Court halts tax on delivery apps; it's unconstitutional

The Supreme Court of Justice of Mexico City (SCJN) has put a definitive stop to the Mexico City government, declaring unconstitutional the 2% tax charged to digital delivery platforms for the use of road infrastructure.

In a decision that sets an important precedent for the regulation of the digital economy in Mexico, the Second Chamber of the Supreme Court of Justice of the Nation (SCJN) declared unconstitutional the 2% "tax" that the Mexico City government had imposed on app-based delivery companies since 2021.

The ruling, resolved by three votes to one, upheld one of the companies in the sector that had challenged the measure. The Court concluded that, although the city government disguised it as a charge for "infrastructure use," it was actually a tax on e-commerce, a matter over which local legislatures do not have the power to legislate.

Suggestion: An infographic that simply explains the SCJN's argument: "It's not a 'profit,' it's a tax. And local legislatures cannot impose taxes on e-commerce."

The significance of this ruling goes beyond Mexico City. By establishing that local governments cannot impose taxes on e-commerce, the Supreme Court of Justice (SCJN) creates a standard that will apply to any state or municipality attempting to implement similar tax measures. This provides legal certainty to technology companies and curbs potential attempts at overregulation at the local level.

The case reached the highest court after a company filed an injunction and a judge ruled in its favor. The Mexico City government challenged the decision, arguing that the charge was fair due to the wear and tear the delivery drivers cause on roads. However, the Court upheld the original ruling, upholding the principle of constitutional legality.

While the ruling represents a legal victory for digital platforms, it does not resolve the underlying problem that gave rise to the tax: the real and tangible impact that the gig economy has on urban infrastructure.

"The judicial authority determined that the fee proposed by the Mexico City government could immediately affect the platforms' operation and impact the finances of thousands of families." – SCJN argument.

The Mexico City government's argument about street wear and tear is not trivial. The rise of delivery apps has increased motorcycle and bicycle traffic, generating new maintenance and road safety needs. The Court, by striking down the tax on legislative grounds, leaves open the question of how cities should manage and finance the effects of this new economy.

The SCJN also considered the impact the tax could have on "thousands of families," a clear allusion to delivery drivers, who would likely see the cost of the tax absorbed into their already meager earnings.

The decision forces the search for new ways, possibly at the federal level, to regulate the relationship between cities and giant technology companies, a debate that is far from over.