The Rise of the Emerging Market Traveler Sponsored This content is created collaboratively with one of our sponsors.
Despite stalled growth in China, Brazil and Russia, a wave of newly middle-class travelers from the BRICs and beyond will start visiting international destinations in the coming decades — dwarfing the numbers we’ve seen thus far.
These new terms are out there to get Airbnb ready to go legit. But there’s still much work to do, including making hosts feel comfortable as the service goes mainstream.
Last week there was a chain of announcements that Airbnb would begin collecting hotel taxes in New York City and San Francisco, its two largest markets in the U.S. This gets the short-term housing operation on the better side of municipalities worried about lost tax revenue when potential hotel guests turn to Airbnb instead.
There are two remaining challenges ahead for Airbnb and its users:
- Most large cities where it operates ban a large portion of the type of short-term apartment rentals listed on the site.
- In cases where the a city doesn’t ban short-term rentals, hosts’ own leases or condo and coop board rules often restrict this type of exchange.
Airbnb outlines some top-level changes in its announcement, but we’ve taken a closer look and compared the new terms with the old terms for the three main areas of contention.
The old version was short and sweet, just sticking to VAT and GST, and some vague mention of withholding:
“Tax” or “Taxes” mean any sales taxes, value added taxes (VAT), goods and services taxes (GST) and other similar municipal, state and federal indirect or other withholding and personal or corporate income taxes.
The new terms swap out the vague statement with particulars that will allow Airbnb to collect lodging taxes on behalf of the users and distribute them to authorities:
… Transient occupancy taxes, tourist or other visitor taxes, accommodation or lodging taxes, fees (such as convention center fees) that accommodation providers may be required by law to collect and remit to governmental agencies, and other similar municipal, state, federal and national indirect or other withholding and personal or corporate income taxes.
Further down in the terms, where once the wording only dealt with W-9s and 1099s, the terms get more specific about local taxes:
You understand and acknowledge that appropriate governmental agencies, departments or authorities (the “Tax Authority”) where your Accommodation is located may require Taxes to be collected by Hosts from Guests on the amount paid for the right to use and/or occupancy of accommodations, and to be remitted to the respective Tax Authority. The laws in jurisdictions may vary, but these taxes are generally required to be collected and remitted as a percentage of the rent or Accommodation Fees set by Hosts, a set amount per day, or other variations, and are sometimes called “occupancy taxes,” “hotel taxes,” “lodging taxes,” “transient taxes,” “sales and use taxes,” “value added taxes,” “room taxes” or “tourist taxes” (hereafter, “Occupancy Taxes”).
In certain jurisdictions, Airbnb may decide in its sole discretion to facilitate collection and remittance of Occupancy Taxes from Guests on behalf of and in-lieu of Hosts, if such tax jurisdiction asserts Airbnb or Hosts have a tax collection and remittance obligation. In any jurisdiction in which we decide to facilitate collection and remittance of Occupancy Taxes, whether you are a Guest or Host you hereby instruct and authorize Airbnb to collect Occupancy Taxes from Guests on behalf of and in lieu of Hosts at the time Accommodation Fees are collected, and to remit such Occupancy Taxes to the Tax Authority.
Breaking the Law
To Airbnb’s credit, the new terms start off with a big, bold warning about laws that can penalize hosts for listing their place on the service. The previous terms buried a much more vague warning twelve paragraphs and multiple bullet points below (ALL CAPS from document).
IN PARTICULAR, HOSTS SHOULD UNDERSTAND HOW THE LAWS WORK IN THEIR RESPECTIVE CITIES. SOME CITIES HAVE LAWS THAT RESTRICT THEIR ABILITY TO HOST PAYING GUESTS FOR SHORT PERIODS. THESE LAWS ARE OFTEN PART OF A CITY’S ZONING OR ADMINISTRATIVE CODES. IN MANY CITIES, HOSTS MUST REGISTER, GET A PERMIT, OR OBTAIN A LICENSE BEFORE LISTING A PROPERTY OR ACCEPTING GUESTS. CERTAIN TYPES OF SHORT-TERM BOOKINGS MAY BE PROHIBITED ALTOGETHER.
Changing leases and condo board contracts and rules will likely be Airbnb’s biggest challenges, while at the same time they are the most direct and immediate ways users will run into problems.
The old terms combined warnings about these “agreements” with tax cautions:
You represent and warrant that any Listing you post and the booking of, or Guest stay at, an Accommodation in a Listing you post (i) will not breach any agreements you have entered into with any third parties and (ii) will (a) be in compliance with all applicable laws, Tax requirements, and rules and regulations that may apply to any Accommodation included in a Listing you post, including, but not limited to, zoning laws and laws governing rentals of residential and other properties and (b) not conflict with the rights of third parties.
The new terms start changing with point (i) and specifically call out condo rules and lease violations:
You acknowledge and agree that you are responsible for any and all Listings you post. Accordingly, you represent and warrant that any Listing you post and the booking of, or a Guest’s stay at, an Accommodation in a Listing you post (i) will not breach any agreements you have entered into with any third parties, such as homeowners association, condominium, lease or rental agreements, and (ii) will (a) be in compliance with all applicable laws (such as zoning laws and laws governing rentals of residential and other properties), Tax requirements, and rules and regulations that may apply to any Accommodation included in a Listing you post (including having all required permits, licenses and registrations), and (b) not conflict with the rights of third parties.
The terms also remind users they are on their own: “Please note that Airbnb assumes no responsibility for a Host’s compliance with any agreements with or duties to third parties, applicable laws, rules and regulations.”
The terms offer a few other insights into the services operations and where it may be headed. One of the more interesting ones, especially to rivals like HomeAway.
Please note that Airbnb does not currently charge fees for the creation of Listings. However, you as a Host acknowledge and agree that Airbnb reserves the right, in its sole discretion, to charge you for and collect fees from you for the creation of Listings.
Airbnb’s “Host Guarantee,” which exists to make hosts feel better if a guest trashes their home (which does not often happen), promises hosts up to $1 million to cover any accidents. But before Airbnb pays this out, they’re going to hit up the destructive guest’s insurance provider first:
If you are a Guest, you understand and agree that Airbnb reserves the right, in its sole discretion, to make a claim under your homeowner’s, renter’s or other insurance policy related to any damage or loss that you may have caused or been responsible for or to an Accommodation or any personal or other property located at an Accommodation (including without limitation amounts paid by Airbnb under the Airbnb Host Guarantee).
In the updated Host Guarantee, Airbnb adds that hosts who’ve filed a claim under the guarantee also must deduct from the settlement any fees they receive from their own insurance companies, much like a health insurance company will take a big cut of any liability insurance payout in order to cover their costs:
You acknowledge and agree that any amount of Covered Losses payable to you under the Airbnb Host Guarantee will be reduced by the amounts you have already collected for the same Covered Losses from a source other than the Airbnb Host Guarantee, including without limitation: (i) amounts received under an insurance policy, guarantee or indemnity …
Airbnb has also added “identity theft” and “identity fraud” to the list of things the Host Guarantee will not cover.
The last reminder from the terms is that hosts are on their own (again, ALL CAPS from document):
YOU ACKNOWLEDGE AND AGREE THAT, TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE ENTIRE RISK ARISING OUT OF YOUR ACCESS TO AND USE OF THE SITE, APPLICATION AND SERVICES, AND YOUR LISTING OF ANY ACCOMMODATIONS VIA THE SITE, APPLICATION AND SERVICES REMAINS WITH YOU.