Square Inc. SQ, -1.50% is suing the City of San Francisco to reduce its tax bill. The San Francisco Examiner reported Tuesday that the mobile payments company, which is based in the city, filed a lawsuit last week seeking a $1.27 million refund from its gross receipts taxes. A win by Square could also reduce its future tax payments. Square claims in the lawsuit that it is not a “financial services” company as the city claims, but an “information” company; “information” companies are taxed at a lower rate. Square also claims the city’s application of the tax is unconstitutional, and that it was improperly taxed for money it was never in possession of. Square employs more than 2,000 workers in San Francisco, and CEO Jack Dorsey’s other company, Twitter Inc. TWTR, -2.28% , received a hefty tax break to locate its headquarters in the city. Dorsey also opposed a ballot measure last year to tax companies’ earnings in excess of $50 million to pay for homeless services, which voters overwhelmingly approved.