San Francisco Taxes Airbnb: Online Booking Service Now Required To Pay City

San Francisco Cracks Down On Airbnb

In a decision issued by Treasurer Jose Cisneros earlier this week, San Francisco will no longer exempt from the city's hotel tax online booking sites that connect tourists with private individuals offering available rooms.

For years, sites like Airbnb have offered San Francisco customers a monetary advantage on top of the always exciting prospect of getting to poke around a stranger's medicine cabinet. Since the early 1960s, all hotels in San Francisco have been forced to pay a 14 to 15.5 percent tax on all rooms booked within the city limits.

Since its inception in 2008, Airbnb has managed to escape paying the tax…until now.

Under this new ruling, booking sites like Airbnb will be responsible for collecting the tax revenues and then distributing them to the city.

"We're not changing the law," treasury spokesperson Greg Kato told the Associated Press. "We're simply explaining existing law."

"[Laws such as San Francisco’s hotel tax] were written long before the Internet or any of these activities were conceived," said an Airbnb spokesperson in a statement. "Innovative new models that allow San Franciscans to generate additional income should be addressed by innovative laws and policies--not stifled by 40-year-old regulations."

"The message that Airbnb was sending was that tourists don't need to pay their fair share," local Democratic Party chair Aaron Peskin told the San Francisco Chronicle, "which means that those of us who live here are getting taxed more for services that they impact."

This policy change comes at a slightly awkward time for a handful of San Francisco's highest-profile politicians who, only days before Cisneros issued his ruling, announced the formation of a working group promoting the city's "sharing economy" specifically targeted at helping companies like ZipCar, Taskrabbit and, yes, Airbnb expand into the San Francisco market.

"The growing 'sharing economy' is leveraging technology and innovation to generate new jobs and income for San Franciscans in every neighborhood and at every income level," said Mayor Ed Lee in a statement announcing the group's formation. "As the birthplace of this new, more sustainable 'sharing economy,' San Francisco must be at the forefront of nurturing its growth, modernizing our laws, and confronting emerging policy issues and concerns."

Lee is a major backer of tech firms like the San Francisco-based Airbnb, which he has regularly held up as emblematic of future of the city's economy. Conversely, tech firms like Airbnb have also been big supporters of the mayor.

The controversy has drawn in Ed Lee, the tech-friendly mayor of San Francisco who has vigorously backed AirBnb and has drawn criticism for his stance. The startup's investors include Ron Conway, the prominent angel investor who steered hundreds of thousands of dollars into Lee's election campaign last November.

In September 2011, AirBnb hired Molly Turner to head its public policy efforts. In San Francisco, the company has employed a top local lobbyist, Alex Tourk, and relied on influential financial backers like Conway to sway city policy.

The conversion of residential apartments into vacation rentals is increasingly common in San Francisco, a city where tourism is far and away the single biggest industry; however, while the practice is highly lucrative, it does come with some significant drawbacks.

First, it runs afoul of a 30-year old law requiring the conversion to be accompanied by the purchase of an expensive permit--something that's both infrequently obtained and rarely enforced. Second, the conversions are so prevalent in some neighborhoods that they're pricing regular tenants in search of long-term housing out of the market entirely.

"It's become a very active speculative industry to be affirmatively turning rental apartments into hotels," Ted Gullicksen, executive director of the San Francisco Tenants Union, told the Bay Citizen. "We call it the 'hotelization' of San Francisco," he said. "Seniors, families and low-income tenants are being pushed out. We have to fight for every affordable unit."

This conflict with Airbnb isn't the first time San Francisco has tangled with online booking services. In 2009, the city filed suit against sites Hotwire and Expedia claiming the hotel booking sites were illegally skirting their payments of the city's hotel tax.

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