Automaker challenges city’s tax strategy, arguing it unfairly ties obligations to its Cruise unit’s limited contributions.

General Motors (GM) is embroiled in a legal battle with the city of San Francisco over an alleged $108 million in excessive taxes over the past seven years. The automaker has filed a complaint in a San Francisco state court, arguing that its tax obligations are unfairly based on the revenues generated by its Cruise division, which had only started making modest contributions to GM’s overall earnings in the past year.

GM maintains that its core operations, including manufacturing and retail activities, occur outside of San Francisco, and that the company has no significant physical presence in the city, such as plants or dealerships. Despite this, the city has linked GM’s tax obligations to the activities of Cruise, its autonomous vehicle unit, which employs remote workers and has a minimal presence in San Francisco.

San Francisco, striving to assert itself as a global innovation hub, has faced ongoing challenges with homelessness, economic struggles, and drug-related issues. Despite efforts to postpone a hike in business taxes until 2025, the city’s gross receipts tax remains a key source of revenue, generating approximately $800 million annually, with GM contributing around 2% of that total.

In its legal filing, GM argues that San Francisco’s tax approach violates California law, which stipulates that taxes should be based on a company’s actual business activities within the city. The automaker claims that attributing significant payroll expenses to its Cruise unit distorts the true nature of its business operations, as many employees work remotely or live outside the city.

This lawsuit takes place amidst increasing scrutiny of GM’s Cruise division, which has faced difficulties in recent months, including the suspension of its license to operate on public roads in California following a series of high-profile incidents involving its autonomous vehicles. This legal dispute adds to the mounting challenges for the company’s self-driving car division.