Airbnb: Let us pay hotel taxes in New York

The service for peer-to-peer home rentals sends a letter to all members of the New York State Legislature asking for the law to be changed to allow it to collect taxes on behalf of its hosts and guests.

Dara Kerr Former senior reporter
Dara Kerr was a senior reporter for CNET covering the on-demand economy and tech culture. She grew up in Colorado, went to school in New York City and can never remember how to pronounce gif.
Dara Kerr
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Airbnb launched a major marketing campaign in New York City, where it posted positive-messaging posters in city subways. Now it hopes to win over the state legislature. CNET

One common complaint lawmakers have against Airbnb is that the company doesn't always collect taxes on the short-term rentals it promotes. Airbnb says it would be happy to do that -- but it's not always legal.

Airbnb sent a letter Wednesday to all 213 members of the New York State Legislature, saying it wants to collect taxes on behalf of Airbnb hosts and guests but that the law doesn't let it. The home-sharing service, which lets people sublet their rooms or entire homes when they're not around, asked the government officials to amend state laws to let it collect taxes just like a hotel would.

"We were hopeful that New York State would address this matter in this year's budget," Airbnb's head of global public policy, David Hantman, wrote in the letter. "Unfortunately, one of the casualties of this year's budget negotiations was a provision governing taxes in online marketplace transactions that could have generated millions of dollars of vital revenue for New Yorkers."

Analysts say if Airbnb can succeed in New York, it could be a signal of how it'll fare elsewhere.

"If Airbnb can achieve legitimization from the legal authorities in a major market like New York, this could serve as a bellwether for many other markets where Airbnb faces similar legal challenges," said PhoCusWright Senior Analyst Douglas Quinby. "Legitimization also means Airbnb and its hosts are legal, authorized, and contributing to the local economy and paying taxes."

For Airbnb to succeed, however, it needs to come to a consensus with lawmakers. Sharing-economy services, such as ride-hailing companies Uber and Lyft, have a long history of tussling with government regulators, sometimes leading to high-profile shut downs and slowed expansion. Airbnb too has struggled with some regulators, because there are strict and clear laws written about short-term rentals. Under many city and state laws, such rentals are illegal.

Airbnb has tried to legitimize its service over the years. In some places, like San Francisco and Portland, the transition has been fairly smooth with the cities enacting laws that allow Airbnb to operate legally. But in New York, Airbnb has battled with government officials for years.

New York Attorney General Eric Schneiderman has gone head-to-head with Airbnb over whether the service's hosts are regular people periodically renting out their rooms or alleged "illegal hotel operators" profiting off short-term rentals. While Airbnb removed thousands of New York listings from its service last year, Schneiderman has said it's not enough.

The attorney general's office released a 41-page report in October that detailed its take on the impact of short-term rentals on New York City. The report's gist was that 72 percent of Airbnb rentals investigated by the office "appeared to violate" state and local laws. Schneiderman declined to comment on Airbnb's letter to the state legislature on Wednesday.

Since Airbnb was founded in 2008, it's grown to become one of the top startups in Silicon Valley. Originally conceived as a service that catered to couch surfers, the service has expanded into a massive online marketplace that has hosts in nearly 200 countries. Airbnb gets between 9 percent and 15 percent of the cost of each rental, and it's impressed investors with its potential: Airbnb is one of the top 10 highest-valued venture-backed companies in the world, with a valuation of $10 billion.

New York isn't the first place Airbnb has attempted to work with the government to collect hotel taxes on short-term rentals. The company has already begun collecting taxes in San Francisco; Portland; San Jose, Calif.; Chicago; Washington, DC; and a few other cities. In his letter on Wednesday, Hantman said Airbnb wants to continue to include more cities.

Given Airbnb's tumultuous history with New York, this move to collect taxes in the state could help safeguard its business, some analysts say.

"I view this as a move by Airbnb to protect its business against further state or municipal restrictions on its ability to do business in New York State," said Henry Harteveldt, travel industry analyst at Atmosphere Research Group. "By taking on this responsibility, this will ensure greater compliance and make Airbnb more appealing both to hosts and to travelers."