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Taxi, limo services refuse to pay new city tax

Laws and LegislationJustice SystemBusiness EnterprisesCivil and Public Service

A broad coalition of taxi, limousine and for-hire sedan companies in Baltimore say they will refuse to pay a new city tax of 25 cents per passenger in what they are calling a collective act of civil disobedience.

The first payments under the new tax, for October, are due Nov. 25, but the companies say they won't pay unless the law is changed to ease administrative burdens or they are allowed to pass the costs on to customers.

"We are proud corporate citizens of Maryland and Baltimore. We don't want to operate outside the law, and we don't want to play an obstructionist role," said Mark Thistel, president of Mount Washington-based FreedomCar and a supporter of the coalition. "But when you get a letter informing you of something you truly have no means to do, you have no choice."

The move involves several companies — including Veolia Transportation, which controls about half the city's cabs — and throws into question a revenue-generating measure in Mayor Stephanie Rawlings-Blake's 10-year city financing plan.

The passenger-for-hire excise tax, which went into effect Oct. 1, requires companies to pay 25 cents to the city for every passenger they transport in Baltimore, regardless of whether the passenger is picked up or dropped off outside the city.

The city Finance Department estimated that the tax, signed into law by Rawlings-Blake this summer, would raise $1.3 million in annual revenue for the city — income that her administration said would be used to improve schools, reduce blight and offset cuts to city property taxes.

Kevin Harris, a spokesman for Rawlings-Blake, said the city has every intention of collecting the tax this month and expects that it will be able to do so.

Companies that do not comply will be referred to the Bureau of Revenue Collections, which will work with the delinquent companies to determine a payment plan, Harris said.

"If they continue to not comply, then it will be turned over to our Law Department for legal action, which is typical for any account that is delinquent," Harris said.

Supporters of the bill said Baltimore cab fares are generally lower than in other metropolitan cities on the East Coast.

But some service providers called the new tax unfair. They said the rollout was botched, and that city leaders either did not inform them of the new tax in time to implement changes or gave them the false impression that its costs could be passed on to customers.

Tracking individual passenger counts per trip, per geographic region, would be costly, they said.

"Trying to collect these funds is like trying to pick every single pea out of a bowl of pea soup," said Joanna Fridinger, president of the Maryland Limo Association. "To have a tax that's a per-person, per-trip fee? Trying to figure that out, for a lot of the companies that do that service, is going to be crazy."

Most limo providers operate a handful of vehicles, if not a single vehicle, and do not have the administrative manpower or technology to keep track of specific details for every trip they make each month and then transmit it to the city, Fridinger said.

Fridinger and others said many providers didn't even know about the tax until they received a letter from the city in mid-October informing them that they should have been tracking the information since Oct. 1.

That's because the city has no idea who is a registered carrier and who isn't, relying on a dated list from the Maryland Public Service Commission when the reality is that new carriers are authorized constantly, coalition leaders said.

Regina Davis, a PSC spokeswoman, said the commission estimates that three to six carriers go out of business each week and four to 10 new carriers are authorized.

"There are some companies in our association that have never received a letter because they're new operators," Fridinger said. "We have some people who have received letters who have since gone out of business. So how can the city enforce [the new tax] if they don't even know who's operating?"

Harris said the fact that carriers start up and close down constantly "is not something that has been raised as a serious concern."

Thistel said he didn't get the letter until Oct. 9. He said he had heard about a "taxi tax" but didn't know it applied to his service and was blindsided.

"It was incredibly clumsy and thuggish," he said. "It's the kind of thing that makes people think that their elected officials are operating against them."

Thistel's company, which operates 20 vehicles, has software that will have to be updated — at a steep cost — to produce and track the information required under the new tax, he said. But other companies have no such technology.

"For the mom-and-pop [companies], I mean, think about the challenges for them," he said. "They have no database, they're driving, they do everything, and now they have to track the rides, the passengers, compile it and submit it every 30 days? It's going to be an administrative burden on them that they just won't do."

If smaller providers do not comply with the tax — not to mention new Web-based competitors such as Uber and Lyft, whose drivers have flown under the radar of regulators — slightly larger companies like his suffer, considering they are the ones the city is going to be able to enforce the tax on, he said.

"We're the only ones with the infrastructure to eventually comply with it, and nobody else will, so we'll be rendered instantly uncompetitive or at a competitive disadvantage," Thistel said.

Dwight Kines, a spokesman for Veolia Transportation, which operates the Yellow, Checker and Sun cab fleets in the city — about 550 vehicles — said Veolia has no intention of paying the tax for now.

Kines said he met with city officials on two occasions when the tax was being considered and was told that providers would be able to pass the tax on to passengers.

When it passed with no such language, he said, he sent a request to the Maryland Public Service Commission asking that a rate increase associated with the new city tax be included as part of broader rate negotiations that have been going on for years. The PSC controls taxi rates in Maryland.

Davis said the service providers or the city could make a formal request to the PSC asking for a rate increase based on the new tax, but Kines said he would have to rethink Veolia's approach given the city's stance.

Kines said taxi taxes aren't unheard of, but are more manageable in cities where fees are charged per trip, rather than per passenger, or where cabs are fitted with "smart meters" that can be manipulated to reflect the tax as an added fee to passengers.

Cabs in Baltimore do not have such meters, though they might agree to install them as part of the rate negotiations with the PSC, he said.

City Councilwoman Mary Pat Clarke, who met with several of the coalition leaders Tuesday, said she is working on legislation that would delay implementation of the tax while she and others work with the providers to find a solution.

"I wasn't trying to rescind the fee," said Clarke, but "to provide time to negotiate a different fee structure that is more practically accounted for, or at least delay long enough so that they can have the time and funding available to be able to meet the documentation requirements of the city."

krector@baltsun.com

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Copyright © 2014, The Baltimore Sun
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