Do taxi drivers pay taxes?

Tax season is a dreaded time of year for everyone, and those who drive taxis are not exempt from paying their taxes either.

As a GST/HST registrant, a taxi driver usually has to collect the GST/HST on amounts charges for taxable supplies of property and services.

• However, tax is usually already included in taxi and limousine fares.

Examples of amounts charged in the taxi or limousine business include:

• metered taxi and limousine flat rates fares charged for transporting passengers by taxi and limousine
• fees charged for leasing a vehicle to a driver
• fees charged by taxi licence owners for the use of their taxi licence
• dispatch fees charged by a taxi stand to a driver
• related charges such as waiting time, parcel delivery and transportation of luggage

As a registrant, a taxi driver can generally claim an input tax credit (ITC) to recover the GST/HST paid or payable on business purchases such as gas, car repairs and car washes.

The registrant has to keep records of the amounts they pay or owe to support ITC claims.

A registrant also has to complete and file GST/HST returns according to reporting periods. This will be either annually, quarterly or monthly.

• A taxi driver is considered self-employed if they set their own hours and no one supervises how they do their job.
• Even if they rent a cab from a fleet and use a dispatcher, they are considered an independent contractor. They will need to take every possible deduction on taxes to lower their tax bill.

• Rent or lease payments: If they’re paying to rent their taxi from a fleet, that’s tax deductible. They should keep track of what the fleet company charges daily, and add up those charges until the end of the year.
• Insurance: If they're paying insurance for their taxi, they can deduct it.
• Supplies: If they use any supplies or equipment in their taxi service, they can deduct those as business expenses. Just remember to save receipts!
• Licenses: Any fees paid to drive a taxi are deductible. This may include not only the taxi licence but any extra charges paid to have a special driver's license.
• Credit card processing fees: The companies that process credit cards charge a transaction fee, which comes out of earnings. They can deduct all transaction fees for credit cards from their taxes.
• Memberships: If they are a member of a trade organization, union or association related to driving a taxi, they can deduct the expense of membership.