S.F. could get $11M a year when Airbnb collects hotel tax
sfgate.com
sfgate.com
I guess the lesson for startups is to break the law until you get big enough until the hit from abiding by the law becomes inconsequential, and make sure to salt the earth behind you so that your competitors can't follow your path to success.
I don't expect existing laws to be instantly relevant to new industry. The typical approach of trying to hammer old regulation down a new hole is dangerous and non-productive to society.
There wouldn't be AirBnBs if we constantly crippled every new business with old regulation before we fully understood its worth and risks.
I feel pretty comfortable being critical of the startup that's breaking the law, in this case. I mean, shouldn't there be a pretty strong presumption in favor of working within the law, even if it is "slow-moving" (heavens forfend! and perhaps it's good to have things like that move somewhat slowly)? A presumption that "but I want to make money now" doesn't quite overpower?
Airbnb always owed hotel tax, and now they are getting around to collecting it. They played the "oh, our users will pay taxes on their own" card, which obviously did not actually happen if this change is expected to increase SF revenue by $11mm a year.
Airbnb was also always subject to the residency laws of the places it operated in, but apparently didn't know that if you let someone book a place for 30 days in California they establish residency and cannot easily be gotten rid of. Despite that being sort of their entire business -- to be the knowledgable middleman that facilitates a housing rental between two parties that don't do this for a living.
Just to be clear: we're talking about a 6 year old company, and new technology that entered the market 6 years ago.
At this point, it's worth asking: in your opinion, how long is a company permitted to break the law after introducing new technology?
At that time it was unclear whether or not the homeowners should have tax liability or AirBnB. And it's a global service, the tax law is different everywhere.
And it takes 6 years to figure that out? Do you seriously believe their lawyers that incapable?
Rational choice theory.
It has now been 2.5 years since that hearing.
And that isn't the only case.. in 2010 there was a NY case, where someone was sued and had to pay $100k+.
Any claim that AirBnb is unaware of their responsibilities under the law is no longer a fair or truthful statement of the situation.
Best case, they KNEW that they've been operating illegally for 2.5 years.
So back to my original question: in your opinion, how long is AirBnb immune from laws for graciously introducing new technology?
So yes In 2012, two years ago, did the state start caring about the business. Not the 4 years prior during growth, as the OP comment tried to paint the picture. They were a well established by 2012.
Civil lawsuits in 2010 have nothing to do with tax obligations. There is significant risk of running a business without proper insurance. These are lessons and failures new businesses learn. Whether you're a homeowner or an SV startup.
What happens if AirBnB becomes decentralized? The distribution of hotels rooms to homeowners is the new reality. It is now convenient that a big company like AirBnB is here to take the hit but the legal system is in no better shape to tax or better enforce property rights or deal with externalities, when hotels are no longer simply hotels. Which is why it's important to reevaluate laws instead of trying to hammer existing ones onto new markets and pretending its fixed.
It's not a false claim. Look, in July 2011, they closed a funding round that valued them at $1B. Today, it's $10B. You're saying 90% of their value is irrelevant to this debate.
It's not irrelevant, and neither is what they've been doing for the past 2.5 years.
It's is absolutely true that they've gotten fat off of purposely violating the law.
http://www.forbes.com/sites/nicoleperlroth/2011/07/24/its-of...
Even in SF - at this moment - it still hasn't been revealed whether or not they have any obligation to pay backtaxes.... as would be the case if they did indeed blatantly break the law.
Even the state hasn't fully confirmed the position on their past activity, yet you and the downvoting-because-I-disagree brigade knows better?
I miss the old HN :(
btw, your Forbes article only confirms my point that the lawmakers only cared about them after they got wealthy. They are slow moving and reactionary, period.
Your average tax accountant can talk you through all of this stuff without issue. The part that AirBnB differed on was aiming for big cities rather than mountains and beaches, and seeking out empty 2nd bedrooms rather than dedicated vacation rentals.
Far from speculative - it's a rather straightforward result from the basic economic principles at play. And even if you hesitate to draw conclusions based on reasoning from first principles alone (which you should), there have been a few studies which have measured this effect empirically.
Keep in mind that the economic impact of hotels (both illegal and legal) on nearby rent has been well studied[0], so unless there is a reason to believe that Airbnb specifically is unique, the default assumption should be that they will have this effect too.
It's not a smoking gun, no, but it's far from speculative if both inductive and deductive reasoning support that conclusion.
[0] Especially zoning, which is a distinct but very related issue.
Personally, no one in my building is subletting, but I did an airbnb search and was surprised by the number of apartments available in my area
If the economy crashes and people stop vacationing, you won't be filling many nights in a hotel.
Not saying anyone should ever do it. Moreso just food for thought. Do they pull an Uber and look at the law, then flagrantly laugh, or play a cold calculated game as this gets bigger and their valuation climbs?
I could draw the supply and demand curve, but it's pretty straightforward.
If they're going to charge 14% hotel tax to people renting out rooms on Airbnb, wouldn't it be more fair to tax that income at the corporate rate instead of the individual rate?
(Yes, I understand the taxes go to different places in each scenario. But from the "take home" perspective of the person/entity doing all the work here, hosts on Airbnb are already having their transaction taxed significantly more than any hotel chain).
Greatly simplifying things:
(Big) corporations in the US get taxed 15%, and then when they pay dividends to shareholders, that gets taxed again as income for the individual.
In fact many small businesses are incorporated in such a way that they skip the 15% tax rate and pay taxes on all of their income at the individual owner's tax rate.
http://peakwatch.typepad.com/photos/research_images/fixed_su...
Can those paying hotel taxes charge off wear and tear, capital expenses as a hotel could? It seems as this only benefits the taxing authority and not much else.