• Nevada: New Law Allows On-Demand Transportation Companies to Operate in the State, Subject to the 3 Percent Excise Tax
  • August 10, 2015 | Authors: David H. Godenswager; David M. Kall; Susan Millradt McGlone
  • Law Firm: McDonald Hopkins LLC - Cleveland Office
  • In June, Nevada lawmakers passed SB 376, the so-called “Uber law” that allows on-demand transportation companies, like Uber and Lyft, to operate in the state. As a result, these firms are now subject to the same tax laws, like the 3 percent Passenger Carrier Tax that Nevada charges transportation network companies, common carriers, and taxicabs. For transportation network companies, the tax is effective upon receiving approval from the Nevada Transportation Authority to operate in Nevada, and for all others, the effective date is Aug. 28, 2015.

    The new law also requires on-demand providers to comply with the same regulations that other transportation companies do. This includes adhering to the rules pertaining to insurance and safety standards, and ensuring that independent contractors are minimally qualified.

    In furtherance of the new law, the Nevada Tax Commission issued an Emergency Regulation on June 25, 2015, to assist taxpayers with procedural requirements, like due dates, filing requirements, contents of a return, and computation of tax amounts due. The regulation also allows the Department of Taxation to collect the taxes.

    According to the Los Angeles Times, this is a big win for Uber and other on-demand rideshare providers because up until the law’s passage, they were not allowed to operate in Nevada. The only other holdouts are South Dakota, Wyoming, West Virginia, and Alaska. The Silver State expects to take in $19 million, which it will put toward a new medical school at the University of Nevada.

    The paper described Las Vegas as an especially important market, in part because it is “the most touristy tourist town in the U.S. The local population is 603,000, but the city attracts 41 million visitors a year.” What is more, in just March 2015 alone, there were 2.5 million cab rides in Nevada, most of which were in Las Vegas.

    The tussle between traditional taxi-cab firms and on-demand transportation companies has been well documented. For instance, The New York Times ran a piece late last month describing the situation in the Hamptons, where Uber and others like it have effectively been banned since the spring of 2014. Local regulations require them to have a business office and license to operate, and rather than comply they “skipped town.”

    In the Hamptons, many consider Uber to be their only option, because “getting a taxi is a drag.” First, there is a frustrating dearth of cabs. In addition, one user described an experience in which her driver, who “barely looked 16 and [who] drove like a 16-year-old,” picked her up in a dilapidated van, with no gas, after making her wait for 30 minutes. Once they were on their way, he drove up on the sidewalk and crashed into a rock, forcing her to climb into the front seat to get out. In addition, pricing can be unpredictable.

    On the other hand, taxi companies complain that they are forced to pay for costly permits, office space and the like, and cannot compete with the on-demand drivers who flout the laws.

    Describing the Las Vegas taxi scene, the Los Angeles Times article noted that “taxis are as ubiquitous as they are in midtown Manhattan. The airport has a taxi queue that's a logistical marvel.” This bodes well for Uber and its ilk.