Visitors to San Francisco aren't paying the required hotel tax on "shared housing."
[UPDATE 3/22: Airbnb owes nearly $1.8 million to the city. Why is Mayor Lee silent?]
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.
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