PROVIDENCE â The owner of the cityâs only cab company says a tax on taxi fares imposed by lawmakers last year has resulted in a loss of business, increased red tape and customer dissatisfaction.
âTaxi drivers survive on tips and what my drivers are telling me is that those tips donât exist anymore because of this sales tax on taxi services,â said Bill Legare, owner of
Valley Transportation on Front Street.
Legare, who is also a member of the Rhode Island Taxi Owners Association, was one of the driving forces behind Tuesdayâs rally at the State House where taxi owners and drivers from across the state gathered to urge the General Assembly to repeal the 7 percent taxi sales tax that was included in the 2012 state budget.
Drivers say the tax is burdensome and many customers reduce tips to offset the tax.
State Sen. Susan Sosnowski (D-Dist. 37 South Kingstown, New Shoreham) is sponsoring legislation to repeal the tax. A similar bill is pending in the House. No votes have been scheduled.
Lawmakers also voted last year to impose 7 percent sales taxes on pet grooming and boarding and items of clothing costing $250 or more. The taxes went into effect last October.
All together, the new taxes are estimated to raise $12 million annually.
The 7 percent taxi tax can tack on an additional $2.10 in sales tax for the average fare, a fee that has angered customers, according to a dispatcher at Airport Taxi in Warwick, which has been providing ground transportation for T.F Green since 1954.
âOur drivers are getting a lot flack from customers and they are not getting the tips anymore,â he said.
Legare and other transportation business owners say the tax was included in the 2012 state budget without any public hearings or input from the public or those in the industry.
âIt was a sneaky, underhanded slap in the face to the stateâs taxi owners and drivers,â says Legare, adding the 7 percent sales tax has hurt his drivers.
Legareâs family-owned company has been providing taxi, school bus, van charter and elderly transportation services in Northern Rhode Island and South Central Massachusetts for 34 years. His Valley Cab Co. fleet includes 12 cabs.
âThe vast majority of taxi customers - many of them on Rite-Care or on welfare and unable to have a car - cannot or will not provide a gratuity for the drivers,â he said. âThis is the reason Rhode Island taxi owners have not requested a rate increase for 12 years â because we know our drivers would get hit very hard if customers were forced to pay more when they arrive at their destination.â
According to Legare, the taxi rate in Rhode Island is exclusively determined by the state Public Utilities Commission and it has been 12 years since those rates have been increased.
âExpenses have risen â gasoline, insurance and vehicle costs â but the taxi business in Rhode Island does not have a strong enough base for the taxi association to seek a rate increase knowing that it would negatively impact our drivers,â he said. âAfter 12 years of not seeking a rate increase, somehow a 7 percent Rhode Island tax on taxi rides was buried very deeply into the annual state budget at this time last year and we had no chance at all to have any discussion concerning the negative impact.â
Legare said while taxi drivers are losing income and struggling to stay in business, the Rhode Island Division of Revenue has reported that the Taxi Tax generated less than half of the revenue that was projected in last yearâs budget
âA sales tax being applied to a âserviceâ is not how we should be doing business,â he said.
In the meantime, legislation has been introduced in both chambers of the General Assembly, and the Finance Committees of both the House of Representatives and the Senate have conducted hearings on the issue. Numerous taxi drivers have appeared at a pair of hearings before the House Finance Committee and at a Senate Finance Committee hearing to provide first-hand accounts of the loss of business, increased red tape and customer dissatisfaction resulting from the tax. The House Finance Committee was presented with copies of nearly 1,000 signatures on a petition in opposition to the Taxi Tax.
Follow Joseph Fitzgerald on Twitter @jofitz7