New tax agreements may bolster Airbnb growth

Airbnb is threat to hotel industry

The controversy surrounding Airbnb isn't likely to abate any time soon, especially with the home-sharing company taking steps to improve its image in the eyes of local governments.

In a statement, Airbnb declared that by May 1, it will will have entered into agreements with more than 275 jurisdictions and collected and remitted more than $240 million in hotel and tourist taxes throughout the world.

"Over the last three years, we’ve partnered with hundreds of governments around the globe to make it easier for our hosts and guests to pay their fair share of hotel and tourist taxes," the statement read. 

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Dollars and Sense

In the U.S. alone, Airbnb collects and remits taxes in more than 250 jurisdictions, and by May 1, more than half of the company's domestic listings will be in communities where it can collect and remit taxes. 

In early April, Airbnb finalized three major agreements in Florida. "Sarasota County, Miami-Dade County, and Broward County all approved measures allowing Airbnb to collect and remit tourist taxes which will bring millions of dollars in new revenue," the company said. 

Chris Bryan, a spokesman for the Texas comptroller, told Fortune that Airbnb approached the state with the offer to pay taxes. "The state saw this as the most efficient way of bringing these people into tax compliance rather than going after thousands and thousands of homeowners," he said.

Similarly, in France, Airbnb will begin collecting and remitting tourist taxes on behalf of our hosts in 31 additional cities, covering popular tourist destinations and ski resorts, reaching a total of 50 French cities this spring.

The State vs. Airbnb

Different jurisdictions have different laws regarding short-term home rentals, and the logic behind those laws varies. 

In some cases, the laws were passed not because of tax issues, but because homeowners were buying multiple apartments to rent on home-sharing sites. An investigation of Airbnb rentals from 2010 to 2014 by the office of New York State Attorney General Eric Schneiderman found that 72 percent of the units in New York City were illegal under the state's laws, with commercial operators making up 6 percent of the hosts and supplying 36 percent of the rentals.

In other words, in a city battling a housing shortage, individuals were buying multiple apartments but renting them out rather than living in them. While Airbnb defended the rights of homeowners to earn extra income by renting out spare rooms, it was harder to defend the monopolization of real estate when so many people are struggling to find affordable housing.

What This Means for Hotels

The taxes Airbnb will be paying to local governments are the same rate paid by hotels, further blurring the legal line between home-sharing and traditional hospitality. 

While the new tax agreements won't change the overwhelming arguments against Airbnb in major markets with housing shortages, they remove an argument hoteliers can use in favor of regulation or restriction. 

But it isn't all bad news. In the last week alone, we've reported about two new alliances—one of them aimed specifically at curbing Airbnb's growth in a major city. Australian Airbnb competitor Stayz—which is owned by online travel agency Expedia—has partnered with Tourism Accommodation Australia to call for caps on the number of nights apartments in inner-city areas can be rented.

In other words, while Airbnb may have earned some brownie points with local governments, other businesses and industries can join forces to make sure that home-sharing doesn't overwhelm the industry.  

And Airbnb may face some challenges in collecting and remitting all the taxes it has pledged. Many of these agreements are less than a year old, and it remains to be seen how it all plays out. Critics of the deals have questioned how local officials could have enough data on Airbnb hosts to verify how much tax the company ought to pay.

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