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UncategorizedCohen hasn't figured out how to collect Airbnb taxes

Cohen hasn’t figured out how to collect Airbnb taxes

48hillsmaliacohen
Sup. Cohen says she wants to make Airbnb pay — but voted against a measure to make Airbnb pay

 

By Tim Redmond

OCTOBER 15, 2014 – Sharen Hewitt, who is a hero to many of us and was one of my choices for Bay Guardian local heroes a few years ago (and I can’t link to that because: shutdown), sponsored a debate for pretty much everyone running for local office Oct. 9, and the theme was Equity.

The equity debate attracted a good crowd to USF on a busy night, and a whole lot of candidates were there – David Campos, David Chiu, Malia Cohen, Ed Donaldson, Tony Kelly, Shawn Richard, Emily Murase, Hydra Mendoza, Jaime Rafaela Wolfe, Trevor McNeil, Shamann Walton … everyone respects Sharen, and they came to talk about how to promote greater economic equality in San Francisco.

Which made for some interesting moments.

Chiu, who came early and had to leave early (and thus spent little time directly with Campos) made a speech about how “increasing inequality is the defining issue of our time.” He made that speech just days after voting against a measure to make a $10 billion corporation pay $25 million in back taxes to San Francisco.

Donaldson, who is running for D 10 supervisor, talked about the pending changes in public housing that he referred to as “privatization.” Cohen, who represents the district now and is running for re-election, said that’s a misnomer: What’s actually happening is that the city (which by all accounts has failed at running public housing) will turn some properties over to local nonprofits that have a record in managing affordable housing, but keep the title to the land.

It’s a complicated issue: No question a lot of public housing is a disaster, and the federal government won’t pick up the tab to fix it, and the city (which seems to have plenty of money for tax breaks for tech companies) can’t find the cash.

So maybe the nonprofits will do a better job – but Tony Kelly, who is also running against Cohen, had some real concerns. “In the agreements,” he said, “the land will revert to Wells Fargo if things don’t work out. …everywhere there has been privatization of public housing, there has been displacement.”

Then we had the Great Airbnb Debate.

Campos stood up and said that you could see the main issues of equity in the city by what happened at the Board of Supervisors a few days earlier – “The board voted to legalize the practices of Airbnb but not to collect the back taxes.”

Donaldson immediately challenged Cohen: “Are you going to do something about this?”

Cohen: “Heck yes.”

I was a little confused. Cohen voted against the Campos measure that would have forced Airbnb to pay its back taxes. The tax collector and the mayor have so far failed to take any affirmative action against the company, even though everyone agrees that those taxes are due. So she wants to do something – but when it came to a vote, she was with Airbnb.

I found her after the debate and asked her to clear things up. “Don’t be confused,” she said. “The industry needs to be regulated and I think we should be going after the back taxes.”

But, I said, you had a chance to do that – to make the legalization of a very lucrative industry contingent on payment of those taxes. One vote would have changed the outcome; one vote (hers, for example) would have forced Airbnb to pay the city $25 million.

“That’s not the only way to get there,” she said.

Okay, fair enough – you don’t like the Campos approach. So how do you suggest we collect those taxes?

“I haven’t figured that out yet.”

Tim Redmond
Tim Redmond has been a political and investigative reporter in San Francisco for more than 30 years. He spent much of that time as executive editor of the Bay Guardian. He is the founder of 48hills.
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  33. As a vacation rental owner, I pay quarterly tax to South Lake Tahoe of 10%. The problem with airbnb is I can not ad the city tax to the bill to collect it and pay it to the city. Airbnb states to just add it to the price ( nightly rate and cleaning fee) The problem with this is people see the higher price and think it is
    (MY PRICE!). Also airbnb charges a fee on the total price. Why should airbnb make a profit off city tax. I do not profit from city tax I am required to collect it and pay it. I should be able to add the tax to the total bill just as any bill has tax printed at the bottom of a invoice, then air bnb sends it to me and I pay my quarterly tax due. I do this with all other rental sights I list on, Airbnb is a problem.

  34. “Forward-thinking” is a highly subjective phrase. As an example, many of the policies advocated by progressives are actually very regressive, e.g. NIMBYism.

    But a moderate will typically be OK with a compromise such as Chiu worked out here. Progressives and Conservatives, representing the two extremes, are much less capable of taking a balanced centrist consensual position.

  35. How do you tell the difference between a moderate and a conservative?

    If you present an innovative, forward-thinking idea, a moderate will hem and haw and beat around the bush and tell you that they agree with you in theory, but, um, well, it’s just that this particular idea, they don’t like… because of some nitpicky reason.

    A conservative will just be honest and tell you they disagree.

  36. @peapod- to answer some of your questions:

    >First, why is AirBNB being singled out? Why not Home Away from Home, or VRBO. Or Craig’s List, for that matter?

    Airbnb is singled out because Ron Conway was an early investor and he is closely aligned with Mayor Lee and is an enemy of the progressive movement. Hence the wish to punish him through AirBNB. AirBNB only got about 7% or guest fee; the tax would be double the amount that they actually received.

    >Applying the standard hotel tax would be erroneous because, well, home shares are not hotels.

    True. Nobody has proven in court that the same taxes should apply. If a friend from New York comes to live in my basement for a month in exchange for buying me dinner a few times do I have to pay TOT taxes on him? He will be using city services, after all.

    >Should hosts bear some of the responsibility? My answer to that one is “yes.”

    Yes. In fact the city tax director said that it was a shared responsibility of the host and the website. Tim Redmond just leaves out the host and writes about it strictly being AirBnb’s responsibility because it suits his purposes to do so. But that is not what the city tax director said.

  37. There’s a couple of issues at play here. First, why is AirBNB being singled out? Why not Home Away from Home, or VRBO. Or Craig’s List, for that matter? Applying the standard hotel tax would be erroneous because, well, home shares are not hotels. The City is still trying to figure how much to tax, and under what circumstances. Should the taxes be tiered and/or categorized? Should hosts bear some of the responsibility? My answer to that one is “yes.” To not report income from home sharing is the same thing as income tax evasion. And the last time I checked, income tax evasion was a federal offense. It seems like the City had plenty of time to figure this out. But as usual, our fearless leaders were naval gazing instead. Lastly, does the City actually know how to collect any taxes? Friends of mine dealing with the Assessor’s Office have have reported frustrating experiences at best. Carmen Chui seems like a smart woman. She should get a new staff. The City’s ability to not only establish revenue generating policies, but tits inability to carry out said policies, is the reason why I refuse to vote for any tax or surcharge. This includes the proposed soda tax. One assumes the BOS has figured out how to collect this tax, but who knows? AirBNB is one company and so far they can’t seem to figure out to get them to pay up.

  38. It’s not that the city cannot figure out how to tax home shares but rather that they do not have the information they need to compute that tax.

    Airbnb do not have to hand over that information on privacy/confidentiality grounds while the hosts don’t have a big incentive to volunteer the information either.

    My guess is that there was some kind of deal whereby Airbnb starts collecting the tax now in return for past tax claims being waived. Seems like a fair compromise to me.

  39. The City demanded that property owners pay back taxes on garages – a tax that seemingly was designed for parking garages downtown and yet can’t figure out how to tax AirBnB, etc.? . 25% of GROSS income of the garages, not net.

  40. Even if airbnb moves to another location the tax that is being levied on room-renters is based on zip code within the city I assume? Is it for the county of San Francisco? Time to move business up to Marin.

  41. Yes, you are correct of course – technicality. I doubt Kim knows that though!

    This is not about the sharing economy though Sam. This is real estate fundamentals 123. How can she even claim to build a platform on housing issues when she is so woefully ignorant? Doesn’t she have any friends in real estate? Has she never bought a single home? I’m can’t believe these people set public policy… Just can’t.

    SF homes in SF may not come with HOA’s but plenty do in other places. Most townhouse associations or even free standing homes have HOA’s in the suburbs (maybe since newer).

  42. Not only don’t we need to create legislation to do the work of the tax collector, it would set a ridiculous precedent.

    Instead of the tax commissioner doing his job we’ll just pass laws that extort people into paying an amount of tax that sound good to us — no need to quantify anything. Let’s just pick a nice round figure…how does $25 million sound? OK, pay up or else!

    Look, the whole thing is just silly. There are reasons why nobody thinks that Progressives could ever govern and Tim Redmond does a great job of laying them out. Too bad nobody reads this stuff.

  43. Exactly. We don’t have to pass a special law to collect a tax that is due under existing law. That is why the supervisors were correct to reject the amendment.

  44. For some reason I listened to the tape of the whole Airbnb discussion at the October 9 Supervisors meeting, and what I remember from that discussion was that at some point someone, I believe it was Chiu, pointed out that it is not the job of the Supervisors to collect taxes and that if the taxes are owed, they could be collected at any time by the responsible agency. But, be my guest and review the tape yourself if you have the time.

  45. Maybe she should have simply deflected the question to the tax collector but, either way, the real point here is that it does not take legislative action or expertise to collect taxes that are already due.

    If you default on your property taxes, do the BofS need to get involved? No. Does it matter if your local supervisor does not know the process for collecting that tax? Again, no.

    Non issue.

  46. No, she doesn’t need to know the nitty-gritty of tax collection. But this issue has been on the front burner for months, has been discussed by the BOS and in the press, and has been used as a political issue in the upcoming elections. If, as she says, she wants the tax to be collected, she can write the tax collector and ask for a clarification as to what should happen and when should happen, and she should be able to tell a journalist that she’d done so. Whatever the actual resolution to this issue is, “um, I dunno” is not the right answer.

  47. Cohen doesn’t need to know how to collect these allegedly owed taxes because she has a tax collector whose job that is. You might as well ask why Cohen cannot drive a Muni bus or conduct surgery at SFGH.

  48. Ron Conway is a backer of Airbnb. If the progressives really cared about the city collecting all of its tax revenue they would be talking about criagslist and the responsibility of the host to pay their taxes.

    Instead they want to use the city’s taxing power to selectively target their enemy. The tax commissioner said that taxes were a joint responsibility of the host and the web company. Progressives just decided to leave out the ‘host’ part.

    Which is an example of why progressives will continue to wear the ‘pathetic losers’ handle for the foreseeable future.

  49. That’s not the issue. Maybe the tax needs to be lowered or adjusted in the future, fine, but that has nothing to do with past taxes. The issue is that Cohen (like others, apparently) agrees that the tax is currently owed, but can’t come explain how that will get paid. After 4 years on the BOS I expect her to know the ropes. So, incompetent? Fearful of consequences? Dishonest? I don’t know, but it’s not good.

  50. Dave, the question is legitimate. If all home-sharing intermediaries are equally taxable on this, then why would the city pursue only one of them?

    And in particular, why would the city pursue the only home-sharing intermediary that is actually willing to make a commitment to the city and co-operate with the city?

    It doesn’t sound smart, ethical or fair.

  51. As usual, the comments and discussion here really cover the topic very well.

    Has anyone noticed though that this is really Chiu’s style? Show up, make a canned statement that really answers no one’s questions and then leave early.

    I want to vote for this guy but he just gives the impression he’s only in it for himself.

  52. “CC&R’s are guiding DOCUMENTS put out by an HOA organization.”

    Not quite. The CC&R’s actually define the HOA rather than the other way about. A HOA is not created until the CC&R’s are documented, agreed and filed with the city’s Assessor-Recorder’s office, along with the Condominium Plan.

    But you are correct that it is the HOA that (allegedly) must be notified rather than the CC&R’s which, in any event, makes no sense because you cannot notify a document of anything.

    And of course only condo buildings have HOA’s anyway. They have no meaning for SFH’s, or for multi-unit buildings where one owner owns them all, whether a rental, TIC or condo.

    It’s not just planning and tax laws that have to catch up with the sharing economy. Evidently it is our politicians and commentators too, who repeatedly demonstrate how out of touch they are with the new zeitgeist.

  53. Last time I looked Malia Cohen wasn’t elected tax commissioner. José Cisneros was, and he defied Mayor Lee by issuing his ruling and then hasn’t done anything to collect the taxes.

    He already pissed off the Mayor, he doesn’t serve at the Mayor’s pleasure, Why hasn’t Cisneros done his job over the past two years and why isn’t anyone calling for his head??? Huh????

    And if it is such a legal cut and dried issue that AirBnb owes these taxes (it isn’t) than why do we need additional motivation to get them to pay? What about the money associated with the many years of craigslist vacation rentals, which continue to this day? Is AirBNB supposed to pay that also? Why not?

    Where does the $25 million figure come from???? Tim uses it like it is a documented figure. It isn’t, of course. I think that took the projection for 2014-2015 and used it backwards for a 2012-2013, estimate then rounded up a few million or so. It sounds good, so why not say it. We’re Progressives, that’s what we do.

    The hosts keep 93% of the money for the stay. Some hosts did the right thing and collected the tax. They did something like charging $114 and noted that it included $14 in TOT taxes. That’s all. No advanced degree required.

    Priceline, Orbitz and the rest all make it very clear in their TOS that they aren’t responsible for TOT taxes. They will include an estimate and pass it along to the host/hotel if requested by the hotel.

  54. “The ability of the city to pretend that an occasional home share is exactly the same as the Hilton Hotel has not yet been supported by any courts that have jurisdiction here.”

    Another excellent point. I just don’t understand why airbnb isn’t fighting harder on his. When you have a total idiot like Kim in the supervisors it’s not surprising they’re just trying not to piss them off. In one of the hearings (and in later ones also) Kim actually called out the “CC&R’s” as an interested party to be notified. I was BEYOND mortified. How could a woman whose entire platform is built on housing issues not realize that CC&R’s are guiding DOCUMENTS put out by an HOA organization. They in and of themselves are not a party to be notified. I nearly fell out of my chair the first time and then I was appalled that the second time around she still hadn’t learned that. Who are these idiots running the government??? They should be required to pass a basic intelligence and world-awareness test.

    At the beginning of the hearing in Sept Weiner did not know whether an insurance product existed to cover this type of rental activity for tenants. By the end of the hearing he pulled a number out of his arse and raised the limit from 150,000 to 500,000!! Can you imagine a tenant having to obtain that for doing this activity for a short amount of time? It’s just outrageous.

  55. I’m actually shocked at his lack of pure logic. Campos needs to be pushed out… He can’t make a congruous argument. His arguments at the hearing were to bring up a 1000 point laundry list about what poor case could use the money.

    GREAT IDEA! I hope Airbnb will consider moving to another city!!!! Bravo! 7% would have been a very reasonable rate for airbnb’s. I for one will do everything I can to avoid this ridiculous and outrageous unfair tax. The only problem is that airbnb will have to suffer as their revenues decline. They should probably reduce the user fees in SF so we don’t all migrate off their website.

  56. What’s interesting is that it is only Airbnb who are being singled out here. And by a not very remarkable coincidence, they just happen to be located in SF and so the city has more leverage over them than their competitors.

    Now, you would think that the city would support local businesses over those domiciled elsewhere right? Wrong. The city instead sees them as a captive set of deep pockets to be pillaged and plundered.

    And Airbnb have played nice here because they could have given the city the finger and moved to Brisbane – a tactic that worked out great for Twitter. Or Airbnb could have relocated their servers to the Caymans and given the city an even bigger finger.

    But no, they decide to stay as good corporate citizens and all the Campos clan want to do is rape them. It’s lucky for the city that I don’t run Airbnb because me and my staff would be off to Geneva, Bermuda or some other garden spot. Taxes, shmaxes – virtual knowledge-based entities can physically be wherever they want. We should kiss the taxable ground they walk on.

    But to your main idea, yes, a decent compromise might have been a “half price” TOT rate of 7% in return for agreeing to be fully complaint. But Campos doesn’t do compromise. He would rather collect nothing and stay pure.

  57. Cohen is correct, and for two reasons.

    The first and simpler reason is that the SF Tax Collector already has all the powers and authority he needs to go after people and entities who are delinquent on their taxes. Indeed, that is the only job they have, so they damn well should know how to do their job.

    If it is determined that, say, Wells Fargo owes another million in SF taxes then we don’t need the Supervisors to pass a bill in order to collect those taxes. We just go out and collect them, using various tactics and strategies.

    The second reason is that it is not clear that Airbnb really owes those taxes. Even the city’s tax collector hasn’t been definitive about that, instead saying that such taxes are a joint responsibility of the intermediary and the host to collect the tax. (And “collect” is the operative word there because really it is the guest who pays it, but the city in a rather self-serving way doesn’t want to try and retrospectively collect taxes from guests, many of them overseas, who were not told at the time about this tax).

    The city could instead go after the hosts, and for two reasons. First, they are the only ones in these transactions who are in SF and who ave to be in SF – if Airbnb were based in Switzerland, you can bet your last dollar that SF would not be trying to collect from them.

    And second because it is the hosts who enjoyed the revenues. Airbnb only collected a fractional fee for arranging the transaction. It doesn’t seem reasonable to ask them for a tax they didn’t collect when the hosts are ultimately the taxpayer here AND they are in the city. IOW, the city is being lazy here.

    Moreover, all the foregoing assumes that the tax is due but all we are really basing that on is the opinion of the tax collector and of course he is going to say that. The ability of the city to pretend that an occasional home share is exactly the same as the Hilton Hotel has not yet been supported by any courts that have jurisdiction here.

    The simplest explanation and solution is that Airbnb agreed to start collecting taxes on condition that alleged back taxes are waived. Given that it is not at all clear that Airbnb had to start collecting taxes, and do not do so almost everywhere else, I think the city already has a great deal.

    Time to move on.

  58. Why doesn’t the city lower the tax (transient occupancy (TOT) percentage) for all hotels and airbnb’s now that they have gotten a windfall from all the additional and unexpected airbnb rooms? What is magical about the outrageous 14% tax? Why should airbnb’s that are *not* hotels and don’t offer the same services and have the same community impact be required to pay the same amount as hotels?

    Where is the thanks to Airbnb for all the corporate income tax they have paid over the past several years?

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