Airbnb is still snubbing SF, even after a NY judge rules it illegal there

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Airbnb features 36 SF neighborhoods on its website but can't figure out how to pay its local taxes.

Now that a judge in New York has ruled that Airbnb is illegal there, a model that violates city tenant laws and state law, that should put pressure on the San Francisco-based company to finally stop snubbing cities and find a way to exist within local regulatory frameworks and finally start paying its taxes.   

It was good to hear KQED’s Forum discuss Airbnb this morning – it was getting lonely as the only local reporter highlighting the company’s open defiance of San Francisco’s ruling that it should be paying the city’s Transient Occupancy Tax, just like hotels – and to finally question an Airbnb executive on an issue the company has been refusing to address publicly (yes, they still aren’t returning my calls).

But the answer that David Hantman, Airbnb’s global head of public policy, gave this morning was pretty astounding in its hypocritical arrogance. He acknowledged the tax ruling by San Francisco and the company’s lack of compliance, and said the company was waiting for clarification on the various issues related to the questions of the legality of some of the short-term rentals it facilitates before paying its taxes.

In other words, this company is making tens of millions of dollars annually in San Francisco alone on a business model that it developed – one that often runs afoul of local land use and tenant laws, and in violation of people’s leases – and it’s up to city officials to find a solution to this company’s problems before it will pay taxes?!?

To his credit, Board of Supervisors President David Chiu has been trying to do just that for months, slogging through a number of complex and difficult issues that arise from this business model, and he has been clear throughout that Airbnb should be paying its taxes to the city, which it isn’t.

“It’s reasonable to ask people who benefit from the economic transactions we’re talking about to pay their fair share,” Chiu reiterated on Forum, citing the cost to the city of serving the 16 million tourists who visit the city each year.

Coincidentally, there’s a German television crew from ARD (Germany’s equivilent of the BBC) in San Francisco this week doing a story on Airbnb and the shareable economy, interviewing me about my coverage of the company, as well as others, including Airbnb co-founder Nathan Blecharczyk.

The ARD reporter told me this afternoon that Blecharczyk was animated and expansive when discussing how wonderful his company is and how it’s changing the world, but he became terse and unresponsive when she raised the issue of local taxes and regulations.

As I said on camera today, Airbnb and other shareable economy companies are cool, I’ve used them myself, and they’re certainly here to stay. But I just don’t understand their unwillingness to be good corporate citizens and to pay the taxes they owe to support the city services that their customers use.

Chiu has clearly said that Airbnb should pay the TOT -- which my reporting has shown would bring $1.8 million annually into city coffers -- and that paying its taxes will be a part of the regulatory package he’s working on. But sources have also told me that negotiations have been hard slog, largely because of Airbnb’s unwillingness to play by the rules and because of the unqualified support the company has from Mayor Ed Lee, whose main political fundraiser, Ron Conway, is also a major investor in Airbnb.

Hopefully the New York ruling and growing media scrutiny will prompt the young executives at Airbnb to finally become good faith partners in a city that has been so good to them -- a city whose leaders seem anxious to return the favor and legalize Airbnb’s operations in San Francisco.

 

Comments

modern world. It's natural that property owners turn to short-term rentals in the fact of SF's punitive rent control rules. I discovered this some 12 years ago when, upon getting a couple of windfall tenant departures, I really did not want to deal with long-term tenants again.

And, by coincidence, I discovered many Germans wanting to come here and live/work short-term. I didn't fall foul of the AirBnB trap because my rentals were typically more than a month (and if they weren't, frankly, I didn't give a damn).

All I knew is that I had exchange some uppity SF tenants who were obsessed with their "rights" for some super-polite foreigners who would rather stick pins in their eyes than assert their rights.

And they paid top dollar.

I'm mostly out of the business now, having sold into the rally. I TIC'ed two buildings and condo'ed another, so my buyers will never again have to deal with these punitive laws. But I have every sympathy with people like Steven who skirt the law and sublet their place. Sometimes the rules make no sense and the only rationale response is to ignore them.

AirBnB have my full support.

Posted by Guest on May. 23, 2013 @ 2:03 pm

You've missed the point. No one is saying here that Airbnb shouldn't exist and do what it does. We're just saying it should pay its taxes.

Posted by So what? on May. 25, 2013 @ 1:10 am

Steve Jones epitomizes the disgusting & insufferable 'hypocrisy' regarding his
totally unwarranted criticism of AIRBNB.
Perhaps Steve should come clean and admit that he has "himself" utilized the
services of Airbnb by benefitting $$ thru rental of his own property, and NOT
paying due taxes? Shame on Steve for his willful failure to acknowledge that
AIRBNB & hosts are responsible for attracting untold millions $$$ to our beautiful
city, and truly benefitting our local economy.
He also refuses to admit that landlords (property owners) who worked for their
investments have a legal right to rent to whomever they wish.
Glory, Glory, praise the 'forward-looking' investors like honest landlords and Airbnb
to continue helping the economy of SF grow.

Posted by Guest on Mar. 03, 2014 @ 5:38 pm

"Perhaps Steve should come clean and admit that he has "himself" utilized the
services of Airbnb by benefitting $$ thru rental of his own property, and NOT
paying due taxes?"

Posted by marcos on Mar. 03, 2014 @ 6:51 pm

on a temporary basis should pay a hotel tax, and there are arguments both ways on that since it's a little like a hotel but there are significant differences too.

But it's still not clear why a third party intermediary who merely provided the connection should be liable. AirBnB doesn't rent out rooms or flats - it merely connects people who wants to.

So if it can be shown that the hotel tax is due on short-term sublets, I believe that that responsibility lies with the person who does the letting. And, Steven, isn't that why you paid the tax to the city, rather than merely shrugging your shoulders and saying it was Craigslist or the Chronicle or whatever service you used?

AirBnB is a broker and advertiser, not a landlord.

Posted by anon on May. 23, 2013 @ 2:15 pm

it an agent in additon to an advertiser.

Posted by Guest on May. 23, 2013 @ 2:34 pm

their clients, else the headhunter that got you your last job would have to pay your income tax if you failed to do so.

Posted by anon on May. 23, 2013 @ 2:57 pm

As long as Ron Conway is an investor. The fix is in for him with Willie Brown and Brown's staff, Ed Lee as well as Willies employees that sit on the BOS.

Posted by Guest on May. 23, 2013 @ 2:40 pm

has rented out short-term lets, and then the city should do it's job of tax collecting rather than expect other entities to do that for them for free.

Posted by anon on May. 23, 2013 @ 2:58 pm

with tenants too - who are violating their lease. We'd get a nice turnover in apartments, more money for property owners and everyone wins!

Posted by Lucretia Snapples on May. 23, 2013 @ 3:10 pm

So his admission here that he has sublet his flat on AirBnB appears to be prima facie evidence that he has violated his lease by illegally subletting, and so should be evicted.

Anyone know his address?

Posted by anon on May. 23, 2013 @ 3:36 pm

that always seems to pop up in stories involving Israelis.

Posted by guest on May. 25, 2013 @ 8:40 am

>"Nothing will change As long as Ron Conway is an investor. The fix is in for him with Willie Brown and Brown's staff, Ed Lee as well as Willies employees that sit on the BOS."

Not sure that you realize how stupid that sounds. AirBNB operates in just about every major city in the world. San Francisco is just one small piece. What difference does Ron Conway make to the cities of Moscow, Istanbul, Prague....?

What difference would it make if San Francisco gave AirBNB a break if the other 98% of the world didn't?

Think about it.

Posted by Troll on May. 23, 2013 @ 3:39 pm

We all know that the city caves as soon as a company threatens to do that.

Posted by anon on May. 23, 2013 @ 3:46 pm

The physical location of Airbnb's offices is irrelevant to their TOT liaiblity. If they are engaged in rental activities in SF (or any other jurisdiction that has a rental tax), they are liabile for the local taxes. This isn't a sales tax on "tangible personal property" that has some tax collection protections for out-of-state companies selling into a "foreign" jurisdiction. This is a rental tax and ANY ACTIVITIES that are targeted to collect fees or rents in a jurisdiction that has a local rental tax will make the company liable for the tax. The mere advertising of rentals in the location will subject the company to tax even if none of their employees ever travel to the city or state where the tax applies. If they don't collect and pay the tax, the company will be shut down and criminal warrants will be issued for the arrest of the officers of the company in case they ever do visit the state in the future.

Posted by Guest on May. 23, 2013 @ 4:28 pm

Why is only AirBnB being chased down here? There are various competitors and they are getting a pass. Why?

Reason is that AirBnB are in SF and the only companies are not. Now, you claim that in theory those other firms are liable. Maybe, maybe not. But the reality is that no pressure can be brought upon them.

suppose the biggest competitor to AirBnB is in Russian. What are you going to do about that? They don't even need a license because it's the internet, dummy.

Our tax laws around internet companies are antiquated because they do not need a physical or geographic presence at all. The fact that AirBnB is in SF should not be used as a hammer to beat them with. They simply will move or cede the business to someone that SF cannot tax.

Focus on the people doing the renting. We know they are here.

Posted by Guest on May. 23, 2013 @ 5:16 pm

No, the focus on Airbnb is because they're the biggest and they owe the most money.

Posted by steven on May. 23, 2013 @ 6:32 pm

Reminds me to always be the second biggest criminal so that I get ignored.

No, you're not going after the SF residents who rent out their places and you're not going after AirBnB's competitors. You are ONLY going after AirBnB because of the Lee/Conway connection and that is selective, self-serving, partisan and repugnant.

If AirBnB were based in San Antonio, Sweden or Switzerland, SF would have no leverage and you wouldn't be talking about this at all.

Posted by Guest on May. 23, 2013 @ 6:49 pm

A reader comment from the first link in Steven's story states that the Airbnb sends out a 1099 to each client at the end of the year. If so, Airbnb has all the financial information readily available for any city/state/country jurisdiction that charges a TOT. (Many toursit cities have theses taxes). This means Airbnb can easily calculate and pay the tax owed on these rental since every company has a legal duty to pay taxes in any place it does business.

I'm still not understanding why SF city agencies, including the DA, are not suing and/or prosecuting Airbnb and its officers over the unpaid TOT. Cities invest billions in tourist infrastructure, using targeted taxes such as TOT to recoup some of these costs. It's criminal that politically connected companies like Airbnb are able to flout local tax laws while local politicians and city agencies, including the District Attorney, sit on their duffs and let this criminal tax evasion continue.

Posted by Guest on May. 23, 2013 @ 3:32 pm

tenants have illegally gained from subletting their units does not mean that AirBnB are themselves liable for the tax.

That's like saying that a headhunter who gets you a job is liable for all the income tax due on your salary.

Posted by anon on May. 23, 2013 @ 3:44 pm

So I know what laws to follow and what laws to ignore.

I guess the rule of thumb is

if it involves taxes the law should be followed.

If it involves progressives delicate feelings it should be ignored.

Posted by Matlock on May. 23, 2013 @ 3:33 pm

just happen to be located in SF. So what if they move out of the city, the state or the country?

Or, alternatively, what if the Bulgarian government decide that AirBnB must pay tax on the Bulgarian sublets that they arrange? Are you OK with a US company capitulating to Bulgarian law?

Posted by Guest on May. 23, 2013 @ 3:47 pm

Every US company that operates overseas is required to pay whatever taxes the foreign city/state/country require. Otherwise the company will be shut down and its officers and maybe employees could be both liable for the tax and/or subject to criminal prosecution.

The first thing any company does that is investigating whether to operate in a particular location - regardless of the city or country where it contemplates doing business - is determine what local taxes will be required. To imply that all businesses are generally tax cheats like Airbnb does a great disservice to vast majority of honest businesses that work very hard to comply with all employment, environmental, operational, AND tax laws that apply to their worldwide operations. It's offensive for you to imply that every company is a criminal tax evader similar to Airbnb.

Posted by Guest on May. 23, 2013 @ 4:07 pm

If Bulgaria passes a law saying that every American has to send then $100 a year, we can safely ignore that because it cannot be enforced.

Likewise, if AirBnB moves outside SF, then SF cannot enforce their local laws.

Else why isn't there any angst here about AirBnB's competitiors, who are base din various places around the world?

Posted by Guest on May. 23, 2013 @ 4:20 pm

my place. If AirBnB is shut down people will simply use another option. This endless game of whack-a-mole is something Steven appears to enjoy since he doesn't offer any solution other than screeching for the company to "pay its taxes" to the city, in effect shilling for Ed Lee's mayoralty.

Posted by Lucretia Snapples on May. 23, 2013 @ 4:00 pm

As has been pointed out many times that this story has been discussed - both here and on sfgate - craigslist does not collect money from the short-term renter. Since you spend virtually 24/7 on this site you're well aware of this fact. We already know you're a sociopathic landlord predator, now we can add blatent liar to the long list of your other anti-social qualities, which is why I assume you have no friends or life and spend most of your time on this website.

Posted by Guest on May. 23, 2013 @ 4:15 pm

instead provide the advertising and connections, but then subcontract the actual money contract so that they are not liable for the hotel tax?

And that helps everyone because . . . ?

Posted by Guest on May. 23, 2013 @ 4:26 pm

even has a distinct section of their board for advertising sublets.

You can use that to sublet to (ideally) foreign tourists and visitors and NEVER have to worry about any bogus hotel tax.

So what Steven is really saying is that he wants to help Craigslist (because Lee and Conway aren't involved with CL) but punish AirBnB.

Dishonest and hypocritical.

Posted by Guest on May. 23, 2013 @ 4:23 pm

>"Chiu has clearly said that Airbnb should pay the TOT"

Does anyone know if this is true? This seems like another example of Steven being confused and hearing what he wants to hear.

I think Chiu is saying that the TOT should be paid without specifying if it should be paid by AirBNB or, as many people think, by the host. Just as the hotel, not Expedia, is responsible for paying TOT.

Also, can anyone name one city on planet earth that is pressuring AirBNB to pay the TOT tax? Come on, it's a big planet. There must be one.

Posted by Troll on May. 23, 2013 @ 4:05 pm

corporation pays all the tax that should be paid by all the tenants who, like Steven, are breaking their lease by illegal subletting.

Posted by Guest on May. 23, 2013 @ 4:21 pm

"Means Testing" is something you should be promoting, if you are concerned with what's fair when it comes to housing. If it wasn't for a system with no accountability regarding what the income status and whether they work in SF-status is, of tenants's benefiting from rent control, landlords would be more open to it. Instead, the tenants union is trying harder and harder to make sure whoever has a rent controlled apt can never be evicted, with making landlords and tenants adversaries, all the while showing a total disregard for rentals for new comers who should get help, and might, except that SF policies are geared toward tenants who have, keeping what they have, regardless of whether it is fair or not.
Vacation rentals will be fine with the tenants union, as long as they can find ways for tenants to work the system more - sublet short term, defy leases where they already agreed to not sublet, etc.
What's fair? Not having tenants making in the six figures, or who commute outside the city, have rent increase limits. And, not having seniority be the determinant with who does and doesn't get, what is essentially, rent subsidies by landlords.

Posted by martin on May. 23, 2013 @ 5:45 pm

in it for themselves. While wealthy folks on the right give to charity, churches and foundations to help the poor, the left like tot alk a good game about helping the poor, but the policies they seek to impose actually hurt the poor.

Rent control is just one example of that.

Posted by anon on May. 23, 2013 @ 6:06 pm

The left doesn't give a damn about the poor - they reason they want more general fund money, turns our $4 or $5 billion isn't enough for 47 square miles, is NOT to give money to the poor. The money goes to the people who purport to be helping the poor.

Posted by Guest on May. 24, 2013 @ 9:48 am

TOT dollars go right into the general fund to support the excessive pay and benefits of the City's oversized workforce etc.

The exception is some District's have minor TOT assessments (on top of current TOT) whose dollars fund items directly, like Moscone Center expansion.

Posted by Guest on May. 24, 2013 @ 9:57 am

If TOT was designed to reimburse the city for visitors using our infrastructure then it would be a flat fee per person, not a percentage of the hotel bill.

Does one visitor at the Ritz Carlton use $75 a day worth of infrastructure? Does a family of 4 in a room on Lombard use only $19?

It isn't 100% clear that AirBNB people should pay the tax, since they are presumably staying at a home that has already paid for its infrastructure. But cities would likely argue that they should pay TOT.

But the concept that AirBNB is solely responsible for the tax is just a Steven Jones fabrication. The city's tax commissioner said that it was a shared responsibility between AirBNB and the hosts, David Chiu said something similar.

Steven completely made up the part about the taxes being the sole responsibility of AirBNB.

Posted by Troll on May. 24, 2013 @ 10:15 am

The tax is therefore nothing more than a "tax it because you can" extortion.

Whether a tax clearly designed for hotels can legitimately be levied on someone subletting their home is dubious and has not yet been tested in the courts.

Posted by Guest on May. 24, 2013 @ 10:32 am

"But I just don’t understand their unwillingness to be good corporate citizens and to pay the taxes they owe to support the city services that their customers use."

They are Israelis.

What else needs to be said?

Posted by guest on May. 25, 2013 @ 8:39 am

I learned about the 14% transient occupancy tax and when my short term tenants (less than 30 days) arrive I collect the tax in cash from them and deliver it to the city of Los Angeles on a monthly basis.

It is not difficult to be legal AND I sleep well at night.

Posted by Guest on Jul. 29, 2013 @ 6:23 pm

I learned about the 14% transient occupancy tax and when my short term tenants (less than 30 days) arrive I collect the tax in cash from them and deliver it to the city of Los Angeles on a monthly basis.

It is not difficult to be legal AND I sleep well at night.

Posted by Guest on Jul. 29, 2013 @ 6:26 pm

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