Marty McFlight is a Washington D.C.-based business consultant who travels to Raleigh once per month. In August, Marty flew from Washington to Raleigh-Durham International Airport (“RDU”) for a day-long visit to his client’s Raleigh headquarters. For his subsequent September client visit, Marty took an Amtrak train from Washington to downtown Raleigh’s Union Station. On each trip, he used an online ride-sharing service (Uber) to travel from the airport or train station to his client’s headquarters.
When he reviewed his August and September business expenses, Marty noticed that the receipt for his ride from RDU to his client’s headquarters included a $3.00 “RDU Airport Surcharge,” but the receipt for his ride from Raleigh’s train station to his client’s headquarters did not include any similar fee. Confused, Marty e-mails Uber to ask why. What will he find?
County and Municipal Authority to Tax or Impose Fees Upon Online Ride-Sharing Services in North Carolina
Marty would quickly learn from Uber that the $3.00 “RDU Airport Surcharge” is not a fee or surcharge that Uber imposes unilaterally. Instead, it is a fee that publicly owned or operated airports in North Carolina may impose upon online ride-sharing services like Uber and their drivers. Where an airport has imposed such a fee, the online ride-sharing service may pass the cost of the fee along to its passengers.
The airport surcharge is a product of North Carolina’s uniform statewide regulatory scheme for online-ride sharing services—deemed “transportation network company (TNC) services” under North Carolina law—that the General Assembly adopted in 2015. See S.L. 2015-237. Under that scheme, North Carolina’s “airport operators” may impose a “reasonable fee” upon a ride-sharing service and its drivers for the use of airport property. See G.S. § 20-280.9(a).
An “airport operator” is “any person with police powers that owns or operates an airport.” G.S. § 20-280.1(1). North Carolina’s municipalities, counties, and airport authorities that own or operate airports qualify as “airport operators.” North Carolina’s municipalities and counties may, individually or in conjunction with one another, own and operate airports. See G.S. § 153A-275(a), G.S. § 153A-274(4) and G.S. § 63-3 (counties); G.S. § 160A-312(a), G.S. § 160A-311(9) and G.S. § 63-2 (municipalities). In some cases, the General Assembly has established separate public airport authorities that may own and operate airports. See, e.g., S.L. 2022-34 (establishing the Washington-Warren Airport Authority). All of these “airport operators” may impose fees upon TNC services like Uber and Lyft if the services pick up or drop off passengers on airport property.
Currently, these fees differ from airport to airport. For example, the City of Fayetteville (which operates Fayetteville Regional Airport) currently imposes a $2.00 pick-up fee and $1.00 drop-off fee; the Greater Asheville Regional Airport Authority imposes a $2.50 pick-up fee and a $0.50 drop-off fee; and the City of Charlotte (which operates Charlotte-Douglas International Airport) imposes a $3.25 pick-up fee and $3.25 drop-off fee.
But aside from their roles as “airport operators,” may North Carolina’s counties and municipalities tax or impose per-trip fees upon online ride-sharing services for simply operating within their respective boundaries? For example, could the City of Raleigh impose a $3.00 “pick-up” fee upon Marty’s Uber trip from the Raleigh train station to his client’s headquarters?
In short, no. Excluding fees charged by publicly owned or operated airports, the General Assembly has taken what some commentators label a “tax free” approach to the regulation of online ride-sharing services—failing to levy state-wide taxes or fees upon online-ride sharing services while also prohibiting local governments from levying taxes or fees upon these services.[1] Since 2015, North Carolina law has expressly prohibited counties and municipalities from taxing or imposing fees upon online ride-sharing services like Uber and Lyft. See G.S. § 20-280.10(a). For that reason, Marty would not find any similar “surcharge” appearing on his receipt for his Uber trip from the Raleigh train station to his client’s Raleigh headquarters.
State and Local Taxes or Fees Imposed Upon Online Ride-Sharing Services in Other States
A December 2021 study of state and local taxation of online ride-sharing services across the country reveals that American states and localities have been far from uniform in their taxing approaches in this area. As of December 2021, 11 states took a “tax-free” approach similar to that employed by the North Carolina General Assembly, five states took a “hands-off” approach to the taxation of TNC services (permitting local taxation in some cases), 12 states employed a “state tax for state use” model (assessing a state-wide tax upon TNC services that was retained at the state level), three states used a “revenue-sharing” model (assessing a state-wide tax but distributing the proceeds of the tax to local governments), and one state used a “local option” model (permitting, but not requiring, cities and counties to levy a tax).
In the “revenue sharing” models, units of local government receive some proceeds of state-imposed taxes and fees on TNC services. For example, South Carolina and Alabama impose a state-wide a “local assessment fee” of 1% of a gross fare. See S.C. Code § 58-23-1700; Ala. Code § 32-7C-23. In both states, the proceeds of the local assessment fee are returned either to the municipality in which a ride originated or, if the ride originated in an unincorporated part of a county, to the county in which such a ride originated. See S.C. Code § 58-23-1700(F)(2); Ala. Code § 32-7C-23(e). Such a model has not been introduced in proposed legislation at the North Carolina General Assembly—and a 2019 proposal in the North Carolina General Assembly to impose a state-wide tax upon TNC services under the “state tax for state use” model failed. See H966, 2019 Appropriations Act, Version 2, Section 40.20.(a) (“Transportation Network Company Privilege Tax”) (proposing a statewide 7% gross receipts tax on intrastate services rendered by a transportation network company). I am not aware of any serious proposals to enact such a tax at present.
County and Municipal Authority to Levy Gross Receipts Tax Upon Short-Term Lease or Rental of Vehicles
A creative legal thinker might ask whether any other alternative authority provides North Carolina’s counties or municipalities with an ability to tax or charge online ride-sharing services. For example, North Carolina counties and municipalities may, but are not required to, levy a gross receipts tax upon the “short-term lease or rental” of vehicles at retail to the general public. See G.S. § 153A-156(a) (county – up to 1.5% of gross receipts); G.S. § 160A-215.1(e) (municipalities – up to 1.5% of gross receipts). Could this authority permit a county or a municipality to impose a gross receipts tax upon online ride-sharing services?
No. Even though the statutory definition of “short-term lease or rental” circularly defines that term as a “lease or rental of a motor vehicle . . ., including a vehicle sharing service, that is not a long-term lease or rental or a vehicle subscription,” a passenger’s use of a TNC service is not a lease or rental of a motor vehicle. See G.S. § 105-187.1(a)(7). Historically, these gross receipts taxes have been levied against rental car companies that rent entire vehicles—not companies that provide transportation to a specific destination.
The General Assembly has expressly limited county and municipal imposition of fees upon TNC services to those contained in Article 10A of Chapter 20. See G.S. § 20-280.10(a) (“Notwithstanding any other provision of law and except as authorized by this Chapter, no county, city, . . . or other governmental agency is authorized to impose fees . . . or otherwise regulate TNC services.”). Any attempt to construe online ride-sharing services as a “short-term lease or rental” subject to a county or municipality’s gross receipts tax would be improper. Unless and until the General Assembly revises current law, counties and municipalities may not impose fees or taxes upon online ride-sharing services outside of the exercise of their authority as airport operators.
