A taxicab company may hire drivers as employees or independent contractors. If a taxicab company leases its taxis to its drivers, the lease receipts are subject to Wisconsin sales or use tax. The lease receipts may also be subject to county and stadium taxes.

The lease receipts are subject to tax regardless of how they are determined:

  • Periodic fee (e.g., daily, weekly, monthly)
  • Percentage of income (e.g., 35% of each fare collected)
  • Mileage basis (e.g., $0.50 per mile driven)
  • Combination of methods or some other basis

Example 1: Taxicab Company Employs Drivers

Taxicab Company hires drivers to drive its taxis. Drivers are paid on a commission basis at 25% of the fares collected by customers. If a driver does not make commissions equal to $10 per hour, Taxicab Company will compensate the driver for the difference.

Tax Treatment

  • The amount that Taxicab Company receives from the fares is not subject to sales tax.
  • Taxicab Company must pay sales or use tax on its purchase of the taxis that it uses in providing its taxi service.

Example 2: Taxicab Company Leases Taxis to Independent Contractors for Weekly Fee

Taxicab Company leases its taxis to independent contractors (i.e., taxi drivers). Taxi drivers pay Taxicab Company a weekly fee of $200 for use of a taxi for 8 hours each day, 6 days per week. Taxicab Company makes no other use of its taxis than to lease them to its independent contractor drivers.

Tax Treatment

  • The weekly lease fee that Taxicab Company receives from the drivers is subject to Wisconsin state sales tax, as well as county and stadium district taxes if applicable.
  • Taxicab Company may purchase its taxis without tax, for resale, since the only use that Taxicab Company makes of the taxis is to rent them to others for a fee.

Example 3: Taxicab Company Leases Taxis to Independent Contractors Based on Miles Driven<.

Taxicab Company leases its taxis to independent contractors (i.e., taxi drivers). Taxi drivers pay Taxicab Company $0.50 per mile for miles driven during each 8 hour shift. Taxicab Company makes no other use of its taxis than to lease them to its independent contractor drivers.

Tax Treatment

  • The $0.50 per-mile lease fee that Taxicab Company receives from the drivers is subject to Wisconsin state sales tax, as well as county and stadium district taxes if applicable.
  • Taxicab Company may purchase its taxis without tax, for resale, since the only use that Taxicab Company makes of the taxis is to rent them to others for a fee.

Example 4: Taxicab Company Leases Taxis to Independent Contractors Based on Percentage of Income Generated

Taxicab Company leases its taxis to independent contractors (i.e., taxi drivers). Taxi drivers pay Taxicab Company 35% of all fares that the driver receives while driving Taxicab Company's taxi. Taxicab Company makes no other use of its taxis than to lease them to its independent contractor drivers.

Tax Treatment

  • The weekly lease fee that Taxicab Company receives from the drivers is subject to Wisconsin state sales tax, as well as county and stadium district taxes if applicable.

Taxicab Company may purchase its taxis without tax, for resale, since the only use that Taxicab Company makes of the taxis is to rent them to others for a fee.

May 10, 2016