Market Overview

New Jersey Back Tax Bill Creates More Uncertainty For Uber, But Industry Remains Strong

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New Jersey Back Tax Bill Creates More Uncertainty For Uber, But Industry Remains Strong

New Jersey’s order that Uber Technologies Inc (NYSE: UBER) must pay more than $600 million in back taxes, interest and penalties for drivers the state considers employees instead of contractors creates more uncertainty for the ride-hailing company.

But despite the new ruling, along with a class action suit in New Jersey that “adds to the regulatory uncertainty,” analyst Justin Post reiterated a Buy rating on Uber's stock.

“The size of the NJ tax bill is another overhang, but we think (transportation network companies) provide valuable consumer services and have options to push back,” Post wrote in a note.

New Jersey Tax Bill

New Jersey’s labor agency sent the tax bill to Uber and a subsidiary this week after an audit. Uber is on the hook for more than $520 million in employment and disability insurance back taxes and about $120 million in interest and penalties.

New Jersey, one of the more aggressive states in pursuing taxes from transportation network companies, has argued Uber should have classified drivers as employees instead of contractors.

The class action suit involves the same issue, though it’s a separate case. That case, still working its way through appeals courts, also involves how drivers should be classified, providing yet more uncertainty for the company there, Post said.

Same As In California

The question of whether drivers for Uber and other ride-sharing services are employees or contractors is also at issue in California, where recently-passed legislation makes drivers employees starting Jan. 1.

But Post said litigation around that new law “could take years to play out,” and noted it’s not just the ride-sharing industry that opposes the law on gig workers. Freelance journalists and truckers have also opposed the new law, with the California Truckers Association recently suing in federal court to block it.

Price Action

Shares of Uber traded up 1.9% to $26.50 on Friday.

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Latest Ratings for UBER

DateFirmActionFromTo
Dec 2019Initiates Coverage OnNeutral
Nov 2019UpgradesHoldBuy
Nov 2019UpgradesHoldBuy

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Posted-In: AB5 Bank of America Gig Economy Justin PostAnalyst Color Government Regulations Analyst Ratings Best of Benzinga

 

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