Mr. Mayor: Stop supporting tax cheats

Businesses don't write the law books, remember?

|
(14)

EDITORIAL Mayor Ed Lee's love affair with all things tech shouldn't extend to allowing a large company to cheat on local taxes.

It's no secret that Airbnb, the successful startup that allows people to share their apartments as hotel rooms, has failed to collect or pay San Francisco's Transitory Occupancy Tax, which every traditional hotel has to pay. Our stories have shown that the city is losing $1.8 million a year, and that number will only grow as the service becomes more popular.

The company claims that all it's doing is facilitating private transactions. But the city's treasurer, Jose Cisneros, has investigated the situation and ruled that Airbnb is liable for collecting and remitting the tax. It's not that hard — the company could simply add the 14 percent onto the prices on its website, make sure the people renting out their homes receive that money, and turn it over to the city.

But that would open the "sharing economy" site to similar rules in all the other cities where it operates. It would force Airbnb to admit that it's a business, like any other business, and that the Internet hasn't made obsolete the notion of following the rules that apply to everyone else in the same line of work.

So the company, funded in part by investor Ron Conway — a close ally of the mayor — takes unfair advantage of the situation, refuses to pay taxes, and undermines the existing hotel industry, which not only pays taxes but employs thousands of San Franciscans.

Lee was asked about the situation on a recent edition of KQED's Forum, and when host Michael Krasny pushed him, Lee said: "They're not so much dodging it, they're making arguments, like any business would, about what applies to them and what doesn't."

That's flatly, factually untrue. Airbnb has already had a chance to make its arguments — to Cisneros — and he rejected them. The company could go to court to overrule the treasurer, but it hasn't. It could go the Board of Supervisors and seek to have the Hotel Tax modified, but it hasn't. The people who run Airbnb aren't making any arguments at all, in any public forum; they're just refusing to pay.

And the mayor is not only letting them get away with it but defending the practice.

This is disgraceful.

A judge in New York City has ruled that Airbnb violates local laws, and people who use it as hosts are now subject to steep fines. There, at least, the company is asking the state Legislature to modify the ban on short-term apartment leasing.

In San Francisco, most renters who sign up with Airbnb to make a little extra money by turning their apartments into hotel rooms are in violation of their leases and could be subject to eviction — something the company doesn't warn about.

It's time for the supervisors to pass legislation regulating this industry. In the meantime, Lee needs to stop defending a company that's openly violating the city's tax laws and direct the city attorney to crack down.

Comments

should collect taxes because the city is too lazy to collect them itself is hardly surprising, but until and unless a court rules that is valid, then it is not at all clear that forcing an intermediary to pay taxes when they are not the ultimate taxpayer will stand up to scrutiny.

So AirBnB are absolutely correct to refuse to be bullied here. And it is perhaps significant that SF is not going after AirBnB's competitors who, not coincidentally, are outside of SF and so SF has no leverage over them.

If the city continues this witch-hunt then AirBnB may simply relocate to Brisbane, whereupon of course the city will then give them a tax break to stay!

Meanwhile the SFBG wouldn't care except that they hate the popular Mayor Lee and see this as a chance to malign him. It's transparent, unethical and it's not working.

The city should go after the hosts and, if they are nice to AirBnB, maybe AirBnB will provide the city with a list of their names and addresses.

Posted by Guest on Jun. 12, 2013 @ 7:21 am

Completely agree.

Posted by Guest on Jun. 12, 2013 @ 9:12 am

totally unfounded. He should be ashamed but, of course, he is beyond shame at this point.

Posted by Guest on Jun. 12, 2013 @ 3:24 pm

Perfect response....and absolutely correct.

If I were AirBnB I would relocate my business out of SF along with all the jobs and payroll taxes I pay to the city if the city continues to harass them.

Until a court rules in favor of the city, AirBnB is not the tax collector. They are not the retailer and they are not the rental provider. They are nothing more than exchange where providers can post their goods just like Craigslist.

Does the city want Craigslist to become the tax collector for folks selling goods on their exchange?

Posted by Guest on Jun. 13, 2013 @ 6:27 am

The city's tax department hasn't assessed any amounts against AirBNB, they haven't tried to collect anything.

The SFBG assertion that AirBNB should go to court at this point is silly....go to court to stop what? An opinion that they don't agree with?

This is absurd, even by SFBG standards. Really.

Posted by Guest on Jun. 13, 2013 @ 7:18 am

the city try and collect in court on what is a very legally dubious premise.

Posted by Guest on Jun. 14, 2013 @ 5:17 am

Only Guest (ie, anon) thinks a business can waltz into a country and not register with the government or pay the required federal and local taxes. When any local and foreign business tries to operate in the US, or Bulgaria or Malaysia, they will usually find out very quickly there's a very long list of local registration, health and safety, employment and tax laws that need to be followed or the business will be shut down and the owners/operators subject to heavy fines and perhaps criminal prosecutions.

Anon's constant posts on these chat boards indicate time and again he's not the sharpest hoe in the tool shed. For example, companies can't avoid local taxes just because they move their offices elsewhere but still operate in the local community, just as no company that makes money in a country can avoid tax, environmental, employment, and health and safety regulations in a country just because the business doesn't have an office or employees there. And despite anon's constant refrain, the politics, economic activity and housing issues in a resort community like Aspen are nowhere close to being similar to a large metropolis like SF, notwithstanding the dozens of times anon says otherwise.

The #1 issue at an upcoming meeting of the G8 leaders in Britian this month is the worldwide sharing of tax information and developing international monitoring to ensure companies aren't using tricks and illegal schemes to avoid local taxation. If anon and the owners of Airbnb think they are really clever and can avoid local taxes in places Airbnb operates, it will only enrage the locals further who are subject to taxes - often very high taxes - and it will quicken the process for criminalizing tax evasion activity for which Airbnb is becoming famous.

I'm still waiting to see Airbnb's SEC registration document for its IPO:

"Airbnb willfully ignores local tax rules because it believes its close connections to local politicians and its access to powerful and expensive attorneys will protect it from tax evasion prosecution. Airbnb would have been liable for $85 million of local taxes had it played by the rules, but either the statutes of limitations have passed for collecting these taxes or Airbnb believes its political connections will protect it from having to pay any back taxes legally owed. Airbnb's business model is based, in part, on willful tax evasion that Airbnb believes will bring more profits to its investors with little downside risk of the business being shut down. If Airbnb is wrong about its assumptions, Airbnb will likely incur hundreds of millions of dollars of legal costs fighting tax authorities around the world, it will be subject to heavy fines and payments of millions of back taxes, and its owners/operators could be subject to heavy penalties including arrest and long jail sentences."

Posted by Guest on Jun. 14, 2013 @ 7:54 am

Palo Alto is politely asking AirBNB to remind the hosts about THEIR obligation to pay TOT taxes:

http://sanfrancisco.cbslocal.com/2013/06/10/palo-alto-city-leaders-worri...

Which is the way that it works, although I enjoy reading the fiction about Ron Conway being so influential that every mayor on the planet is looking the other way about AirBNB not paying taxes on revenues that they don't enjoy from properties that they don't own.

It always makes my day.

Posted by Guest on Jun. 14, 2013 @ 8:15 am

agree to pass on details of their hosts, and then the city can do the job it is supposed to do - collect taxes.

Posted by Guest on Jun. 14, 2013 @ 8:54 am

sales tax on their fees. No problem there so your comments about the IRS are irrelevant.

No, the issue here is whether the city can push off their obligation to collect tax from AirBnB hosts onto a company that merely makes an introduction.

And that question has not been resolved because it hasn't gone to court. The fact that none of those other countries you cited tries this on is significant.

The rest of what you said about local taxes applies to businesses with a physical presence in that jurisdiction. AirBnB might just happen to be based in SF (for now) but their competitors are not, and SF aren't chasing down their competitors.

Interesting huh?

Posted by Guest on Jun. 14, 2013 @ 8:52 am

SF isn't chasing AirBNB either. The Tax Commissioner issued an opinion, that's all. They haven't tried to collect anything, which would certainly prompt a legal challenge.

The part about AirBNB avoiding their taxes is something that Steven Jones made up because he hates Mayor Lee. Does he have any letters from San Francisco to AirBNB asking them to pay some amount of TOT? They should be available...why not just file a Sunshine request for them?

Posted by Guest on Jun. 14, 2013 @ 9:20 am

news in the hope that it will prompt the city to start harassing AirBnB - something the city doesn't seem that interested in doing, presumably because it knows it is on shakey legal ground.

Posted by Guest on Jun. 14, 2013 @ 9:34 am

AirBNB operates around the world, in just about every major city.

Could the SFBG please name one city, anywhere in the world, that is actively trying to get AirBNB to pay TOT taxes.

Just naming one example would go a long way to establishing some credibility here. A chance to indicate there there is some journalistic integrity at the SFBG.

Thank you.

Posted by Troll on Jun. 13, 2013 @ 7:12 am

and the visitor was from some third nation?

SF cannot tax a Bulgarian entity that has no physical presence or assets here. Nor do they have any jurisdiction over that foreign visitor. So they have to go after the host.

And if SF has to go after the host in the case of every one of AirBnB's competitors, then on what rational and credible basis should they single out AirBnB for special mistreatment?

The whole point of internet peer-to-peer commerce is that it doesn't really have to physically exist anywhere. Cities have to tax the person making the profit and the person who is in SF - in both cases that is the host.

But SF is being lazy and trying to get websites to do their dirty work for them. We should resist.

Posted by Guest on Jun. 13, 2013 @ 7:24 am

Post new comment

The content of this field is kept private and will not be shown publicly.