Uber takes aim at 'patchwork' of ride share taxes in Illinois

CHICAGO (Reuters) - Uber Technologies Inc on Wednesday sued a Chicago suburb over a new ride share tax, while calling on Illinois lawmakers to address the state’s “emerging patchwork” of taxation.

FILE PHOTO: An Uber pick-up location is pictured in San Diego, California, September 30. 2019. REUTERS/Mike Blake

The lawsuit could have implications for Chicago Mayor Lori Lightfoot’s plan to raise $40 million in new revenue from ride shares as the city grapples with an $838 million budget hole.

The case Uber filed in Cook County Circuit Court against the village of Skokie said that while most states do not allow local government taxation of ride sharing services, municipalities in Illinois are imposing their own fees and taxes on the industry.

In a statement, the company said that while it believes Skokie’s taxes “run against well-established Illinois law,” it hopes to work with Illinois lawmakers on legislation “that raises revenue in a way that makes sense for the state and the industry.”

An ordinance Skokie adopted in May imposes a tax on ride shares beginning or terminating in the suburb as compensation for the wear and tear on roads and infrastructure from increased traffic, according to the lawsuit.

Uber claimed the tax violates Illinois’ constitution because it imposes “an unauthorized occupation tax” that applies outside of Skokie’s jurisdiction, noting that 86% of Uber trips originating or ending there in the first nine months of 2019 crossed the suburb’s borders.

Ann Tennes, Skokie’s communications director, said the village has not been formally notified about the lawsuit and was declining to comment at this time.

Lightfoot has proposed raising the city’s tax on single-passenger ride shares to $1.13 per ride from 60 cents, along with imposing a new $1.75 surcharge on weekday rides beginning or ending in a designated downtown area to combat traffic congestion. The city also collects accessibility and administrative fees totaling 12 cents per trip.

Uber has opposed the move, saying it would lead to the nation’s highest ride sharing fee. But national comparisons are hard to make. Some cities and states collect a percentage of the total fare, according to the Eno Center for Transportation, a think tank.

Lyft Inc, Uber’s rival, said the proposal “shows a total misunderstanding of what causes congestion and how Chicagoans are moving around the city.”

Reporting by Karen Pierog in Chicago; Editing by Matthew Lewis