GM Sues San Francisco Over $108m Tax Bill – Report

General Motors has filed a lawsuit against the city of San Francisco, in a tax dispute centred around its Cruise self-driving division.

Bloomberg first reported on the General Motors lawsuit, which alleged that San Francisco unfairly used the presence of its Cruise self-driving unit to tie its tax bill to a portion of GM’s global revenue. GM contends that it operates as a separate entity to Cruise.

Cruise has been racked recently by the dismissal of nine key executives, including chief operating officer Gil West. The GM-owned firm has also cut more than 900 jobs (about one quarter of its 3,800 strong workforce).

GM lawsuit

The GM lawsuit filed with the state court has alleged that San Francisco unfairly taxed it $108 million over seven years, despite the car maker having very low sales and almost no personnel, dealerships, plants, or other physical locations in the city.

The car maker said that San Francisco used the presence of its Cruise self-driving unit to tie its tax bill to a portion of GM’s global revenue, which meant more than $3 billion was subject to city taxes last year alone.

Detroit-based GM argued that San Francisco-based Cruise is wholly separate from GM and only began generating a small amount of revenue last year.

There was no mention in the lawsuit why GM has decided now to challenge the San Francisco tax regime, which it has previously paid.

GM is reportedly seeking a refund totalling nearly $108 million in taxes and nearly $13 million in interest and penalties, claiming an overpayment for the tax years 2016 through 2022.

GM pointed out that, during the years in question, it sold vehicles through approximately 4,200 independent dealers nationwide, none of which were located in San Francisco.

The company furthermore noted in the lawsuit that Cruise primarily engaged in research and development activities in San Francisco during the period covered by the lawsuit, generating limited revenue from its ride-hailing business until June 2022.

Strained relationship

Cruise and San Francisco currently have a strained relationship, due to a grisly accident in October.

It began back in August, when the California state regulator – the Public Utilities Commission (PUC) – had approved an expansion that authorised around-the-clock rides (from both Cruise and Waymo) throughout San Francisco – the second most dense city in America.

However that move had been strongly opposed by transportation and safety agencies, such as the police and fire departments, as well as many residents, because of concerns about robotaxi’s erratic driving and interference with their operations.

The PUC approval had allowed both Cruise and Waymo to charge fares for rides at any time of day, and had further cemented San Francisco’s position as the home city for self-driving car services.

But on 2 October matters took a turn for the worse for Cruise, when a pedestrian was struck by vehicle driven by a hit-and-run driver, who fled the scene.

The pedestrian was unfortunately flung into the path of the Cruise robotaxi, and the person was then dragged beneath the robotaxi for 20 feet (6 metres) as it pulled over to the side of the road.

The critically injured female pedestrian was pinned beneath its rear wheels and had to be extracted from under the robotaxi with the help of the “jaws of life” by the Fire Department, before being taken to San Francisco General Hospital with “multiple traumatic injuries.”

After California pulled its licence, Cruise implemented a number of changes, including a recall (i.e. an over-the-air software update) of 950 driverless cars from the roads.

Cruise then confirmed that it was withdrawing all its vehicles from testing on public roads in the United States, to conduct a safety review after the accident. It also hired an outside law firm to scrutinise its response to the 2 October accident.

Cruise more recently revealed it was planning to re-launch in one unspecified city before expanding to others.