- Associated Press - Tuesday, March 24, 2015

PROVIDENCE, R.I. (AP) - Rhode Island lawmakers questioned an Uber executive Tuesday about why the ride-hailing company isn’t paying the state sales tax, and one legislator said afterward the company should begin remitting the tax “immediately.”

As part of its work to update the motor vehicle code, a legislative commission met with Cathy Zhou, general manager of Uber for Rhode Island and Massachusetts and quizzed her about the sales tax.

Commission members told Zhou they’re concerned that Uber collects state sales taxes from local rides, but doesn’t remit it to the state.

“Since you’re already collecting it, I feel like we’re 90 percent of the way there,” Rep. Daniel Reilly said. “Is there a reason why we’re not getting it?”

Zhou deferred the question and others to Uber’s tax experts, who weren’t in attendance, but she said Rhode Island law is ambiguous on how businesses like Uber that operate on peer-to-peer technology should be treated for tax purposes.

She said Uber is working with Rhode Island’s tax division to remit the collected payments from the drivers of private cars and has passed on the taxes from drivers of cars with public plates to be properly remitted to the state.

“This points out why there’s such a clear need for sensible ride-sharing legislation that provides regulatory clarity in this area,” Zhou said.

Commission co-chair Rep. John Edwards told her the sales tax issue is critical.

“Especially where you have a company that has been collecting it and keeping it aside, and not remitting it properly to the state,” he said. “It’s a big issue for us and an issue of concern. And it’s something that should’ve been brought to our attention beforehand.”

Edwards asked about Uber’s revenues, but Zhou said she didn’t have those figures available. He said after the hearing that he expects the overdue tax funds to be remitted “immediately.”

“It’s astonishing to me that a major corporation would be able to skirt or flout our sales tax laws,” said the Democrat and House majority whip.

In 2012, lawmakers expanded the 7 percent sales tax to apply to previously exempt automobile ride-for-hire services.

Uber has partnered with more than 1,000 drivers in Rhode Island and tens of thousands of people have used the service since it launched in the state in September 2013, Zhou said.

Neither Uber nor Lyft, a similar ride service, has registered to collect and file sales taxes in Rhode Island, according to the Division of Taxation. If a business should collect and remit Rhode Island sales taxes but does not, the business can be referred to the division’s field audit staff, which can charge interest and penalties.

Division officials wouldn’t say Tuesday whether Uber or Lyft has been referred, saying the division doesn’t discuss details involving specific taxpayers.

The last major revisions to the motor vehicle code occurred in 1950. Edwards said he wants to make sure in any proposed legislation this year that ride-hailing companies are paying taxes and that there are standardized requirements for insurance and background checks.

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