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Taxi Drivers: RI’s Fare Tax Is Killing Their Business

Friday, June 14, 2013

 

RI's taxi drivers are pressuring the state legislature to repeal a tax on their business.

Rhode Island’s taxi drivers are crying for the repeal of a tax placed on taxicab, limousine, charter bus, and other ground passenger transportation services. “If you have ten customers in a day, and each one needs two to three minutes to explain the added tax, over the course of the day that’s thirty minutes of unpaid time. It’s unfair.” said Tom Bengaff, a driver for Airport Taxi.

Robert Coupe of the Taxi Owners Association of Rhode Island explained that, “while taxi drivers are losing income and struggling to stay in business, the Rhode Island Department of Revenue has reported the Taxi Tax generated less than half of the revenue that was projected in last year’s budget.”

Why The Math Doesn’t Work

The Taxi Owners Association has stated publicly that the tax is not collecting what it promised. The Association stated in a report that the fourth quarter of 2012 yielded collections in the amount of $116,174.82. This was attributed to lower than estimated sales tax collections because of “consumer price sensitivity,” and lower employment tax collections due to fewer fares.

Effective October 1, 2012, Rhode Island’s 7% sales and use tax extended to taxicab, limousine, charter bus, and other ground passenger transportation services. Pending legislation has been referred to and heard by both Senate and House Finance Committees. House Finance was presented with nearly 1,000 signatures petitioning the repeal of the tax. Bill sponsor, Senator V. Susan Sosnowski (Democrat - District 37, New Shoreham, South Kingston), pioneered the legislation with a House version sponsored by Representative Elaine Coderre (Democrat – District 60, Pawtucket). Both the House and Senate versions of the bill “…would remove taxicab services from the definition of ‘services’ as applicable to liability and computation of the sales and use taxes.”

Neil Downing, Chief Revenue Agent Rhode Island Division of Taxation, told GoLocal, “The state budget for the fiscal year that will end June 30, 2013, projects that revenue from the tax will total about $2.5 million.” Downing continued, “Please note that the revenue projection is for the last nine months of the fiscal year -- from October 1, 2012, through June 30, 2013. (The tax was not in effect for the first three months of the fiscal year -- in other words, it was not in effect for July, August, or September of 2012.) We have added a section to our annual sales tax reconciliation form to track the tax revenue,” said Downing, “but have nothing to report to you as yet; the provision is too new.”

Taxing the Wrong People

According to a report released by the Bureau of Labor Statistics, the median annual wage of taxi drivers and chauffeurs was $22,440 in May of 2010. The lowest 10% earned less than $16,480 and the top 10% earned more than $36,450. The wage data includes money earned from tips. Furthermore, according to information provided by Mr. Coupe, “Theirs is a heavily regulated industry, with strict requirements; for instance, costly car upkeep and geographical limitations. Profits are controlled by the state and are already slim for a profession whose average worker is below the poverty line.”

In a press release on June 11th, 2013 from the Taxi Owners Association of Rhode Island: “While taxi drivers are losing income and struggling to stay in business, the Rhode Island Division of Revenue has reported that the Taxi Tax generated less than half of the revenue that was projected in last year’s budget.” Driver, Tom Bengaff said, “The fares think the taxes are not real. They think they are being cheated.

“The biggest problem is keeping customers.”

 

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