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Room for Clarity on Airbnb and Hotel Taxes

Rental website Airbnb has attracted newcomers to the vacation rental business and not all of them realize the city expects them to pay hefty hotel taxes.

Visitors to San Diego are increasingly bypassing hotels in favor of apartments and homes rented on websites like Airbnb. The hosts renting out rooms or homes, meanwhile, sometimes bypass the pricey hotel taxes the city says they should be paying.

Airbnb, a San Francisco-based company, allows its users to post short-term rentals for everything from a shared room or a couch to an entire home. Rental periods vary from one night to as long as a month, and the site connects visitors and hosts in cities across the globe.

After a series of dust-ups, Airbnb recently announced it’ll begin requiring operators in San Francisco, Portland and New York City to tack local taxes onto visitors’ bills. So far San Diego – a city that considers tourism one of its top revenue generators – isn’t part of those plans.

A lack of specific city regulations has created confusion and frustration among both the local hotel industry and even some Airbnb hosts, though many may be unaware they need to collect taxes in the first place.

The city says they do. City officials say Airbnb users should pay city bed taxes – which would likely add an 11 percent charge to the typical Airbnb bill. But the rules don’t single out Airbnb or similar websites. They simply refer to general residential rentals and hotels.

The city also expects anyone who uses Airbnb to rent out their place to fork over at least $50 annually in business taxes.

The city can’t say what percentage of local Airbnb hosts actually write these checks. It relies on them to register with the city, or on someone to report that they’re not following the rules.

Lawmakers in many cities have responded to Airbnb by clamping down, a move encouraged by hotels competing with the web venture.

This month alone, a handful of San Francisco leaders have proposed both county legislation and a ballot measure to impose strict rules on Airbnb hosts.

But San Diego officials have yet to scrutinize how Airbnb might affect the local tourism industry, or take public steps to ensure Airbnb hosts face the same charges and regulations traditional hotels and vacation homes live with.

Airbnb’s website doesn’t offer much direction in the meantime.

Airbnb’s terms of service advises hosts that they’ll need to collect “applicable taxes.” It says that the operators – not the website – is solely responsible for deciding what those are. The company did not respond to repeated requests.

So the onus is largely on the Airbnb hosts to research and pay taxes accordingly.

That’s not easy.

John P. Anderson, a North Park resident and certified public accountant, advertises his backyard cottage on Airbnb but confessed he’s spent roughly four hours wading through city codes without a clear understanding of whether he needs to collect city bed taxes.

He’s opted against it for now because he’s not certain the rules apply to him. After all, there’s not a hotel on his property. He has, however, upped his insurance policy and paid federal taxes based on the income he’s collected from visitors.

“I’m not going out of my way to pay a bunch of money that I don’t owe,” Anderson said.

Another Airbnb host, Ann Callahan, owns Hillcrest Bed and Breakfast, a historic five-room home near the neighborhood’s bustling core that she promotes on the rental website – and she believes hosts like Anderson should be paying up.

Callahan has long collected hotel taxes, held commercial liability insurance and subjected her business to health inspections. In recent years, she’s also used Airbnb to nab last-minute visitors. She’s enjoyed the help it provides but suspects her decision to charge bed taxes isn’t doing her any favors attracting business.

When visitors inquire about Callahan’s bed and breakfast, she sends them a message to let them know she’ll add an 11.05 percent tax to their bills. Callahan thinks many of the customers who don’t respond or go with another option are deterred by the extra charge.

“I’m sure I’ve lost a lot of business over it,” Callahan said.

Callahan said both Airbnb and the city should do a better job clarifying the tax and regulatory rules.

State and local hotel lobbying forces are on the same page.

The chief executives of both the San Diego County Hotel-Motel Association and the California Lodging and Hotel Association told VOSD they believe cities including San Diego need to crack down on Airbnb hosts.

“If someone wants to compete in the hospitality business, they should be able to meet the same regulations,” said Lynn Mohrfeld, who leads the state group.

But Mohrfeld said the nature of the situation requires local regulation. Statewide laws wouldn’t be effective because cities and counties largely decide how much to tax or regulate rental companies and hotels.

He pointed to Santa Cruz as one California success story.

In 2010, the beachfront city approved a mandated vacation rental inspection program to cope with off-the-books properties like the ones advertised on Airbnb. It’s since posted links to a fee calculator and frequently asked questions on the city website too.

The next year, Santa Cruz County also began requiring registration and hotel tax payments for rental properties, an approach expected to bring in more than $1 million annually to the county.

City Treasurer Gail Granewich said the burden should be on operators – not the city – to follow the rules.

“It’s their duty to figure out and find out what is required,” Granewich said. “That’s all the tax laws. We try to do a great job on our website. There’s always room for improvement.”

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