Director's Rule 5-970

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Transportation Network Company Tax

(1) Introduction. Recognizing that Seattle is a national leader in the fair treatment of workers, on Sept. 19, 2019, Mayor Durkan announced the Fare Share Plan to promote compensation standards for the drivers of the Transportation Network Companies (TNCs). TNCs provide application dispatch services that allow passengers to directly request the dispatch of drivers via the internet using mobile interfaces such as smartphone applications. In 2018, over 24 million TNC rides were taken in Seattle.

Utilizing its taxing authority granted by the Washington State Constitution and the Washington State Legislature, effective July 1, 2020, the City of Seattle will impose a tax on TNCs operating in Seattle.

Starting Jan. 1, 2021, the taxable threshold changes from 1,000,000 trips originating in Seattle in the prior calendar quarter to 200,000 trips originating in Seattle in the prior calendar quarter.

(2) Definitions. For purposes of this rule, the following definitions will apply:

(a) "Application dispatch" means technology that allows consumers to directly request dispatch of drivers for trips and/or allows drivers or TNCs to accept payments for trips via the internet using mobile interfaces such as, but not limited to, smartphone and tablet applications.

(b) "For-hire driver" means any person in physical control of a taxicab, for-hire vehicle, or transportation network company endorsed vehicle who is required to be licensed in the City. The term includes a lease driver, owner/operator, or employee, who drives taxicabs, for-hire vehicles, or transportation network company endorsed vehicles.

(c) "For-hire vehicle" means any motor vehicle used for the transportation of passengers for compensation with certain exceptions and has the same meaning as given in SMC 6.310.110.

(d) "Motor vehicle" means every motorized vehicle by or upon which any person may be transported or carried upon a public street, highway or alley and has the same meaning as given in Section 6.310.110. Vehicles used exclusively upon stationary rail tracks or propelled by the use of overhead electric wires are not considered motor vehicles.

(e) "Operating in Seattle" means, with respect to a TNC, providing application dispatch services to any affiliated driver at any time for the transport of any passenger for compensation from a point within the geographical con nes of Seattle.

(f) "Personal vehicle" means a motor vehicle that is not a taxicab or for-hire vehicle, that is subject to regulation under Chapter 6.310, and that is used by a driver to provide trips arranged through a TNC application dispatch system.

(g) "Split fare" is a method of allocating the cost of a single trip between passengers on the same trip.

(h) "Shared-ride" or "Pooled-ride" means allowing the TNC driver to use the open seats in the vehicle to their full advantage. A passenger may be paired with other passengers along the course of their route. The pickup and drop-o order can vary with every ride.

"Taxicab" means every motor vehicle:

(i) That is held out to the public as providing transportation to passengers or articles for hire;

(ii)   Where the route traveled or destination is controlled by the customer;

(iii) That carries signs or indicia of a taxicab, including the words "taxi," "taxicab," or "cab"; and

(iv) Where the fare is based on an amount recorded and indicated on a taximeter or on an application dispatch system linked to a taximeter, or by a special contract rate permitted under SMC 6.310.

(j) "TNC" means a transportation network company.

(k) "TNC dispatched trip" or "trip" means the provision of transportation by a transportation network company driver to a passenger in a TNC vehicle through the use of a TNC's application dispatch system. The term "TNC dispatched trip" does not include transportation provided by taxicabs or for-hire vehicles:

(l) "TNC driver" or "driver" means a driver, licensed or required to be licensed under SMC 6.310, an affiliated with, and accepting dispatched trips from a TNC.

(m) "TNC vehicle" means a personal motor vehicle used for the transportation of passengers for compensation that is a       liated with a TNC.

(n) "Transportation network company" means a person, licensed or required to be licensed under SMC 6.310, operating in Seattle that o ers prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers using their personal vehicles.

(o) "Trip that originates in Seattle" means a TNC dispatched trip where a passenger enters a TNC vehicle within Seattle city limits.

(3) Tax rate and measure. The tax is imposed upon every TNC operating within the City that provides application dispatch services via the internet using mobile interfaces such as smartphone applications to connect drivers with passengers for transportation services.

(a) The amount of the tax due is $0.57 per trip that originates in Seattle.

(i) Each pooled or shared ride is a di erent trip and the TNC tax is due for each trip that originates in Seattle.

(ii) Alternatively, a split fare is a single trip and the total fare is allocated between the passengers on trips that originate in Seattle.

(b) The TNC shall enter on the tax return the number of trips originating in Seattle even though no tax may be due.

(c) For the periods between July 1, 2020, and Dec. 31, 2020, no tax is due from a TNC that reports fewer than 1 million trips that originate in Seattle during the prior calendar quarter. For the periods after Dec. 31, 2020, no tax is due from a TNC that reports fewer than 200,000 trips that originate in Seattle during the prior calendar quarter.

(d) Any TNC reporting a number of trips below the relevant threshold in subsection (3) (c) shall complete and le a return but declare no tax due on the return.

(e) TNC taxes collected from customers are included in gross receipts for Business and Occupation taxes as well as for the Seattle Business License tax. The TNC taxes collected are not a deductible expense. TNC taxes collected are separate and apart from the TNC licensing fee collected under SMC 6.310.150 and the wheelchair accessible services surcharge collected under SMC 6.310.175.

(f) If the TNC company o ers a refund to a dissatis ed customer, the TNC tax still applies to trips that originate in Seattle. Conversely, the TNC tax does not apply to service charges for canceled trips.

(g) The TNC tax applies only to Transportation Network Company trips originating in Seattle. Other for-hire vehicles and drivers are excluded from the TNC tax.

(4) Deductions. A taxpayer may deduct from the measure of the tax any trip that originates in Seattle and terminates outside the state of Washington.

(5) Examples. The following examples identify a number of facts and then state a conclusion. The tax status of each circumstance must be determined after a review of all the facts and circumstances.

(a) Example 1: From July 1, 2020 through Sept. 30, 2020, Driver A works for TNC Co. which has more than 1 million trips that originate in Seattle per quarter. Driver A receives a request from Passenger B for a ride from downtown Seattle to Bellevue. TNC Co. would be liable for the $0.57 per trip tax in Quarter 3, 2020, because the trip originated in Seattle.

(b) Example 2: Same as Example 1, except Passenger B requests a ride from Bellevue to downtown Seattle. TNC Co. would not be liable for the TNC tax because the trip originated in Bellevue.

(c) Example 3: Same as Example 1, except Passenger B requests a ride from downtown Seattle to Portland, Oregon. TNC Co. would not be liable for the TNC tax on this trip. A taxpayer may deduct from the measure of the tax any trip that originates in Seattle and terminates outside the state of Washington.

(d) Example 4: From July 1, 2020 through Sept. 30, 2020, Driver B works for Upstart TNC. Upstart is a new TNC o ering luxury and specialty vehicles. Upstart has a limited number of drivers and only provides about 200,000 rides per month that originate in Seattle. Driver B receives a request on his smartphone from Passenger C for a ride from downtown Seattle to Bellevue. Upstart TNC would not be liable for the $0.57 per trip tax because the tax does not apply to TNCs that reports fewer than 1 million trips that originate in Seattle in the prior calendar quarter. Even though Upstart TNC is below the threshold for Quarter 3, 2020, they will need to complete and le a return, declaring no tax due.

(e) Example 5: From Jan. 1, 2021 through March 31, 2021, Driver C works for Cutting Edge TNC. Cutting Edge TNC had 300,000 rides that originated in Seattle between Oct. 1, 2020 through Dec. 31, 2020, the prior calendar quarter. Driver C receives a request on his smartphone from Passenger V for a ride from downtown Seattle to Bellevue. Cutting Edge TNC would be liable for the $0.57 per trip tax because the trip originated in Seattle and during the prior calendar quarter, Cutting Edge TNC had more than 200,000 trips that originated in Seattle. For Quarter 1, 2021, Cutting Edge TNC will need to complete a TNC tax return and pay the amount of tax due.

(f) Example 6: Driver D works for Expedition TNC and Expedition TNC has sufficient rides in the previous quarter that originate in Seattle to exceed the number of rides threshold in subsection (3)(c) of the rule. Driver D receives a request from Passenger X for a ride from downtown Seattle to Redmond. Passenger X uses the pooled-ride feature to request his trip. X's pooled-ride allows Expedition TNC's driver to use the open seats in the vehicle to their full advantage. After picking up passenger X and on the way to Redmond, Driver A receives another pooled-ride request from Passenger Y. Passenger Y is picked up in Seattle and will be dropped o in Bellevue. After dropping o Passenger Y in Bellevue, Driver D receives another pooled-ride request from Passenger Z. Passenger Z is picked up in Bellevue and dropped o in Redmond. In this instance, Expedition TNC would be liable for TNC tax on the trips provided to both X and Y because their trips originated in Seattle.

(g) Example 7: Driver E works for Quick Outing TNC and Quick Outing has sufficient rides in the previous quarter that originate in Seattle to exceed the number of rides threshold in subsection (3)(c) of the rule. Driver E receives a request from Passenger T for a ride from a location in downtown Seattle to another location within the city limits of Seattle. After requesting the ride, Passenger G decides to split the fare with their friend Passenger W using the Quick-Outing TNC app. Driver E picks up passengers T and W in downtown Seattle to take them to their destination. In this instance, Quick Outing TNC would be liable for the TNC tax on one trip because there is only one ride request. A split fare is only a means of allowing passengers to split the cost of a ride between themselves and not the result of more than one ride request.