On Friday 17.2.2017, the Federal Court has held that the uberX service, supplied by one of its drivers, constituted the supply of “taxi travel” within the meaning of s144-5(1) [see extract below] of the A New Business System (Goods and Services Tax) Act 1999 (GST Act).
At the heart of this proceeding is the question whether persons who are Uber drivers are required to be registered for GST purposes. The issue is one of statutory construction. Enterprises with a turnover of less than $75,000 do not need to register for GST but there is a special rule in s144-5(1) of the GST Act, which has the effect that ‘taxi’ and ‘limousine’ operators are required to be registered, regardless of turnover.
That provision requires a person who is carrying on an enterprise to be registered for GST purposes “if, in carrying on your enterprise, you supply taxi travel” (s 144-5(1)). The phrase “taxi travel” is defined in s 195-1 of the GST Act as meaning “travel that involves transporting passengers, by taxi or limousine, for fares”.
In simple terms, the core issue is whether, in carrying on the enterprise of providing uberX services to passengers (who are known as “uberX Riders”), uberX drivers (who are known as “uberX Partners”) supply “taxi travel” as defined. If so, they must register for GST purposes.
The parties ultimately agreed that the core issue in the proceeding is encapsulated in the more specific question whether the applicant is entitled to a declaratory order that, on 11 September 2015, Mr Brian Colin Fine did not “supply taxi travel” within the meaning of section 144-5(1) of the GST Act. As will emerge, Mr Fine is an uberX Partner.
Uber sought to rely on the following:
- An UberX car has no ‘taxi meter’ (that is replaced by the smart phones and the software belonging to Uber).
- Taxi’s are specially marked as such, whereas UberX vehicles are not (because UberX drivers drive their own vehicle).
- Taxi’s can be hailed from the street and from taxi ranks, whereas UberX vehicles will only arrive if called (so that the software can be accessed).
- UberX rides cannot be obtained without getting the Uber ‘app’ and establishing an account, with credit card details, where as a person riding in a taxi can do so without any prior arrangement and can pay by cash or credit card.
- Taxis are registered as such and automatically satisfy the definition, whereas it is not so obvious that an UberX vehicle is a ‘taxi’.
- Part of the requirements for such registration is the ‘universal service’ obligation, whereas Uber drivers have no obligation to accept a fare.
- At the time this legislation was drawn, there were only ‘taxis’ (and ‘limousines’) that could hired by the public for point to point travel for a fare and the law should not be interpreted as extending to new innovations that do not obviously fit the definition.
These points are largely covered by the submissions in para 81 extracted below.
After extensive review of the matter, the Federal Court came to the view that the uberX Partner in question was supplying taxi travel as defined in ss144-5(1) and 195-1 of the GST Act when he was operating as an uberX driver. The Court considered that, at the relevant time, he or she was supplying travel that involved ‘transporting passengers by taxi for fares’. This was because the Court held that the relevant terms should take their ‘ordinary meaning’ and should not overly confected by the distinctions put up by Uber. This conclusion has been extracted at para 135 below.
(Uber B.V. v FCT [2017] FCA 110, Federal Court, Griffiths J, 17 February 2017.)
[FJM] [FCA reasons] [LTN 31, 17/2/17]
Extract from the GST Act
Division 144 – Taxis
144-5 Requirement to register
(1) You are required to be registered if, in *carrying on your enterprise, you supply *taxi travel.
(2) It does not matter whether:
(a) your *GST turnover meets the *registration turnover threshold; or
(b) in *carrying on your enterprise, you make other supplies besides supplies of *taxi travel.
(3) This section has effect despite section 23-5 (which is about who is required to be registered).
195-1 Dictionary
In this Act, except so far as the contrary intention appears:
taxi travel – means travel that involves transporting passengers, by taxi or limousine, for fares.
Extract from Federal Court decision
- In reply, the following submissions were made by the applicant concerning factual matters raised by the Commissioner.
(a) The Commissioner’s contention that “the methodology used by Uber was not relevantly different” should be rejected. The point of a taximeter is that it is affixed to, and on display within, the vehicle to enable the customer to see at any time the running balance of the fare. Furthermore, there is no connection between the fixed minimum fare applied by Uber (for the benefit of uberX Partners) and the capped maximum time and distance rates that apply to taxi fares (for the protection of consumers).
(b) The physical markings on taxis are important because it is what those vehicles do and it is the special entitlements of such vehicles, which informs the ordinary meaning of the word “taxi”. The Commissioner’s contention that the State and Territory regulatory requirements with respect to those markings are not the issue. The contention that the car symbol displayed on the GPS map on the Uber app is equivalent to the marking on a physical vehicle is incorrect. The marking on a taxi vehicle facilitates street hails and indicates availability at kerbside ranks. That is peculiar to taxis and is absent in any other vehicles, including the uberX service.
(c) As a result of what is referred to as the universal service obligation, taxis must (subject to limited exceptions) accept fares from any member of the public (passengers who are anonymous). Contrary to the Commissioner’s submission, Uber submitted that this is a significant feature of the ordinary meaning of “taxi”. Furthermore, uberX vehicles are not “available for hire by members of the public” in the same way as taxis, in that they cannot be hired anonymously by anyone through rank and hail services. uberX services are only available to those who register as a licensee of the Uber app, meet qualifying conditions (such as being 18 years of age or older), and provide information in advance of making any trip request, including credit card details.
(d) There is a significant distinction between rank and hail services that taxis provide and the electronic booking for near immediate pick up through the Partner app to which uberX Partners are confined. Rank and hail services are a defining characteristic of taxis, and only taxis. While opening the Uber Partner app may be suggested as bearing similarities to waiting for an online booking, nothing that any uberX Partner does is the equivalent of waiting at a taxi rank for passers-by to enter without any booking at all, or the equivalent of accepting fares by a street hand gesture, again without any booking at all. uberX Partners are free at all times to accept or reject trip requests, unlike taxi drivers.
135 Applying these principles, which I view as providing helpful guidance rather than talismanic formulae or inflexible rules of law, I consider that the words in s 195-1 should be given their ordinary, everyday meanings and not a trade or specialised meaning (including one which reflects what Dr Abelson describes as a “regulatory concept”). I accept the Commissioner’s submission that the ordinary meaning of the word “taxi” is a vehicle available for hire by the public and which transports a passenger at his or her direction for the payment of a fare that will often, but not always, be calculated by reference to a taximeter. This meaning is supported by the dictionary definitions, which are set out in [55] above. I do not regard the use of those dictionary definitions to confirm the ordinary meaning of the word “taxi” as offending any of the relevant principles concerning limitations in the use of such materials.