Ride-sharing service Uber has lost its battle with the Australian Taxation Office over whether its drivers have to pay the 10 per cent GST.
Uber had challenged an ATO ruling that its drivers were legally classified as providing taxi travel and therefore needed to be registered for GST.
But the Federal Court in NSW on Friday ruled that a 2015 Uber trip at the centre of the case constituted supplying "taxi travel" within the meaning of the GST Act.
That means Uber drivers must pay GST on their earnings.
"Broadly construed, and having regard to other relevant matters of construction, I consider that the word 'taxi' is sufficiently broad in its ordinary meaning to encompass the uberX service supplied," Justice John Griffiths said in his judgment.
Whether or not Uber trips were classified as "taxi travel" was key because under the GST Act enterprises with a turnover of less than $75,000 don't need to register for the tax - with the exception of taxi and limousine operators.
An Uber spokesman said the company was "disappointed" by Friday's outcome.
" We are now reviewing the decision and will provide our driver-partners with more information as soon as we can," he said in a statement.
The Australian Taxi Industry Association says the ruling is a win for fairness and provides everyone with much-needed certainty.
"We've been asking for a level playing field ... and the Federal Court agrees with us," association chief executive Blair Davies told AAP.
"It walks like a duck, it quacks like a duck - it's a taxi service they (Uber) are providing and they should be treated like taxi drivers by the tax office."
Mr Davies said smart Uber drivers would have been collecting and remitting GST since the tax office ruling in August 2015.
"If they've been holding onto it (GST) they should pay it over to the tax office now.
"If they weren't doing that they're in serious trouble because they've been living on a fool's hope that they wouldn't have to pay GST."
In the days after the initial ATO ruling in August 2015, Uber hiked its prices by about 10 per cent, meaning there shouldn't be any impact on prices as a result of Friday's Federal Court decision.