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Saturday, October 16, 2021

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UncategorizedSeems like everyone is against the Airbnb bill

Seems like everyone is against the Airbnb bill

Janan New, a landlord representative, spoke against the bill ....
Janan New, a landlord representative, spoke against the bill ….

By Tim Redmond

OCTOBER 3, 2104 –Pretty amazing how many opponents David Chiu’s Airbnb legislation has drawn. At a noon press conference today, the landlords and the tenants, hotel workers and (fairly conservative) neighborhood groups, joined together to make the case that his bill is deeply flawed and shouldn’t pass in its current form.

There were amazing moments. Consider this, quote, verbatim “We can’t allow our valuable rent-controlled housing stock to be decimated by people only looking to make a profit.”

You think that was someone from the Tenants Union? No – that was Janan New, the head of the San Francisco Apartment Association, a leading landlord group.

... and so did Ted Gullicksen of the Tenants Union.
… and so did Ted Gullicksen of the Tenants Union.

Chiu said when he presented his bill to the Land Use Committee a few weeks ago that he had met with all of the stakeholders, had hammered out a compromise that would address the need for regulation without eliminating the short-term rental business. Ted Gullicksen, director of the Tenants Union, was among those involved.

But he was on the podium today, saying that the bill would allow entire apartment buildings to be converted to Airbnb, that hundreds of tenants face eviction under this short-term rental crisis that is (as his often opponent, Janan News says) decimating that rent-controlled housing stock.

In fact, I’m not sure there’s anyone supporting the Chiu bill who isn’t making money from the hotelization of the neighborhoods.

The coalition is pushing for the supervisors to block the bill at this point, slow down the process, and do it right. But at the very least, members want three amendments – a private right of action to sue, a limit to 90 days a year for all short-term rentals (with the hosting platforms reporting the necessary data to the city), and the protection of all subsidized affordable housing stock.

Mike Casey, head of the hotel workers union, says Airbnb should pay its back taxes
Mike Casey, head of the hotel workers union, says Airbnb should pay its back taxes

Mike Casey, head of the hotel workers’ union, had another demand: Airbnb should pay its back taxes.

The city’s tax collector has ruled that the company – NOT the individual hosts, but the corporation that runs the platform – is liable for collecting and paying the city’s hotel tax. We’re talking about at least $27 million that has never been turned over to San Francisco. Now, Airbnb says it will pay in the future – but Chiu would legalize the short-term rental game without ever demanding a dime of the back taxes.

“This Board of Supervisors is actually considering not holding a $10 billion corporation accountable,” Casey said. “If this is the sharing economy, how about sharing the wealth of a big corporation?”

Doug Engmann, former planning commission chair, noted that the bill would rezone the entire city – and that when he was running the commission, even modest neighborhood rezonings took months and months. “This legislation should be voted down,” he said.

So we will see this week: Will the supervisors bow to our tech overlords, or listen to the tenants, the landlords, and a whole lot of homeowners who want this bill substantially changed or defeated?

A final thought: My old friend Laura Fraser, a writer who owns a small house in Mexico, posted a comment that I’m going to repost here, because it’s telling:

To Airbnb my Mexico house, I need to become a resident, get a work permit with permission to rent my house, register with Hacienda, the agency that controls housing, set up an account with them, hire an accountant who reports my rental income every other month, and pay taxes on that income. As a small business, my tax rate is lower than a hotel, but about 13%. Hacienda has people who go through VRBO and Airbnb and sees if they are registered and fines them if they are not, which is incentive for gringos like me to go through those steps and not just rent out my house to other gringos and pay no taxes whatsoever for the city services I use and the impact I make on the hotel and rental markets. I also pay for maternity leave as required for my housekeeper and other employee benefits. In other words, it’s a bit of a hassle but I’m getting a good deal in return, and if Mexico can manage to regulate Airbnb, you’d think San Francisco could, too.

Yep. You’d think.

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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103 COMMENTS

  1. Maybe Sam was remembering the figure in the Chron article at http://www.sfchronicle.com/business/item/airbnb-san-francisco-30110.php saying that about 1/3 of airbnb rentals are just a room as opposed to a whole unit.

    That article also pointed out that only 5% of the whole units being rented on airbnb are full-time short-term rentals. The other 95% are only occasionally rented short-term and most of the time are occupied either by the owner or a long-term tenant, and so do not represent units where anyone was evicted to make way for airbnb use. (It doesn’t specify whether the other 5% are places where someone was evicted or just places where the owner moved out or bought a vacant place and never tried to rent it long-term or whatever else.)

  2. Yes, I have mostly used CraigsList to find short-term tenants and nobody has ever suggested that Craig should pay the alleged tax on it.

    I don’t really understand why only Airbnb gets the attention here when many other entities also assist SF residents to conduct this allegedly illegal and taxable conduct.

    (Actually i do know – It’s the Conway/Lee connection.)

    Another odd thing is how the city can claim both that short-term lets are illegal AND that they are taxable It can only be be or the other or else the city is profiting from illegal acts. It’s like requiring hookers and drug dealers to pay a special city tax.

  3. I read it somewhere. Quite possibly here. The figure struck me as reasonable so I have no reason to doubt it. Do you?

  4. Now you are starting to understand, Ellen. Ultimately all the city can do is go after the physical presence in SF.

    That could be the host but could not be the intermediary is that intermediary were beyond the city’s ability to enforce collection.

    That’s why Airbnb is mostly irrelevant here. I’ve done short-term lets for 15 years and the city has been happy to let me do that, evidently. They are trying to collect from Airbnb because it is easy and not because it is logical.

  5. No, if Airbnb were located in, say, Switzerland then the city could still send them tax demands but the point is that Aibnb could simply ignore them with impunity.

    Yes, the law might say they owe the tax but that’s useless to the city of only a Swiss court could enforce it, And foreign jurisdictions typically do not help foreign tax collectors endeavors to collect from their own nationals and entities.

    Old school businesses requires physical assets here to do business but a server can be anywhere, as we have seen painfully with offshore poker sites.

    You can pass any law you like but without the ability to enforce, you are wasting your time and rely on the other party voluntarily complying

  6. You are agreeing with me – you just don’t realize it.

    If Airbnb had no physical presence within the city’s jurisdiction then the city could not enforce any rules or taxes upon them, in the same way that a business entity in Iran cannot force its rules and taxes upon anyone here.

    In that case either Airbnb decides to voluntarily comply with the city’s requests OR the city would have no choice but to go after the only party to this who are physically in SF i.e. the hosts.

    And the city has been able to go after the hosts for decades now, and yet rarely if ever does.

    So my question remains – why single out Airbnb just because they happen to be located here?

  7. I remember Leona Helmsley the Cruella De Vil of real life saying “only poor people pay taxes” before being hauled to jail. Hey airBS and hosts PAY YOUR FAIR SHARE and everyone stop voting and supporting Weiner and Chui they don’t give a crap about the people only themselves and their cronies

  8. Tim is right.

    And furthermore, what about the years of ‘Vacation Rentals’ on craigslist? AirBnb should pay those taxes also. Better yet, Ron Conway should pay them himself!

  9. Can you provide a reliable citation for “About one third of Airbnb hosts are tenants”?

    I’m genuinely interested to know where that data comes from.

  10. As I pointed above Sam, it would be owner / occupier that would get the bill.

    People would cease to participant and Airbnb no matter where they operated would not be able to conduct business here.

    It’s nothing new and it’s not rocket science to enforce local tax laws. We’ve been doing it for millennia.

  11. Sam sorry to tell you are very poorly informed on this subject.

    The location of servers is irrelevant to the enforcement of local and international laws taxation and otherwise. Especially to do with tax and trade. Remember the WTO riots in 1999? They were all about that. You should google that.

    This fact has been demonstrated again and again with increasing efficiency and brutality. Google Pirate Bay, Silk Road and Freedom hosting. And they were for the most part “digital only” operations.

    If the ‘last mile’ of the transaction has a physical and in some cases a digital component to be delivered or transacted e.g. pharmaceuticals purchased from a Canadian website to a gun bought on the darknet or an apartment rented on a Swiss website to be physically occupied by a person in San Francisco – that is where the “transaction” takes place.

    The apartment that’s been rented is still physically here. It is publicly advertised on the website.

    That transaction can be reproduced by any city or state inspector to verify and collect tax. No need to call the state department. The owner / occupier would be assessed and presented with a tax bill. Estimations of past tax can be calculated by the number of ratings etc. Airbnb is operated in plain sight.

    Unfortunately as we’re seeing with the rest of the “sharing” economy – it is the participants that get the shaft.

    We don’t need to make a deal with anyone.

  12. Sam you’re so far out of your depth here.

    Airbnb is not operating in a virtual economy. Don’t believe every press release you read and lay off the kool-aid.

    As for operating a locally “illegal” business in a virtual economy – even a “virtual” digital-only business and giving any local authority in the world “the finger”? Ask the Pirate Bay sysadmins how that is working out for them in prison or how about the dark prince of the underground “sharing” economy Dread Pirate Roberts of Silkroad?

    Old school tax rules always matter where there is a physical presence.

    In this case whether or not AirBnB has a “nexus” for employees or developers in San Francisco they still require their “partners” to have physical building to rent in said locality.

    That building is subject to the local laws taxwise etc

    That is where their model is flawed and that is where they will fail.

    If we’ve learnt anything from the past 20 odd years of glorious internet e-commerce it’s that if you have a tangible physical product or need or desire a local presence – you will eventually have to pay local taxes and play by local rules.

    Airbnb and their ilk are hardly Silkroad 2 or Evolution and judging by the recent giving of the finger to Italy’s Monkeyparking by SF – It really doesn’t matter where in the world you are if you desire to do business here.

  13. Lines are toed not towed, and the official line comes down from the City Attorney and holds the force of law until the court or the City Attorney says otherwise.

  14. Folks: I’m proud of this discussion, but let’s keep it on the topic and not get personal. I am a big boy but insulting me doesn’t do much for the issue. And if the insults go beyond me, I will be forced to resort to the delete key. We are having a fun, lively debate. No need to call names.

    Now: there is a lot of talk about how Airbnb is a “virtual” corporation that needs no Earthly base and could be anywhere, and there have been comparisons to Expedia. Big difference, though: Expedia simply refers people to commercial hotel, rental car companies and airlines — all of which pay the needed taxes. Expedia doesn’t have to pay taxes on a room booked through its service in SF; the actual commercial hotel that the visitor checks into and pays collects those taxes and remits them. Same with the airlines and car-rental companies.

    I recently booked a rental car in upstate NY with Expedia. I got there and the car-rental company collected the (rather significant) taxes and airport fees when I paid.

    Airbnb “hosts” are not, typically, commercial businesses that are used to collecting taxes on sales. And the company has not, frankly, been very good about telling its hosts that they owe local taxes. In this case, the company is and ought to be responsible for collecting those taxes — or else for making clear to the hosts that they have to collect, how much the tax is, and where to remit.

    As the tax collector noted, joint liability means that, if the hosts don’t pay (and they weren’t told to, or how to, or where to) Airbnb is liable. I think that’s fair. You can’t go back and find all the hosts and go after them. The company, I say, was responsible for either making sure its hosts knew about their liability, or now making good on it.

    I don’t want to “punish” Airbnb. I don’t even want to end all short-term rentals. I just want this new business properly limited and regulated — and I want the company that’s making a lot of money off of this to pay that taxes that are due.

    Now: If Airbnb wants to give the city a list of every host over the past five years, how often they rented, for how much, and the total due,so the city can send them a tax bill, fine. Airbnb says it won’t do that. Fine: Then pay the taxes yourself, folks. Somebody needs to.

  15. About one third of Airbnb hosts are tenants. Are you including those tenants in your rather too convenient and self-serving definition of “the wealthy”?

    Or do you mean just that anyone who owns a home and who could do this is “wealthy”?

    Are you arguing for zero tolerance for tenants who sublet vis Airbnb? The overwhelming majority of those who share their home are not wealthy by any means. Many are doing this just to get by.

  16. Why do you support vigorous law enforcement for everyone but those with more money, for whom no laws need apply?

  17. LOL, marcos, of course a city official will trot out that line. He has to tow the official line.

    But he said nothing about whether or why a court would support that opinion. The fact that the city doesn’t enforce this technicality is more indicative of their real opinion.

  18. http://www.huffingtonpost.com/2012/10/03/airbnb_n_1936523.html

    Planning Director John Rahaim explained to the San Francisco Chronicle that bed-and-breakfast conversion applications are rare. “[These online short-term rentals have] become so common that people don’t even realize it’s not legal,” he said. “We’ll look online and see if they’re advertising somewhere on a regular basis, and then ask them to stop…In almost every case they’ve done that.”

  19. “I’m not aware of any court ruling that says that Airbnb’s activities are illegal. Please provide a citation.”

    I provide a citation and still you bitch.

  20. NYC is in a different state and therefore has a different legal system. So a ruling in NY doesn’t tell us anything about how a local court would rule here.

    So I repeat my assertion that there has so far been no legal confirmation that the city can treat an occasional home share in the exact same way as a 400-room downtown hotel.

  21. “Dave, you just confirmed my point. The city can collect the taxes from Airbnb without going to each individual host.”

    Yes…they could. If their sole objective was to punish AirBNB and give the hosts a free ride.

    But that isn’t their objective…that is YOUR objective. They would have to justify their actions, you don’t.

    How many ‘mistakes’ did you make in this article?

    How many of your ‘mistakes’ just happened to support your argument?

  22. You may be correct that “Wiener does not want to regulate” but I disagree with your statement that “Weiner’s comment and all in a similar vein assume that tech corps like AirBnB are of a category that is fundamentally novel. Horse manure”.

    That over-simplifies an important distinction and one I made earlier. An on-line business like Airbnb doesn’t have to have a physical location anywhere, or at least not anywhere where SF has any jurisdiction.

    So taxing and regulating purely online entities becomes potentially much more complicated, because of their ability to easily relocate themselves wherever they want, e.g. in a Caribbean tax shelter with no legal reciprocity with the US.

    Airbnb is an easy one to pick on because it happens to be physically located within the city. But why disadvantage them against, say, their Swiss rivals? This business is international and Airbnb operates virtually in 200 countries. Clearly their base of operation could be anywhere that suits them.

    As an analogy, look at the way that the Federal government, with far more resources, has totally failed to control the offshore poker sites from selling to Americans.

    PS: I voted for you in June. Who are you endorsing re Chiu/Campos?

  23. Weiner’s comment, “The genie is out of the bottle and can’t be put back in,” is spurious. In fact, EVERY new industry has a period where it operates outside of the framework of regulation for the simple fact that it is new and no one has figured out whether or how to regulate it.

    The first automobiles were driven for years before anyone realized there were a lot of them, they traveled much faster than horse and buggies, they were far larger, they made noise and belched smoke, and when they crashed, it was a bloody mess. In other words, the new industry had “externalities” that no one at first understood.

    Once the consequences and externalities are fully understood, regulation quite naturally begins when the public, through elected representatives, creates rules. That’s how we got the DMV, auto insurance regs and finally air bags, CAFE and smog control standards.

    Weiner’s comment and all in a similar vein assume that tech corps like AirBnB are of a category that is fundamentally novel. Horse manure. The problem is that Weiner doesn’t WANT to regulate, and one can only assume because it’s not in his personal political interest to regulate.

    I don’t find it shocking that Weiner represent the interests of the tech corps and the owners profiting from AirBnB rather than the interests of those who will be hurt by loosely regulated or unregulated bed and breakfasts in every neighborhood. In a democracy, all interests need to be represented, including corporate and ownership interests with a profit motive.

    But puhleeze, let’s call a spade a spade. Weiner isn’t a progressive, he is repping the Money Interests.

    The genie can and should be put part way back into the bottle through good old fashioned political sausage grinding. The only question is how far back into the bottle.

    I hope half or three quarters of the way, so San Francisco preserves what remains of it’s mixed socio-economic base. There are powerful forces stratifying SF. If we don’t collectively push back, SF will soon be a rich, white, techie playground with a few rent control weirdos and minorities hanging on by their fingernails and a huge service class commuting in from Vallejo and Tracy.

  24. Tim, you stated emphatically with capital letters that the City ruled that Airbnb, not the hosts were liable. So I cited the text showing that your statement wasn’t true. The City said that they were equal partners in any liability.

    And your analogy needs a little work…Going after the hotel is equivalent to going after the hosts. Going after Airbnb is equivalent to going after Expedia or Orbitz or Hotels.com. Think about it.

    I don’t think that you realize that you are spreading false information, but your ‘mistakes’ always fall in the same direction. You never make ‘mistakes’ that make SEIU or Campos look bad…all of your ‘mistakes’ tend to make the people that you don’t like look bad.

    Whether or not you do it intentionally I think it is important that people realize how much false information you print.

  25. Well, Sam, you were good (as were many people like you in SF, some of them friends of mine) when this was a modest, quiet, small-time gig. Then Airbnb decided to make it a multibillion dollar business so the founders and investors could get rich. Now, as Scott Wiener says, the genii is out of the bottle. There will be no more “don’t ask, don’t tell.” Either SF will pass a law regulating short-term rentals (and I think we can, on reasonable terms) or the city will start cracking down on people who do it illegally.

    You were cool for years, because it was under the radar and nobody cared. Airbnb and Ron Conway, seeking IPO millions, ruined it for you.

    Sorry, Sam. And I mean that, seriously.

  26. OK, Tim, I can agree with that, with the proviso that ultimately the city can only close down the hosts and not a website operating thousands of miles away.

    Again, I suggest you look at the current dispute between the US government and foreign-based poker websites who sell to US residents in defiance of US law.

    If the Feds can’t stop that, and they cannot, then what chance does the city have?

  27. Yes, if Airbnb stays in SF, the city would likely prevail.

    But why disadvantage local businesses versus their competitors who are beyond the city’s reach?

  28. Yes, the planning code makes short-term lets technically illegal, but that isn’t enforced right now. So those of us who do short-term lets (and I’ve been doing them for 15 years) are perfectly happy without any new law. We are happy to maintain the current “don’t ask; don;t tell” situation.

    If you or Chiu wants a new law then my question is simple – what do I get out of it? I’m OK with the Chiu bill because it is fairly neutral. It’s a real compromise. You just want to stop people like me because you think I will then rent out my units long-term.

    I will not, because of rent control.

  29. Sam, if we enforced the law and banned short-term rentals in SF, the issue would be moot. No Airbnb in SF; no taxes to collect. Again, not suggesting that – -I think that limited, regulated, and taxed short-term rentals can work, with permits and oversight. But Airbnb can do no business in this city at all –wherever it is based — if the city bans it. Not like Amazon; the city can’t stop me from buying a book on the Internet. But the city can absolutely stop me from renting out my home as a vacation hotel. Which means: No Airbnb here.
    Again: We can say — pay us, San Francisco, taxes, or stop doing business in our town. As long as the houses that are being rented out are here, we are in control. If we choose to be.

  30. Actually, city would likely win if it had political will to file. Practices are in violation of existing SF law. If Airbnb prefers to move out of town rather than comply with existing law, so be it. The proposed legislation would be a gift to Airbnb.

  31. For those who care, I admit I misstated what happened — there was a lot of legal fuss, but my cartoonists at the Guardian still had to collect the tax — until the state tax board, on Paul’s appeal, voted down the tax on cartoons. But until the law changed, they still wanted to force the cartoonists (not the clients) to pay the tax.

    http://www.rcfp.org/browse-media-law-resources/news/cartoon-sales-tax-voted-down-equalization-board

    Congrats, Paul, good fight. If the city decided not to collect hotel taxes from Airbnb, that would be one thing. But so far, the city has decided that the company owes the taxes. And hasn’t paid.

  32. But what is those cartoonists were in Bulgaria and SFBG were in Ireland. Who would SF then collect the tax from if not the buyers who were in SF.

    Your tax rules pre-suppose a physical presence in SF. What do you do if the entity that you want to collect tax from is beyond your powers?

    Yes, SF can ban all short-term lets but, even then, they can only ultimately go after the local hosts and not some website in Africa.

    Same reason why the US hasn’t gottten hold of Assange.

  33. Dave, I don ‘t make stuff up. I make mistakes, but I try very hard to get this stuff right. And in fact, your cite is accurate: The city CAN COLLECT ALL THE MONEY, plus interest and penalties, from Airbnb. You don’t go try to find hotel tenants if a big hotel stiffs the city on taxes, tho they are jointly liable; you go after the hotel. Or in this case, the hosting platform. I don’t see why this is even an issue.

  34. And I remember at the Bay Guardian we went back and paid the sales tax for our cartoonists. Huge hassle finding all the records and doing that. Easy to crack down on cartoonists. What about billion-dollar corps?

  35. Oh, and Paul, good to have you reading 48hills. I hope you agree: If the state can go after poor cartoonists for collecting sales tax, the city can certainly ask the same of Airbnb.

  36. Dave, you just confirmed my point. The city can collect the taxes from Airbnb without going to each individual host.

    Sam, the law in San Francisco today is very clear: Short-term rentals (under 30 days) are illegal in most parts of town. That’s why Chiu introduced this bill — to make those rental legal. You can create a B&B if you want, but you have to get a permit and go through a City Planning hearing. There would be no need for the Chiu bill if this were legal now.

  37. Oh, good. Glad the cartoonists won. I just remember my poor friends getting hassled by the state and having to pay taxes. I thought the state Leg eventually changed the law.

  38. Actually, Tim, that cartoonist tax case was MY fight and I fought it. The regulatory dispute ran from 1991 to 1996. You are 100% wrong citing a loss. The cartoonists WON.

  39. No, Tim, that’s not entirely true. You need leverage to enforce laws.

    Suppose Airbnb move to Ireland, gives the finger to the city, and operates in contravention to local law. Realistically what could the city do about that?

    I’d say nothing except go after the only physical presence that would exist in SF ie the hosts.

    It’s like the on-line poker websites that have US customers even though that is illegal under Federal law. Or the out-of-state on-line vendors who sell to local residents without collecting local taxes.

    This is what you don’t get. The sharing economy is also, in many cases, the virtual economy. It doesn’t need to have a physical presence so the city cannot arrest anyone, seize assets, issue liens or anything else.

    Airbnb happens to be in the city for now anyway. But nothing stops them moving to where the city has no leverage. So the city has to make a deal with them. Call it the Twitter tactic if you like. We need them more than they need us.

  40. Airbnb are open to the tax only insofar as their business has physical assets in SF that could be seized if they fail yo pay.

    Why would you want to punish a company that gives jobs to locals by putting them at a disadvantage against foreign competitors? Do you hate people who live and work here?

  41. I’m not aware of any court ruling that says that Airbnb’s activities are illegal. Please provide a citation.

    Anyway the focus should be short-term lets and not on any intermediary, who can clearly locate themselves somewhere beyond local law anyway

  42. Sam, we have the ultimate leverage: We can enforce existing laws that ban short-term rentals. Airbnb would be out of business in SF. Plain and simple, Sure, they could move to Ireland and do business in other cities, but not here. And other cities might get the same idea.

    Not saying we should do that (I’m not against limited, regulated short-term rentals by owners or tenants who apply for a permit in a public process). But Airbnb can’t operate in SF without city permission. Plain and simple.

  43. Airbnb is the fiscal agent doing business in San Francisco by mediating short term stays in San Francisco real estate. If the cash flows through Airbnb and they take their cut, then they are subject to tax.

  44. Airbnb knows that they are winners who take all when they get their illegal business model made legal retroactively.

  45. FWIW, Tim Redmond fabricated this key statement:

    “The city’s tax collector has ruled that the company – NOT the individual hosts, but the corporation that runs the platform – is liable for collecting and paying the city’s hotel tax. ”

    Here is what the City Treasurer really said: :

    “Both the website company and the host are considered operators. As operators, they are jointly responsible for collecting TOT from the guest and making sure that the Office of Treasurer & Tax Collector receives the TOT paid by the guest. Until that liability is fully satisfied, the Office of Treasurer & Tax Collector may collect the TOT liability, plus interest and penalties, from either operator – the website company or the host.”

    Source: http://sftreasurer.org/tot_host_website_merchant_faq#2

    Look, Progressive, Moderate, whatever. Read Tim Redmond all you like but it is important to remember that he makes up a lot of stuff as he goes along. He gets on a roll and wants to say something to support his side so he just says it.

    Sticking to the truth is just not an issue for Tim Redmond; this is a clear cut example.

  46. Today’s “rally” was 12 old cranky white people. 13 if you count the author of this article. #papertiger

  47. Tim, you’ve just made my point for me. If Airbnb moved to (say) Ireland and continued to place visitors with SF hosts without collecting any taxes then, yes, SF could try and enforce their rules and taxes. Just not on Airbnb because they would be physically beyond our jurisdiction and would have no assets here that could be seized.

    Instead they would have to go after the hosts because they are here.

    QED.

  48. Tim, you missed my point. Yes, hotels collect the tax but those hotels are physically present here. If they don’t comply with local tax rules the city could place liens on their physical property.

    What can the city do if a Swiss website placing visitors with SF hosts refused to collect or hand over the taxes? Nothing, unless you think the State Department cares.

    That makes all the difference in the world. The on-line sharing economy does not exist physically, so companies like Airbnb can locate themselves wherever they wish. All the city will do here is disadvantage Airbnb versus competitors elsewhere, thereby encouraging them to relocate.

    And that is why we have to make a deal with Airbnb, as much as you hate it. Because we don’t have much leverage.

  49. Airbnb could move to Ireland. San Francisco could mandate that it collect and pay the tax — or shut down all its short-term rentals. The actual housing units that are being rented are, by definition, in San Francisco, and the city has the right to set and enforce zoning laws.

  50. Oh, and if Airbnb “left the city” it wouldn’t matter. Many of the hotels in town are owned by out of town or international corporations. They still have to pay the city’s hotel tax.

  51. Tim, one important difference there is that those cartoonists were physically in SF. Imagine instead that they were foreign cartoonists selling by mail order to SF. How could SF have forced them to pay the tax?

    The city can ultimately only lean on those who are physically here. That is why out-of-State vendors don’t collect sales tax, let alone foreign vendors. Amazon only agreed because they wanted to build warehouses in Ca for same-day delivery. Their competitors are still not charging sales tax.

    And Airbnb needs no physical presence at all, let alone here. It’s a website and could run from anywhere on the planet. That is where the old-school tax rules you are citing fall down. They don’t work in a virtual economy because the website and servers can be far, far away.

    Which just leaves the hosts. Maybe Airbnb will pay up because it wants to stay in SF. but what about rivals in Europe or Asia? How are you going to collect from them? They will just give the city the finger.

  52. Oh, and the fact that the poor cartoonists and illustrators didn’t know that they should have collected sales taxes made no difference. If it’s taxable — and hotel rooms are taxable — the person who is supposed to collect those taxes is liable. Period.

    There were legal fights over this. The cartoonists lost.

  53. Actually, Sup Wiener is telling the truth: The city could go after Airbnb any time. There might be a court fight; I think the city would win, easily. I don’t know why that hasn’t happened.

    I think Sam is wrong here. Hotel “tenants” and hotels are jointly responsible for paying the city’s transient occupancy tax, but the hotels are 100 percent responsible for collecting it. From the tenants. If they don’t collect it from their customers, that doesn’t get them off the hook — they still owe that money.

    I have friends who are freelance cartoonists and artists. In the 1990s, the state decided that cartoons are a “product” that you have to collect sales tax on (unlike written words, which can be sold to a magazine sales-tax free). Suddenly every cartoonist in the state was PERSONALLY liable for paying the sales tax that he or she DIDN’T collect from clients.

    No matter that the client should have paid it; the person responsible for collecting the tax is on the hook. If poor freelancer cartoonists and illustrators can deal with that, so can a $10 billion corporation.

    If I own a store and decide (as some retailers do on occasion) to offer a “sales tax holiday” and let you buy stuff without paying tax as a promotion, that doesn’t mean the tax isn’t due; the retailer has to pay it.

    Airbnb didn’t collect that tax from its clients, who didn’t collect it from their tenants. Doesn’t matter — Airbnb, the city has ruled, still has to pay that tax.

    The legislation could say: Pay your back taxes and we’ll legalize going forward. Or Chiu could have made that part of the deal. It doesn’t and he didn’t.

    I suspect that the mayor has leaned on city officials NOT to seek to collect the back taxes. I don’t know that. I do know that some of my friends who were freelance artists lost much of their (modest) savings when they were told they had to pay back sales taxes. Airbnb should be treated no differently.

  54. I doubt it, given that it requires additional regulation, taxes and oversight.

    As an Airbnb host I can say with absolute certainty that I would prefer the existing “don’t ask; don’t tell” system of minimal enforcement and interference. But airbnb are acknowledging both the validity of the city regulating this and the tax issue – both of which personally I would rather they fight.

    But I am realistic that some closure is needed here and Chiu has deftly balanced the conflicting interests here – something that Campos would have gotten nowhere with.

  55. Lisa, a few obvious possibilities present themselves:

    1) It was a condition of the deal that Airbnb made to start collecting taxes this month that any past taxes are waived

    2) The city doesn’t have any confidence that they would prevail in court if Airbnb simply says no.

    3) Airbnb may move out of the city, state or even the nation if they are punished relative to foreign competitors by being singled out for special tax treatment

    4) The city prefers to go after the individual hosts in much the same was as happens with sales tax on out-of-state purchases

  56. Tim, I just received a brief reply from Supervisor Weiner re: airbnb and the collection of hotel taxes stating
    “the tax collector could pursue back taxes tomorrow. No additional legislation is required.”
    Any idea what’s holding up the collection – or is it simple delinquency?

  57. Tim, it is precisely because nobody likes Chiu’s bill that gives it credibility. Because any bill that has massive support from one side and massive opposition from the other could be clearly seen as biased and partisan.

    Compromise is messy but the result is that nobody is totally happy, while nobody is totally unhappy either. That’s the sign of a compromise.

    One factual correction to your piece. It is not true that the city claims that only Airbnb is liable for the hotel tax. The city has said that the intermediary and the host are jointly responsible. It might be convenient for the city to go after the deep pockets of a corporation that conveniently lies within its jurisdiction. But what would happen if Airbnb were Swiss? The city would go after the only people they could – the hosts, because they are in SF.

    (That assumes that a court eventually ratifies the city’s ability to treat home-sharing as a hotel – something that is far from certain).

    That’s why when you buy stuff on the internet from a vendor that has no presence in CA, no sales tax gets paid. Because CA has no ability to enforce collection on out-of-jurisdiction entities.

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