General Motors (GM) is taking on San Francisco, alleging an unjust tax burden of $108 million over seven years.
According to GM’s complaint filed in a state court in San Francisco last week, the automaker’s core business operates outside the city, with no physical presence, plants, dealerships, or significant retail activity.
San Francisco’s taxation strategy, argues GM, inaccurately ties the company’s obligations to the revenue generated by its Cruise unit, which only began modestly contributing to the bottom line last year.
Business but no physical presence
San Francisco, aiming to position itself as a global innovation hub amid a post-pandemic recovery, faces criticism for its handling of various issues, including homelessness, drug problems, and economic setbacks.
Despite city officials delaying plans to increase business taxes until 2025, GM’s gross receipts tax, constituting a major portion of the city’s business tax, contributes around $800 million annually, with GM accounting for approximately 2% of these revenues.
GM challenges the fairness of San Francisco’s tax approach under a California mandate, arguing that taxes should accurately reflect a company’s business operations within a city. The automaker highlights the distortions caused by attributing significant payroll expenses to Cruise, whose employees often work remotely and, in some cases, reside outside the city.
The complaint filed by the company asserts that, in accordance with the California Government Code, city taxes should accurately mirror the proportion of activity conducted within the city, a requirement that, according to the company, is not met in the case of GM, both in a general sense and in its specific application.
This legal clash unfolds against the backdrop of recent challenges for GM’s Cruise unit, which lost its license to operate on public roads in California in October. The suspension followed high-profile incidents, including collisions with a fire truck and a pedestrian, intensifying scrutiny on the autonomous driving sector.
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