General Motors sues San Francisco for $121 mn over alleged tax overcharge

General Motors (GM) has initiated legal proceedings against the city of San Francisco, seeking to recover over $100 million, alleging an unjustly inflated tax bill.  

According to Reuters, the lawsuit, filed in California Superior Court, claims that GM was charged a higher tax amount than warranted due to the improper inclusion of its Cruise self-driving car unit in the calculations. GM is pursuing $108 million in recoveries, along with an additional $13 million in penalties and interest.  

The automaker contends that Cruise, based in San Francisco, operates independently from GM, generating minimal sales and should not be factored into the parent company’s tax liabilities in a city where GM’s presence is limited.  

According to the lawsuit, GM reported only about $677,000 worth of goods sold in San Francisco in 2022.  

GM’s legal action raises questions about the accuracy of the city’s tax calculations and highlights the contentious relationship between the automaker and San Francisco. The lawsuit argues that the California Government Code mandates fair taxation, ensuring that city taxes accurately reflect the proportion of business conducted within its limits.  

GM contends that the current tax calculations, particularly involving the Cruise unit, do not align with this mandate. While the funds involved represent a fraction of GM’s reported $156.7 billion in sales in 2022, the legal dispute comes at a challenging time for San Francisco.  

The city faces an $800 million budget deficit over the next two fiscal years due to pandemic-related economic challenges. Mayor London Breed has requested city agencies to implement 10 per cent budget cuts to address the fiscal gap.

The legal action follows an October incident involving Cruise in San Francisco, resulting in safety concerns and regulatory scrutiny. The aftermath prompted Cruise to withdraw its U.S. cars from roads, conduct a safety review, and reduce its staff by nearly 25 per cent nationwide.  

(With inputs from Reuters)