Does Mayor Lee support Airbnb dodging its $1.8 million tax debt to SF?

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Is Mayor Ed Lee more loyal to the city or his campaign contributors?
Tim Daw

My story in this week's Guardian about how Airbnb appears to be refusing to pay the hotel taxes it owes to the city has gotten a lot of attention. But I'm still getting stonewalled by representatives from the company and Mayor Ed Lee, who apparently refuses to take a public stand against corporate tax evasion, even when it means thousands of San Franciscans could get stuck with an unexpected tax bill.

How much money are we talking about? According to a study that Airbnb commissioned and publicized late last year, its hosts in San Francisco collect $12.7 million from their guests every year. That means that if the company was charging the 14 percent Transient Occupancy Tax – as the Tax Collector's Office last year ruled that it must – it would be paying the city nearly $1.8 million annually.

But that doesn't seem to be happening, although only Airbnb can say for sure, which is why its spokespeople have been dodging my questions for more than a week. As I reported, taxpayer privacy laws prevent city officials from disclosing how much individual businesses pay in local taxes, but we do know Airbnb doesn't add the TOT to the online transactions it facilitates or specifically encourage its San Francisco hosts to collect the taxes (even though the tax codes make the hosts and Airbnb jointly responsible for this growing debt to city coffers). And with the company charging 6-12 percent per transaction, it's a safe bet that it isn't simply paying the taxes itself.

What makes this particular case of corporate tax dodging even more interesting is the fact that Mayor Lee has a close connection to this particular San Francisco-based corporation. Venture capitalist Ron Conway is a top investor in both Airbnb and Mayor Lee's political campaigns, creating a potential conflict-of-interest in Room 200. Last year, Mayor Lee personally lobbied against the interpretation by the Tax Collector's Office, and now he appears to be silently backing Airbnb's resistance to paying its taxes.

Last week, when I was trying to get a comment for Lee spokesperson Francis Tsang on Airbnb's apparent tax dodge, he replied, “It's an incorrect assumption that Airbnb and hosts haven't been paying any transient occupancy tax..” Of course, because of the taxpayer privacy laws, Tsang can't actually support that statement and I responded by laying out the evidence that the city is getting stiffed by Airbnb.

Then, he and Airbnb simply stopped responding to my questions, even though I've made repeated inquiries and asked only whether Mayor Lee was willing to make a public statement calling for a major San Francisco corporation to meet its local tax obligations. And in the interests of fully transparency, I'll close with the email that I sent to spokespersons for Airbnb and the Mayor's Office on Wednesday as my story came out, along with their emails in case you want to push for answers yourself.

kim@airbnb.com, francis.tsang@sfgov.org, christine.falvey@sfgov.org.

Dear Airbnb and mayoral spokespeople,

Since I couldn't get responsive answers from any of you about why Airbnb isn't collecting the Transient Occupancy Tax from its guests, I wanted to forward the link to my story on the topic in our latest issue (http://www.sfbg.com/2013/03/19/airbnb-isnt-sharing) and to let you know that I will continue covering this issue in the Guardian and our sister newspapers until you address it publicly.

Because of privacy laws that limit the Tax Collector's Office from addressing this directly, only Airbnb can say whether they're paying any of the hotel taxes that the city last year conclusively ruled that they owe. As I reported in my story, that tax obligation is shared jointly by Airbnb and its hosts, who don't appear to have been warned of this by the company, making this an issue of consumer protection as well as corporate greed.

Will the Mayor's Office make a public statement opposing tax evasion? Will it stand up for San Franciscans who may be unwittingly stuck with the tax bill by Airbnb? Or will Mayor Lee stick up for a tax-dodging corporation funded by the same billionaire that funds his political campaigns? And how will people feel about San Franciscans and the city treasury paying for his political ambitions?

These are all questions that I plan to air and explore in the Guardian, and I think that our readers and the general public deserve answers to those questions. If there are reasons why Airbnb guests aren't being charged the TOT, some other arrangement that has been made, or some other complex reasons why Airbnb feels it can't comply with last year's ruling by the Tax Collector's Office, I'll be happy to hear it and let you make your case to our readers. But I don't think that continuing to stonewall me is going to be a viable strategy for any of you. I hope to hear from you soon.

Comments

hosts "evading" the tax and focusing only on the broker, AirBnB. He seems to think that if a corporation pays the tax it is soemhow completely different than if the host pays the same tax, when in fact it makes no difference at all.

He's also realized that it is not the one percent who are using AirBnB but other tenants like him, along with lower-income homeowners. Exactly the constituency he usually plays to.

Oops.

Posted by Guest on Mar. 25, 2013 @ 1:22 pm

Yes....AirBNB hosts should be VERY upset that they aren't being FORCED to pay the hotel tax!!!!

I missed that one. AirBNB charges a 12% commission so they aren't going to fork over all their revenue plus another 5% or so to pay the tax, of course the hosts will have to pay their own tax. The only thing that AirBNB could do is take it out of their payments up front and forward it to the tax jurisdiction, which is a huge process (just ask ADP).

The ironic thing is that AirBNB serves the people that Steven claims to be protecting. Ron Conway and Larry Ellison don't rent out people's dens or let people from Idaho stay in their guest cottages. AirBNB helps people with limited reources. But taking a cheap shot at Conway and Ed Lee trumps any help that could go to people that Steven claims to want to help.

Posted by Troll on Mar. 25, 2013 @ 1:11 pm

Steven has gotten his class-warfare panties in a bunched-up wedgie.

Posted by Guest on Mar. 25, 2013 @ 1:25 pm

I've said before and I'll say it again: if paying taxes dooms your business model, then you don't really have an effective business model. If you want to argue that Airbnb will lose business to hotels if they pay the same tax as hotels, then why isn't that unfair competition? As for my points questioning how much business hosts will lose under the tax, consider that most hosts choose fairly arbitrary price points anyway given that their fixed costs aren't usually as rigid as a hotel's. Hosts just try to find that sweet spot that will maximize their profits, and I really don't think it will doom any of them if they make a few bucks less on each stay in order to be good citizens and help the city pay for the services that their guests are using. Again, nobody likes paying taxes, I get that, but that's life in the big city.

Posted by steven on Mar. 25, 2013 @ 5:39 pm

We need to be saying that a lot more often in this town to a lot of people. The suburbanization of San Francisco's psyche crosses political lines and seeks to domesticate a big city into a safe, manageable and ultimately predictable bedroom community.

Posted by marcos on Mar. 25, 2013 @ 5:54 pm
Posted by Guest on Mar. 26, 2013 @ 6:14 am

I want San Francisco to be risky and unpredictable.

Posted by marcos on Mar. 26, 2013 @ 6:27 am

such "values" on a populace who clearly disagree with that is doomed to failure.

You should probably discuss with your therapist why you are so vested in seeking to confer negative values on your neighbors. And why instead you aren't asking them what they would like, rather than trying constantly to tell them what they should want.

Posted by Guest on Mar. 26, 2013 @ 7:08 am

You bore me, so predictable.

Posted by marcos on Mar. 26, 2013 @ 8:30 am
Posted by anon on Mar. 26, 2013 @ 10:14 am

then you wouldn't choose to squat in a place like San Francisco, which is full of gay liberals.

No, if a gay liberal really wanted to experience "risk", they'd move to Tulsa or Cheyenne.

You're full of it.

Posted by anon on Mar. 26, 2013 @ 8:20 am

You bore me, so predictable.

Posted by marcos on Mar. 26, 2013 @ 8:30 am
Posted by Guest on Mar. 26, 2013 @ 10:27 am

it's hardly significant here that you think adding 14% to the cost of something "won't matter".

It won't hit AirBnB's profits so much because, despite your claim, they are not the ones eligible to pay the tax. AirBnB isn't competing with the hotels - the hosts are.

So either the hosts are 14% out of pocket or the guests are. And either way, that means less business, or the business is routed thru another entity that doesn't collect the tax.

The present system is fine. The guest pays the host whatever price they agree to, and it is the host's responsibility to declare that income. AirBnB is neutral to that, and should not be seen as "free tax collection" for the city. If the city wants to collect taxes, they should pay for it.

Posted by Guest on Mar. 26, 2013 @ 6:14 am

We let thousands ride MUNI for free, yet complain about a "revenue problem" when we don't have enought for MUNI services or maintenance. We have people who move here, complain that they can't get into free housing, so we need more government subsidized housing. We have the ACLU fighting Laura's law tooth and nail to keep mentally-ill homeless on the streets - while a handfill of drunks drug-induced incompetents who hog millions in resources for homeless and mental health.
We spend hundreds of thousands to build a fenced-in bike lane on one of the least ridden streets in the city (Cargo Way), and complain that we don't have enough money for more bike lanes.
The City of SF spends $10,000 per year for every man, woman and child in the city. That is more than enough for "important" services.

Posted by Richmondman on Mar. 25, 2013 @ 1:33 pm

capita basis. Throw in obstructive public sector unions, archaic working practices and insanely generous health and pension benefits and the city finances are out of control.

Maybe if we all refuse to pay any taxes, the city will be forced to develop a spine and actually deal with what is really bleeding this city dry.

Hint: It isn't the odd tenant subletting his spare bedroom and being angry and about being deemed a "hotel".

Posted by Guest on Mar. 25, 2013 @ 1:48 pm

I mean, why not go after Craigslist?

Just imagine the number of people selling things on Craigslist without paying sales tax on the proceeds.

Posted by Demented, Yet Terribly, Terribly, Persistent on Mar. 25, 2013 @ 12:37 pm

never suggest going after them. Corporations are completely different, and a legitimate target.

Just like he never suggested that CL should not be running hooker ad's, because of course SFBG runs hooker ad's. Such services are illegal but did Steven take a stand on either? No he did not.

His view of what laws should be enforced is very jaundiced and prejudicial.

Posted by Guest on Mar. 25, 2013 @ 12:43 pm

If I were a Nevada legislator reading this thread, I would be proposing a 14% "lodging tax" be imposed on Burning Man. (As a matter of fact, I'm astonished that they haven't done it already.)

After all, Burners use lots of Nevada services (roads, etc.), and according to Steven, a 14% tax will do hardly anything at all. The State of Nevada would raise, what - a couple of million bucks, that the State could use for all sorts of useful things, just like government spending by the City of San Francisco.

And we know from Steven that it's OK to target one organization - what better target than a tens of thousands of generally wealthy out-of-staters who can afford to pony up several hundred bucks for a ticket.

Why, they'll hardly notice the 14% tax!

Posted by Demented, Yet Terribly, Terribly, Persistent on Mar. 25, 2013 @ 9:25 pm

In Nevada or anywhere else, and you never will be. You're just a demented troll with no life.

Posted by Anonymous Guest on Mar. 25, 2013 @ 9:43 pm

eligible for what I now call "the Steven Jones tax".

Posted by Guest on Mar. 26, 2013 @ 6:09 am

Actually, Pershing County, Nevada is doing that very thing right now, last year proposing to increase fees to cover the impact of burners. http://www.huffingtonpost.com/2012/10/11/burning-man-lawsuit_n_1960076.html

Personally, I think that's a reasonable thing to ask. I don't think it will have much impact at all on people's decision to attend Burning Man and I don't agree with Black Rock City LLC's lawsuit fighting the fees, except perhaps its concern that a conservative judge seems interested in more active regulating behavior and free expression at the event, which I alluded to in this article: http://www.sfbg.com/2012/08/22/talk-about-chaos?page=0,0

But again, the decision that Airbnb should pay the hotel taxes wasn't my decision, it was the decision of the Tax Collector's Office. I'm simply reporting on a corporate scofflaw that is skirting its responsibilities to the city. My history and personal interests should be irrelevant to the discussion about Airbnb.

 

Posted by steven on Mar. 26, 2013 @ 9:53 am

several responsibility" between AirBnB and the host, as you stated earlier, then it does not follow from that that AirBnB have to collect or pay the tax. It merely means that one or other of those two parties has to pay it.

AirBnB clearly thinks that the hosts should pay it, since they are the ones receiving payment for the room. Their only liability arises if the individual host does not pay the tax. In that case, and only in that case, the city could ask AirBnB to pay it.

At least, that's my interpretation of "joint and several".

Posted by anon on Mar. 26, 2013 @ 10:13 am

A very reasonably stated comment, anon, bravo. Yes, this is why I've written that this is a consumer protection issue as much as a corporate accountability or city revenue issue. Many Airbnb hosts won't be aware of this liability if they haven't been followed the issue as directly as Airbnb has, so they could be stuck with a tax liability without realizing it. Airbnb has fancy graphics for each San Francisco neighborhood, but the company does nothing to offer specific information, advice, or a mechanism for charging the TOT to its local hosts (hosts that it was able to whip up into an unsuccessful opposition campaign against the tax interpretation last year, demonstrating they know about this issue and can engage in targetted communications when they want to). In addition, as other commenters have pointed out, hosts would need to get a business license in order to set up the mechanism to pay their taxes, and that's a difficult and cumbersome obligation as well. But it would be simple for Airbnb to add the 14 percent tax onto each transaction and pay it on a quarterly basis, which is why it seems fairly obvious that the company needs to play a role in complying with this local law. After all, Airbnb has become a multi-million-dollar corporation facilitating these transactions, and that's why it seems fairly outrageous to many people that this company executives are treating their home city with such disdain and contempt. And that's also why I'm laying some of the blame on Mayor Ed Lee, who communicates directly with them, shares a key benefactor (Ron Conway) with the, and is unwilling to advocate for the interests of the city he was elected to represent.

Posted by steven on Mar. 26, 2013 @ 2:21 pm

I had to read that over two or three times over before proceeding... somebody's been cribbing.

I'll add that it was reasonably stated *and* perfectly parried. This Airbnb begins to look more and more a scam to "shrink the baby."

Nice Citizen Kane reference in the photo.

Posted by lillipublicans on Mar. 27, 2013 @ 4:25 am

Censored comments by the left are just as bad as censorship by the right. they just don't have the self righteousness the left has. Or had. because let's face it the left in this nation is as willing to lie, cheat and steal as the Cheney/Bush right.

Go fuck yourselves. You're all assholes. Hope your new corporate masters pull the plug on a "newspaper" that has been dying for 10+ years. Glad Craigslist fucked you up!

ASSHOLES WHO WON'T PRINT DISSENT JUST LIKE SFGATE.COM!

Posted by Guest on Mar. 26, 2013 @ 11:06 pm
Posted by lillipublicans on Mar. 27, 2013 @ 4:14 am
Posted by lillipublicans on Mar. 27, 2013 @ 4:15 am

What are you talking about? I haven't deleted any comments to this post, and I think anyone can see from reading the comments that conservative critics of me and the city have had plenty to say.

Posted by steven on Mar. 27, 2013 @ 11:13 am

I am not aware that you have editted the debate here, even though you have been subjected to some withering criticism.

In fact, the lack of censorship here is the one thing that keeps this forum active and vibrant, that the editors resist what I am sure is the great temptation to micromanage the dialog.

Posted by Guest on Mar. 27, 2013 @ 11:28 am

Rather than having "plenty to say," the wingers have *little* to say.

They compensate for that by saying what little they have *over* and *over* and *over* again.

Posted by lillipublicans on Mar. 27, 2013 @ 3:41 pm

I do not believe that Steven is censoring anything. But I believe that you think that he should.

And even though I think you are wrong about that and just about everything else, I still do not think you should be censored here, even tho SFGate clearly does.

Posted by anon on Mar. 27, 2013 @ 3:52 pm

Hi, thanks for sharing.

Posted by card on Apr. 11, 2013 @ 6:48 pm

Airbnb is a party to an illegal transaction. They book rentals for owners and don't verify or care whether the rental is illegal.

They sidestep the payment of lawful taxes that are due by any business, which is what this is with legalise. Short term rentals owe lodging tax. Airbnb assists rental operators in evading those taxes by hiding the identities of the owners from anyone but the renters and defending them against lawful examination of those businesses.

In cities where short term rentals are illegal, this site should be shut down by injunction with a cease and desist order as they are party to and aiding an illegal transaction.

In cities where short term rentals are legal, licensed, and regulated, the site should be required to ask proof of that licensing from rental owners, and keep that proof on file for government agencies to audit. They should also provide those records to taxing authorities on request to aid in the collection of lawful taxes.

Posted by GuestBob on Mar. 18, 2014 @ 11:56 pm

That these rentals deplete the affordable housing stock and turn buildings into floating unregulated hotels.

Posted by GuestBob on Mar. 18, 2014 @ 11:57 pm