Resolution seeks to mandate that short-term rental companies cough up millions in back levies
By Tim Redmond
JANUARY 29, 2015 – The San Francisco Democratic Party voted unanimously last night to demand that Airbnb and other short-term rental hosting companies pay their back taxes, after Treasurer Jose Cisneros told the panel he had no problem with the measure.
Cisneros didn’t endorse the measure, but he confirmed to me that “I am always in support of people telling people to pay their taxes.”
The approval came after Sup. Scott Wiener tried to substitute a different resolution, with lots of language praising the legislation by then-Sup David Chiu that legalized short-term rentals.
Wiener, with the support of Assemblymember Chiu’s proxy, argued that a strong resolution calling on Airbnb to pay its back taxes might be used to promote legislation by Sup. David Campos that would condition legalization on the payment.
But Committee Member Bevan Dufty offered his own amended resolution – “If Scott can amend the whole thing then so can I” – that took most of the original language with a few tweaks.
When it was clear that the Dufty version had widespread support, Wiener backed down and went along.
Taxpayer privacy laws prevent Cisneros from saying whether Airbnb has paid what it owes. But if the company was fully square with the city, it’s likely we would know that: Airbnb is free to say it’s paid all it owes.
Among the most interesting moments: Matt Dorsey, who in his day job works as a press aide to City Attorney, noted that when the bill to legalize short-term rental was passed, “we had a moment of leverage.”
At that point, he said, the city could have said: You are doing something illegal, and we are going to give you permission to do it – but first, pay up your back taxes. The supervisors failed to do that – which is why this is still an issue.
Much of this thread has been spent wasting time arguing about whether Airbnb must collect and pay to the city hotel-style occupancy taxes or whether individuals who use the service must pay it directly. That question was put to rest when Ed Lee signed the Airbnb legislation last fall. Taxes are being collected in San Francisco and Portland and are or will be in Amsterdam, San Jose, Chicago, and Washington, D.C., according to an article today in Tech Crunch.
The only remaining question is whether Airbnb owes taxes from rentals it arranged before the legislation was signed. Tim’s quotes from the Cisneros and the language from the regulation (adopted in April 2012) posted by Dale, clearly state that it should be. The questions now are how and when and is it possible. We are owed an explanation from Ed Lee and Jose Cisneros and this should come up at every public forum they attend.
The most interesting comment in Tim’s article came from Matt Dorsey, who in his day job works as a press aide to City Attorney, who noted that when the bill to legalize short-term rental was passed, “we had a moment of leverage.”
Thanks to Mayor Lee, David Chiu, Scott Wiener, and four other supervisors, that moment of leverage is gone. Meanwhile, the rest of us poor saps in San Francisco who do pay our taxes, year-in and year-out, are SOL. It shows you the difference between being a well-connected multi-billion dollar corporation, and being a regular taxpayer, even in allegedly “liberal” San Francisco.
Tim, since you’re here in the comments, I am asking you for a 2nd time to please investigate the salaries of sales people at Macy’s & Bloomingdales. I know people that work there, people are getting paid, literally $100 a week! FULL TIME it is sales vs draw & Macy’s is subtracting people’s commissions. It is horrible, can you talk to people, in say the shoe department & find out what is going on? Macy’s is NOT PAYING PEOPLE even MIN WAGE, and they’re taking ANOTHER HUGE CHUNK for that terrible useless union and another huge chunk for their health insurance!!! Please, think of people who are not making min wage, look at MACY’S!
Is the definition of “virtual” lost on your little troll brain? At any given time in any given neighborhood an unregulated, tax evasive hotel can pop up operate and then disappear only to arise again.
Yes, the only speech worth protecting is economic speech.
So the answer is no, Expedia and Priceline only deal business to business with entities that conform to local law. I am sure that their legal team is quite vigilant in ensuring that they are not exposed to legal liability.
“I think that Priceline and Expedia insulate themselves by only aggregating providers that are legitimate hotel businesses that are regulated and pay tax. You can’t book a home share on them, can you?”
That’s a bit of a stretch. You can’t book a homeshare on Expedia (yet) but you can book tiny family run motels. In any event, if you look at their TOS they disavow any responsibility for remitting the tax, period.
I think that Priceline and Expedia insulate themselves by only aggregating providers that are legitimate hotel businesses that are regulated and pay tax. You can’t book a home share on them, can you?
“Retailers collect sales tax and remit. Hotels — or platforms like Airbnb — have to collect that tax and remit.”
100% false.
First, platforms like Priceline and Expedia make it clear that they are not responsible for remitting TOT taxes. They collect an estimate, pass it along to the hotel who, hopefully, remits it to the city.
Here is how Cisneros says on his web site:
“For the purpose of efficient tax collection and administration, the Office of Treasurer & Tax Collector will allow a qualified website company to enter an agreement with a host to act as the host’s agent for collection of TOT, under which the website company undertakes the obligation to collect and remit the entirety of TOT on each transaction and to report and remit TOT and tax filings to the Office of Treasurer & Tax Collector.”
But he never says anything about the website company having an obligation to remit.
Just to be clear, Sam: I spoke to the treasurer last night. Jose Cisneros, who is in charge of tax collections, told me that — in most cases — the host and the platform are BOTH liable, and that if the host doesn’t pay the platform is equally liable for the bill. A hotel visitor pays the hotel tax on his or her bill — but it’s the responsibility of the hotel to remit to collect that money and remit to the city. There is no tax bill, any more than there’s a sales-tax bill delivered to Macy’s. Retailers collect sales tax and remit. Hotels — or platforms like Airbnb — have to collect that tax and remit. That’s the law and it’s not even debatable. If a furniture dealer, to drum up business, declares (as some do) a “tax holiday” — ie, shop today and pay no sales tax! — it doesn’t mean that sales tax isn’t due. It just means the retailer is going to pay it for you. Airbnb had the responsibility to inform its hosts about the tax, COLLECT IT, and remit.
Guest, can you name more than one conspirator?
Without that, there is no conspiracy.
One can always count on Democrats to want to tax people. And that’s ONE of the reasons that November 2014 happened.
Conspiracy to evade taxes.
Usually a crime is defined by breaking a law. Would you care to cite the specific law in question?
True, Dave, I do my short-term lets off CraigsList or off the grid, and I haven’t heard anything from the city. I guess they are only interested in sharing economy entities that Ron Conway has something to do with. Nothing personal there.
I think Airbnb keeps 9% of the money as a finder’s fee. So they are being asked to give the city ALL of the money they made here PLUS another 5%.
Meanwhile, the hosts, kept 91% of the money, get to keep it all.
Seems fair to me!!!
And do we care if the hosts also use criagslist, or develop offline relationships with the Airbnb referrals?
It is those with quasi-socialist ideas who are the real one percent–the vast majority of Americans are very happy with capitalism and property rights.
Good luck with overthrowing capitalism.
The American Way has a firm emphasis on individual effort and of course on capitalism.One dilemma of capitalism is that it is more profitable for me to pay my employees less.
Guest, money leaves SF for all kinds of reasons. We allow the free movement of capital in this country.
Unles you want to ban tourism, money will always flow out of the city, but much more money flows in, so we are net winners because we are a tourist destination
Shorter “Sam”: WAAAAAAHHHHHH!!!
No, those who are sucking money out of the city without giving anything back are the ones who are sucking money out of the city without giving anything back. Plenty of people I disagree with are not doing that.
You’re contradicting yourself.
Gary, then how do explain that other out-of-state on-line vendors are still not charging the tax?
I switched from Amazon when they started collecting the tax precisely for that reason.
Yes, and anyone who doesn’t agree with you is a troll who is sucking money out of the city while giving nothing back.
Because Airbnb needs no physical presence in the taxing jurisdiction.
In other words, the city is being lazy and choosing to go after Airbnb rather than the hosts, who were the ones that collected the monies.
The fee that airbnb collects from a rental is less than the tax due.
I love how ardently progs want to have people prosecuted for crimes, as longs as their the ‘right’ crimes. The crime of blocking trains and highways? Hell no! Don’t prosecute. Merits bias much?
Sam, Amazon was forced, faced with the option of abandoning the California market or pay taxes. They didn’t ‘volunteer’.
For a time, after the On-Line Tax bill was signed, Amazon actually stopped selling products from many California vendors.
But, California being the 8th largest economy in the world was too big of a market to ditch over ideological idiocy.
Per the US Tax Code, a person is taxed on their world-wide income, regardless of the source. So, ultimately it’s up to the hosts to report the income. There’s no reason why the City (and the FTB and IRS) can’t audit the hosts individually. It’s just a lot easier for them if AirBnB would with-hold and remit the TOT directly.
Then explain this:
“the Expedia Companies do not collect taxes for remittance to applicable taxing authorities…The hotel suppliers are responsible for remitting applicable taxes to the applicable taxing jurisdictions”
http://www.expedia.com/p/info-other/legal.htm
“we are not the vendor collecting and remitting taxes to the applicable taxing authorities. Our hotel suppliers, as vendors, bill all applicable taxes to us and we pay over such amounts directly to the vendors.”
http://www.priceline.com/privacypolicy/terms_en.html
So Expedia and Priceline openly say that they are not responsible for remitting the tax. But AirBNB is I guess.
Can you point me to where in the criminal code it says that it is a crime to share your home?
I am not aware of any SF neighborhoods that are hotel zones. Less than 1% of SF homes are ever ofered for rent on Airbnb.
Dale, I am aware of no required to pay disputed taxes ahead of a settlement.
No, this is the City’s official regulation regarding STRs and hotel taxes. If Airbnb (or another entity) wants to challenge its validity, they pay the tax before going to court. That’s the way the payroll/gross receipts tax was handled. Why should Airbnb be treated differently than other businesses?
Dale, it is important to note that that is just the opinion of the tax collector. Until and unless a court supports that opinion, it remains just that. Tax authorities do often go to court and lose.
I suspect part of why the city has not gone to court is because of the risk that a judge may determine either that the host has to pay, or that a hotel tax should not apply to shared situations.
This way, Airbnb does the city’s work for them, going forward. Everyone wins, and the only people who pay are not SF residents.
There are so few AirBnB hosts, there is no real political risk in holding them accountable for their crimes that turn everyone else’s neigborhoods into virtual hotel zones.
Campos would then have to accuse tenants of being criminals and, being the consummate identity politician, he would never accuse anyone who wasn’t a white male property owner.
Dale, in disputes with the IRS, there is often a settlement deal, where the taxpayer pays less than is due, and the IRS accepts that rather than go to court. Same as in any other civil dispute most cases settle.
Anyway, nobody knows how much is allegedly owed. The city has no way of computing a bill.
Gary, Amazon volunteered to start collecting CA sales tax because they wanted to build warehouses in CA for same-day delivery. Sales tax is only due if an entity has a physical presence in CA.
I switched to other on-line vendors who still do not charge sales tax.
This is how it works for the 1%. From this month’s Harper’s Index:
Portion of the hundred best-paid U.S. CEOs who earn more annually than their companies pay in federal taxes : 1/3
all well and good regarding Leno, but it should be noted he tried to pressure Campos to amend but was rebuffed just saying
Here’s the Treasurer’s determination in full: http://sftreasurer.org/sites/sftreasurer.org/files/migrated/FileCenter/Documents/Business_Zone/Tax_Collector_Regulation_2012_1.pdf
And here’s the relevant language:
(i) A “guest room” within the meaning of the TOT includes a private residence (whether a singlefamily
residence, condominium, apartment, or any other kind of residence) or any portion thereof,
including but not limited to any room or space or portion thereof, without regard to whether such
space is shared with or accessible to others. Occupancy of such guest room is subject to the TOT.
(ii) The full amount that an occupant pays to secure or obtain the right to occupy a guest room is
“rent” subject to the TOT, regardless of whether any portion of that payment is characterized as a
“service fee” or otherwise. The full amount received by a website company, or any other person
acting as merchant of record in connection with an occupancy transaction, is “rent” subject to the
TOT.
(iii) A website company, or any other person acting as merchant of record who receives rent in
connection with an occupancy transaction, is an “operator” who is responsible for collecting the TOT
owed by the occupant and for remitting the TOT to the City. Any person receiving such rent shall
provide a receipt to the occupant. Such receipt shall include a separate line item specifically identifying the TOT.
Think how well that approach would work with the IRS. They send you a bill because you didn’t pay income taxes for a couple of years, and your response is, “I’m willing to pay them in the future if we forget about the ones from the past.”
Brilliant.
Campos is too timid to take such a risk, any risks.
I would like for Campos to hold a meeting in his district, and at that meeting, tell everyone who attends that used AirBnB that they are criminals for not paying their taxes on the transaction, and to demand that they pay what they owe. Until he does that, or something similar, he is just a hack going after what he thinks is an easy target. The taxes owed are a joint liability, after all. Tiresome
Awesome, under this reasoning, since others are paying more taxes, then I don’t have to pay mine either!
Yep Campos making a cheap appeal for more crack for SEIU. The AirBnB executives and hosts should be prosecuted for their crimes.
Of course, if you are not rich and detached, then you must be abject poor and unwashed, there is no middle ground.
“Suck money out”? Funny that tax revenues are at all-time highs and the city finances are healthier then they’ve been for quite a while.
Another dog and pony show from Campos. AirBnB does not owe tax from the rents collected by the hosts. Just more red meat for the rabid base…
Yes, because only the poor, wretched unwashed contribute anything to the city.
Exactly. Remember when Amazon didn’t collect sales taxes for California? Same same.
“Both AirBnB and the hosts are jointly committing a crime by advertising and connecting guests with hosts and profiting off of the deal and not reporting it to the taxation authorities.”
OK….just curious, is there a single word of truth in that statement or is it completely made up?
Because like all latter day prospectors, these trolls are here to suck money out of this city while contributing nothing back.
Both AirBnB and the hosts are jointly committing a crime by advertising and connecting guests with hosts and profiting off of the deal and not reporting it to the taxation authorities.
If they were camping on the sidewalk, you’d be throwing conniption fits.
The equivalent to a hotel here is the Airbnb host. So is DCCC saying that the hosts should pay? The tax collector has said that he thinks that both parties are liable for the payments. So why the focus only on Airbnb?
It seems to me that the hosts are on the hook here as well.
To Jamie, I am 100% certain that no bill has been issued since the city has no way of knowing how many stays are affected. The 25 million figure is pure, wild speculation.
I would assume that Aibnb only offered to start collecting the taxes on condition that they be offered immunity for any prior claims.
Luckily the DCCC has no jurisdiction on this matter anyway.
Why don’t our very own trolls offer to pay it for their AirBnB friends?
That’s not the way hotel taxes (or business taxes) work.Hotels report the the number of nights they’ve rented rooms at what rates, along with the taxes due.
Has a tax bill been presented to AirBnB yet? Maybe they would pay a bill if presented with one. ??
Tip of the hat to State Senator Mark Leno, who sponsored this resolution with Campos and Levitan.