Uber has sent out an email to NSW users warning them about a $1 levy which will be charged on each ride by the State Government from Thursday.

The tax applies to every trip made in taxis, hire cars and ridesharing services like Uber in the majority of the state.

Passengers would be charged $1 plus GST for each ride, on a temporary basis, which would go towards a $250 million taxi compensation package for the taxi industry.

It would be up to each service provider to decide whether to absorb the levy, or to pass it on to their NSW customers.

Uber customers to take the hit

A source from Uber confirmed that customers will bear the burden of this new tax.

An email to the ridesharing companies urged their users to contact Transport Minister Andrew Constance late on Tuesday evening.

"If you think this tax is unfair, make sure your voice is heard," the message read.

The tax was announced by the State Government two years ago when the NSW Government legalised Uber in December 2015.

NSW was the second jurisdiction in Australia after the ACT to legalise the service amid an outcry from the taxi industry over unfair levies and business loss from Uber's market penetration.

The Passenger Service Levy is described as giving "a level playing field across industry" on the NSW Government website.

It will take effect on Thursday, February 1, and could be in place for up to five years.

Company puzzled over taxi industry 'bailout'

Uber said the introduction of the tax two years after it was announced was puzzling.

"The NSW Government's point to point transport reforms have given people more choice and expanded the reach of safe, reliable and affordable transport options across the state," a spokesman said.

"The reforms have grown the pie for the whole industry and demand for taxis has remained stable and license values have rebounded.

"We are puzzled as to why the NSW Government is still taxing the traveling public to give the taxi industry a bailout that the data shows they don't need."

"I don't think this new tax is fair," said an Uber driver who wished to remain anonymous.

"We're just compensating taxis because their number plates are losing value."

Levy to apply to most populated parts of NSW

Map of where the Passenger Service Levy will apply in NSW from Thursday. ( Supplied: NSW Government )

The passenger levy will apply in the eastern and most populous parts of NSW in Sydney, Dubbo, Tweed Heads, Griffith, Albury, Queanbeyan, Deniliquin, Narromine, Gilgandra, Tamworth, Narrabri, Moree, Boggabilla and Coonabarabran.

It will not apply to the isolated, western part of the state including the towns of Balranald, Hay, Condobolin, Nyngan, Coonamble and Burren Junction, with the exception of Broken Hill and Wentworth where the levy will apply.