Airbnb isn't sharing

Visitors to San Francisco aren't paying the required hotel tax on "shared housing."

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Airbnb has detailed sections on San Francisco and its neighborhoods, none of which mention their customers' tax obligations.
WWW.AIRBNB.COM/LOCATIONS/SAN-FRANCISCO

[UPDATE 3/22: Airbnb owes nearly $1.8 million to the city. Why is Mayor Lee silent?]

steve@sfbg.com

Despite a widely watched ruling last year by the San Francisco Treasurer/Tax Collector's Office that Internet-based "shared housing" companies must pay the city's hotel tax, the high-profile local outfit Airbnb and its hosts aren't routinely charging guests that 14 percent tax.

And while privacy laws prevent the city from revealing any company's specific tax payments, it's possible that San Francisco is getting no hotel tax money from Airbnb at all.

Airbnb allows residents to rent out their apartments to visitors through a web interface. Tax Collector Jose Cisneros concluded in April 2012 that the company and its hosts are acting as hotels, and must pay the city's Transient Occupancy Tax.

But almost a year later, Airbnb's website doesn't include the tax in its booking rates. And local hosts who are partially responsible for paying the tax are being given only vague information about their tax obligations.

Hotels add the tax to the price of a room. But when you book a room on the Airbnb site, there's no category for local taxes and the 14 percent isn't added to the price.

When I inquired about renting an Airbnb room in San Francisco this week and asked my would-be host about the issue, he said he was unaware of his tax obligation and referred me to Airbnb's online policies, which are vague at best. One FAQ specifically about tax issues was answered, "We expect all hosts to abide by local laws, agreements, and other applicable regulations, as outlined in our terms of service," later adding, "We encourage you to work with a legal and/or tax professional in your area to determine how to handle compliance."

For a company that bills itself as an easy way for the average renter to make some spare cash, that doesn't seem to encourage compliance with San Francisco law. Even the civic-minded host who clicks through the "How do I collect taxes for my reservations?" question is given this answer, "You are responsible for managing your tax and other regulatory obligations. If you determine that you need to collect tax for renting in your city, please add the tax amount to the listing price."

We couldn't find a listing anywhere that included the city's 14 percent tax.

In theory, the hosts could be paying that money — but the entire transaction is done through the web, and there's nothing on the site that informs hosts that they need to collect 14 percent. In fact, there's no mention in any of the material about any specific city tax.

It's possible that Airbnb is simply covering the 14 percent out of its profits — but the company only collects 6 to 12 percent of the cost of a room as its cut. So by taking on the taxes itself, Airbnb would be losing money on every transaction.

Greg Kato, the policy and legislative director for the Tax Collector's Office, told us he's barred from disclosing information about Airbnb or any individual taxpayer. So the city can't confirm or deny that the money is coming in. He did say that his office takes the issue seriously: "Just because I can't talk to you about individual taxpayers doesn't mean we aren't enforcing the law....We continue to collect taxes, we continue to audit folks and do investigations."

Airbnb could tell us if it's paying, but spokesperson Kimberly Rubey and local consultants to the company have ignored repeated calls and email inquires from the Guardian about the issue.

Airbnb lobbied aggressively to avoid the tax liability, with the support of Mayor Ed Lee. The mayor's top campaign fundraiser, venture capitalist Ron Conway, was a big early investor in the company.

Comments

And they are compounding their evasion with violating their leases.

Of course the city tax office is going to claim this is a kosher tax. In the same way that W claims the invasion of Iraq was also kosher. And just as you no doubt protested W's war and practiced civil disobedience against it, so do ordinary, honest people when the government goes too far and tries to tax them for having a guest in their home.

So far, SF has the good sense to not even try and enforce this miserable abortion of a confiscation. A pox on them.

Posted by Guest on Mar. 21, 2013 @ 3:55 pm

when cisneros concluded that airbnb spots were acting as hotels, what law/ordinance/regulation did he cite as the authority for the city to collect the tax? i'd like to read the text of it to see if i agree.

Posted by Guest on Mar. 22, 2013 @ 9:34 pm

First, it's not a "hotel tax." The tax applies to anyone receiving money above a certain amount from short-term occupants (I believe the threshold is $30 a night). It's a "transient occupancy tax" that is similar to taxes hundreds of communities across the country have enacted. If the tax was unconstitutional in any way, you can bet the largest payors of the tax would have had it overturned by the courts by now since some taxpayers pay millions of dollars of transient occupany tax every year.

The ordinance can be found once you learn how to use a cool website called "google." There are also some links above (and perhaps in the article itself) to parts of the ordinance and to an article on sfgate that discusses the tax and its application to ANY owner/operator of real estate that receives payments from stort-term visitors.

Whether you agree whether the tax should apply to your situation is irrelevant. We don't get to choose what taxes we pay based on whether we agree or not, unless we're looking for problems with the tax authorities. After penalties, interest, and legal fees to fight a tax audit, most rational taxpayers conclude that it's better to pay a tax rather than have the city coming after us for tax evasion. Of course if you want to pay tens of thousands in legal fees fighting the tax, and then pay the back taxes, penalties, and interest, be my guest.

The issue being discussed here is why the city is not aggressively collecting the tax from owners/operators who owe the tax, many of whom are millionaires. Some of us believe the treasurer, tax collector, city attorney, and mayor are looking the other way and not enforcing the tax ordinance since millionaires seem to be treated much differently in this country and city compared to lowly workers who are bombarded with regressive taxes and sky-high rents.

If an owner/operator doesn't want to pay the tax, it's easy enough for them to sell the property to someone who would be more than happy to pay the tax in exchange for having a very valuable piece of real estate in one of the wealthiest cities in the world, located at the crossroads of the booming tech industry and close proximity to multi-millionaires and billionaires from other parts of the world looking to diversity their investments by owning very valuable San Francisco real estate.

Posted by guest on Mar. 23, 2013 @ 5:30 am

jealous much?

Posted by Guest on Mar. 23, 2013 @ 7:47 am

The SF Tax Collector does not have the power to impose new taxes. He only has the power to collect taxes. City taxes may only be imposed by the Board of Supervisors that are elected by the citizens of SF to pass laws. So the SF Tax Collector has attempted to unilaterally impose a new tax on airbnb rentals by simply "reinterpreting" the law and declaring that Airbnb rentals are subject to the TOT.

The Tax Collector tried to pretend that he is only interpreting the law already on the books when he handed down his directive in 2012. But this wasn't just an interpretation of the TOT as it existed. Because if that was the case, then past TOT taxes would be owed by all Airbnb rentals that occurred in the 4 or 5 years prior to the Tax Collector's 2012 directive. Under this new "interpretation" of the TOT law, anyone who rented out a room on Airbnb in the last 4 or 5 years could be held liable to pay back taxes, interest and penalties, and could also be held criminally liable for tax evasion and sentenced to prison.

Does anyone really think that the Tax Collector has that kind of power? Does anyone really think the SF Tax Collector is empowered under the city charter to wield power so arbitrary that he can unilaterally issue proclamations that require citizens to pay taxes on transactions that occurred 5 years ago, as well as interest and penalties, or risk incarceration? Of course he doesn't. And if he did, the law would not pass muster under the U.S. Constitution.

If the city wants to impose a tax on Airbnb rentals, then the duly elected Board of Supervisors should pass a law in accordance with the wishes of the voters that put them in office. That is how a democratic government operates. It doesn't permit one person who holds the office of Tax Collector to unilaterally impose taxes on the citizens of San Francisco.

The Tax Collector's job is to enforce the law and collect taxes; he doesn't have the power to impose tax laws, which is precisely what he tried to do when he "interpreted' the TOT to include airbnb rentals. And that is exactly why the city has not attempted to enforce this bogus interpretation of the law - because if they did, they know they would not be successful in court.

Posted by Guest on Jun. 13, 2013 @ 2:27 pm

It has been quite clear to me from the start here that the SF Tax Inspector was assuming that the hotel tax applies to hosts who rent out their homes (itself far from clear) and then leaping from that to the dubious notion that the city doesn't have to go after those hosts but, rather, can demand that an internet intermediary can oh so conveniently collect that on the city's behalf.

You cannot blame the guy from trying, but the city needs to overcome two important hurdles before this gets anywhere close to a done deal.

Lee understands that, AirBnB understands that, we all understand that, but Tim and Steven hate that Lee is so popular, and see a chance to discredit it even when it is obvious that this will just rebound on them.

What a pair of losers.

Posted by Guest on Jun. 13, 2013 @ 2:50 pm

Airbnb has withheld money owed to me, called customer service & supervisor. They give you no info/policy reference, NOTHING. I have had to search for Brian Chesky e-mail/phone number to no avail. Do you know how to get in contact with him to address my issue with him.

Posted by Guest- Host on Aug. 13, 2013 @ 2:36 pm

I rent out a place in Seattle on Airbnb, VRBO and Homeaway. I charge the 9.5% tax to my guests and pay the state at the end of each month. It does not seem to stop people from renting my place, I average 310 nights per year.

Posted by guest on Feb. 04, 2014 @ 12:06 pm