This remains to be seen. It is possible that SF police will start pulling drivers over and ticketing those who don’t display a business license, but that hasn’t happened yet, and it would be difficult to enforce with tens of thousands of drivers on the street.
Another important point is from a strictly legal standpoint, since I’d have to register my business in every city I drive in: that means San Francisco, Oakland, Berkeley, San Mateo, Palo Alto, San Jose, and… you get the idea. This business license requirement just doesn’t make much sense for rideshare drivers since we operate in multiple cities.
One possible solution could be modeled after agreements Uber and Lyft has worked out with airports. At San Francisco International Airport (SFO), drivers must display a placard that Uber and Lyft gave us. This lets airport security know we are here legally and have paid our dues. The added cost of this placard is passed onto the riders. A fee of $3.85 is charged to all pick ups and drop offs at SFO. This way SFO gets paid and the cost is not an undue burden to drivers.
I do think cities should be collecting taxes from local businesses, and a model like this could charge each rider a small amount that goes directly to the city. If the city wants $91 per driver, they could charge riders less than $0.50 per ride to come up with that money. If SF received 45 cents per ride, it would only take 200 rides (approximately 10-14 days in SF) for the city to get it’s $91. The city wants anyone who works over 7 days in the city a year to pay for a business license. A model like this could guarantee the city is getting every penny without penalizing drivers or adding much cost for riders.
Bottom line: Do rideshare drivers need to obtain a business license? Officially, yes. Can you get by without it? Probably, depending on your city or state. If you are in San Francisco, here are useful instructions Lyft created to register.
So, what do you guys think? Did any of you in SF who received the letter have information we didn’t cover? Please leave a comment below.
Make Every Mile CountDid you know that every 1,000 business miles can generate $540 in tax deductions? Never miss another mile with the new QuickBooks Self-Employed automatic mileage tracker.
-Ryan @ RSG
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- Do Rideshare Drivers Need To Get Business Licenses? - June 1, 2016