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Airbnb: SLO’s New Tax Collector

By Mark A. Diaz

Airbnb plans to take taxes into its own hands, but it is up to individual government agencies whether or not to get on board.

The City of San Luis Obispo invited Airbnb, an online marketplace and hospitality service for people to lease or rent short-term lodging (30 consecutive days or less) also known as homestay rentals, to assume the tax collection responsibilities from its “hosts” and remit the revenue to the City.

“In 2015, we made it loud and clear that we wanted to work with cities, states, counties…” said Matt Middlebrook, Airbnb’s chief of public policy in California, “to help collect and remit hotel taxes on behalf of our hosts.”

The company reached an agreement in October 2017, to collect and remit taxes from San Luis Obispo County’s unincorporated areas which are regions that do not have their own municipal corporation but instead are governed by the county.  In much the same way, Washington D.C. is a district and not a state and is governed by congress. Middlebrook said that through automated taxation on the Airbnb website, the company collected more than a million dollars in revenue for SLO County in less than a year.

“We’ve had an agreement with the county since last year,” said Middlebrook, “Just since October 2017…we have collected and remitted over a million dollars to the county for lodgings in the unincorporated [areas].”

In the City of San Luis Obispo all lodging business, including homestay properties, are required to collect 13 percent of the rental cost in taxes; a 10 percent TOT from their guests, plus a 2 percent Tourism Business Improvement District (TBID) assessment and a 1 percent Tourism Marketing District (TMD) assessment, according the City’s website. Streamlining the process may attract potential hosts to using Airbnb over other companies to forego dealing with the hassle of collecting and reporting taxes.

“We are stepping into the shoes of the actual host in terms of absorbing the legal liability to collect and remit these taxes,” said Middlebrook, “We are essentially assuming all legal liability to collect and remit, so we have a huge disincentive.”

The legal liability for short-term rental taxation in Pismo Beach, Arroyo Grande, and Grover Beach still fall upon the short-term rental operators with no current plans of changing the policy.

“We’re going to be holding a collection of taxes to the liability of the person who’s renting their home,” said Pismo City Manager Jim Lewis. “We will only be legalizing primary residents, and we’ll be using our online TOT tax collecting software that we currently use, so private individuals will be using that as well. We won’t be having the online companies do it automatically for us, it will be the responsibility of the individual who’s renting their home to keep those records.”

In May 2018, Pismo Beach voted in ordinances that held home short-term rental operators responsible for the actions and negative impacts resulting from its renters such as undue noise. In December 2011, the California Coastal Commission struck down an effort by the beach town to prohibit these types of vacation rentals citing the LCP Land Use Plan (LUP) requirements.

“The prohibition on vacation rentals in the city’s residential zones would significantly restrict the potential for alternate lodging opportunities for coastal visitors,” wrote the Commission in a public statement. “In these areas, it is in conflict with the LCP Land Use Plan (LUP) requirements for promoting access to the city’s beaches and shoreline access areas.”

The week of August 6, 2018, Pismo is set to bring new ordinances for the Commission to review.

“We do have our short-term rental ordinance going to the Coastal Commission next week,” said Lewis. “Assuming its approved, we then will administer our own administrative procedures at the second council meeting in August. They’ll be going into effect in October.”

Lewis stated that Pismo Beach prefers its current method of taxation and argued that if other rental companies follow Airbnb’s route of third-party taxation, it increases the chance of errors being made. Pismo’s system also ensures that all rental sites are treated equally with the burden of taxation being kept on the owner.

The company’s volunteer tax agreement began in Portland in 2014, since then the company has formalized more than 400 tax agreements around the world that have resulted in the remittance of more than $700 million in taxes for our hosts to local jurisdiction. Given the number of cities and jurisdictions that use Airbnb, the company does not actively seek out tax agreements but encourages them to start the process.

“It has been a priority for Airbnb as a company to engage with and work with local jurisdictions on all things related to short-term rental regulations on the law, on other issues,” said Middlebrook.  “This was one more way that we were able to engage with the community and jurisdictions of local cities.”

Middlebrook said that the company collected more than $600 million in revenue for local jurisdictions in the United States and that, “California is the number one most visited state on Airbnb’s platform.” He stated that nearly seven million people visited California just using Airbnb.

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