Airbnb reaches tax deal with Los Angeles

Airbnb, the biggest disruptor to the hospitality industry since the onset of online travel agencies, is regularly criticized for not complying with laws associated with traditional hotel companies. The most glaring oversight, in the eyes of the hotel industry, is the company not being held to task over state and local taxes on booked rooms, taxes that are traditionally high for hotels.

New York City’s feud with Airbnb is well documented, but on the other side of the U.S. a similar contest has made some headway. As a result of a new ordinance, Airbnb will now pay taxes to the city of Los Angeles, beginning Aug. 1. The decision was made as part of a three-year agreement between Airbnb and the city in which Airbnb will take it upon itself to ensure its operators are paying taxes. In the past the responsibility fell on the shoulders of the operators.

Similar to what is taking place in Los Angeles, an initiative is in place to make sure Airbnb collects taxes on rentals booked in Cleveland and Philadelphia during the Republican and Democratic national conventions. The Cleveland city council passed a 3-percent transient occupancy tax on Airbnb guests, while the company began collecting taxes in Cleveland at a rate of 5.5 percent. Meanwhile, Philadelphia began collecting an 8.5-percent occupancy tax on Airbnb guests in July 2015.

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In a statement, Airbnb said that it would have paid Los Angeles $23 million in taxes during 2015 if the city had worked with it to strike a deal earlier, and to date the company claims to have paid more than $85 million in hotel taxes across 190 cities and jurisdictions globally. 

But Los Angeles still hasn’t legalized short-term rentals. Airbnb has agreed to start remitting hotel taxes to the city of Los Angeles on behalf of its hosts in the area, the company said on Monday.

As part of the deal, the home-sharing company will collect lodging taxes from its Los Angeles hosts and hand the proceeds over to the city, similar to its existing agreements with San Francisco and nearly 200 other cities worldwide. The deal will go into effect in August, according to the Los Angeles Times, which first reported the agreement.

“These agreements allow cities to rightfully benefit in the economic impact of home sharing while also making it easier for Airbnb hosts, ­the vast majority of whom are middle-class people sharing their own home, to comply with local tax laws,” John Choi, Airbnb’s public policy manager for the Los Angeles area, said in a statement. “We are pleased that this process is moving forward and will benefit Los Angeles.”

The American Hotel & Lodging Association has been at the forefront of the push to raise awareness of the discrepancies between Airbnb’s treatment in the eye of the law when compared with hotels, and for the AH&LA Airbnb’s responsibilities don’t end with paying taxes. In many cities, short-term rentals of 30 days or less are still considered illegal, and as the AH&LA continues its analysis of the company’s impact on the largest hotel markets in the U.S. it frequently notes a lack of enforcement for these laws. However, figures shared by the AH&LA have been contested by Airbnb in the past, with company spokesman Christopher Nulty claiming the AH&LA’s report is “just another example of the [hotel] industry’s attempt to mislead and manipulate to stifle competition.”

Other issues with Airbnb’s comparison to hotels under the law persist, such as improper disclosure of a resident’s status as a home-sharer or a the lack of laws enforcing safety standards for home-sharing operators. An AH&LA report on Boston’s home-sharing market showed that approximately 83 percent of the city’s Airbnb revenue came from operators who list their home for rent more than 30 days per year, raising questions about whether or not these homes are being used as residences at all.

Los Angeles also has a response to these concerns, with city officials considering a new law that would impose 180-day annual caps for renting a primary residence, and a 15-day cap for other properties. On top of that, hosts will be forced to register with the city, another issue plaguing major cities. If passed, Airbnb will be forced to turn over the names and addresses of hosts who remain unregistered—something that Airbnb has contested.

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