Uber/Lyft Driver's Guide

Joining the "Gig" economy?

Getting started as a driver with Uber, Lyft, or a similar service can get a little more complicated than you might think because there are potentially licenses, taxes, and insurances you need to consider. We have written this brief guide to help you sort it all out by answering some common questions. As long as you are delivering only people and not any goods or cargo (like food, packages, groceries, etc.) the state of Washington considers this a ride-sharing service not a vehicle for hire. This means you are not a taxi and are exempt from needing to acquire a “Vehicle for Hire” endorsement. You can learn more about the “Vehicle for Hire” endorsement here: https://dor.wa.gov/manage-business/state-endorsements/vehicle-hire-taxi).

Unless you are driving a very large vehicle (16+ person van or commercial truck), you will not need a Commercial Driver’s License. Learn more about who needs a Commercial Driver’s License here: https://www.dol.wa.gov/driverslicense/cdlrequired.html

What if I deliver goods? any person who conducts operations as a common carrier in Washington state intrastate commerce may be required to obtain a Common Carrier permit from the Washington Utilities and Transportation Commission. The term "common carrier" means any person (for hire) who undertakes to transport property, including general commodities or household goods, for the general public by motor vehicle for compensation. To learn more on the Common Carrier Permit requirements visit https://www.utc.wa.gov/regulatedIndustries/transportation/commonCarriers/Pages/default.aspx. For assistance please contact the Washington Utilities and Transportation Commission at 360-664-1222, or 360-664-1170.

Do I need a business license? There are several licenses you may need, first let's talk about the state business license. As an Uber or Lyft driver, you are considered an independent contractor (not an employee), and must register for a state business license with the Department of Revenue (DOR) if you meet any of the following conditions:

  • Your business grosses $12,000 or more per year.
  • You’re doing business using a name other than your full legal name.
  • You plan to hire employees within the next 90 days.

If your business meets any of the above criteria, your next step is to apply for a Washington State Business License. DOR also provides a "Business Tax Guide" you might find helpful.

In addition to your state business license, you will likely need a separate business license with the cities and counties where you will be operating. Each city and some counties in Washington state may require a separate business license to operate within their boundaries.  Review the city or county website where your business will be operating to determine any additional licensing or permitting requirements, such as, a “For-Hire” Permit and “TNC Vehicle Endorsement” decal.

Am I required to have workers compensation insurance? No. Uber and Lyft drivers that transport people (not goods or cargoes) are not required to have workers’ compensation insurance.

Do I need to set up an unemployment insurance tax account with the state? Most likely not. Uber and Lyft drivers, as independent contractors, are not considered an employee, and may be exempt from paying unemployment insurance taxes.  The Employment Security Department (ESD) is responsible for regulating unemployment insurance in the state of Washington. For information as to whether or not you qualify for the exemption, contact the ESD Tax account management center.

What are My Self-Employed Tax Obligations? If you received income from an Uber/Lyft sharing economy activity during the calendar year as a self-employed individual (e.g., independent contractor), you may be required to file a tax return to report that income to the IRS.   The IRS is providing additional information to help people, and many tax professionals can assist with tax issues and questions related to this emerging area. Uber and Lyft drivers are considered Self-Employed workers, and as such, are taxed differently from employees.  Self-employed individuals (e.g., independent contractors) must pay self-employment tax.  Self-employment tax consists of Social Security and Medicare taxes, and with no employer-matching of these taxes, self-employed individuals pay the full amount of Social Security and Medicare taxes themselves. However, don’t confuse it with income tax or estimated taxes. 

For additional information on tax issues relating to shared economy activities visit the IRS, Sharing Economy Tax Center page at: https://www.irs.gov/businesses/gig-economy-tax-center .