Airbnb Agrees to Collect Taxes From its Hosts in Los Angeles

As it has in cities that include San Francisco; Portland, Oregon, and Newark, New Jersey, Airbnb has signed an agreement with city officials in Los Angeles to collect and remit lodging taxes on behalf of its hosts.

The tax collection, at a rate of 14 percent, is set to begin in August. The agreement also allows the city to audit the tax payments and to go after hosts for previous tax liabilities.

According to estimates from Airbnb, if Los Angeles had struck this type of tax agreement with Airbnb in 2015, then Airbnb would have already remitted $23 million in lodging taxes to the city. Los Angeles is Airbnb’s second largest market in the U.S. according to data from CBRE Hotels, which provides information to the real estate community.

The Los Angeles Times reported that city officials hope the agreement will generate tax revenues of at least $5 million annually, and they do not want the agreement to misinterpreted as legalization of short-term rentals.

In Los Angeles, many of Airbnb’s current listings would be considered illegal because of the city’s zoning laws regarding short-term rentals. In most areas of the city, it is illegal to rent out a home for less than 30 days. Hosts who are renting out their homes on Airbnb and other platforms are required to pay lodging taxes, but the city has had difficulty collecting the taxes, which is another reason why officials said they agreed to this deal with Airbnb.

As we’ve noted before, these city tax agreements are at the core of Airbnb’s strategy for legalization in various jurisdictions around the world.

The move by Los Angeles city officials to agree to a voluntary collection agreement with Airbnb comes at a time when the city is currently considering new legislation to regulate the types of short-term rentals offered by platforms such as Airbnb, HomeAway, and FlipKey.

This new law would legalize short-term rentals for residents for up to 90 days per year, but it requires platforms like Airbnb to provide the city with information about the hosts, their addresses, and the number of days they have rented their homes and for how much. Property landlords also have to register with the city, and rent-controlled or designated affordable housing would be exempt from participating in short-term rentals. Hosts who fail to comply with the law would also be fined, as would websites that display listings that violate the new law. Sites that don’t provide data to the city would likewise be fined.

This legislation awaits approval from the Los Angeles City Council, but given how it is structured, it’s debatable whether it would survive legal review by the courts. Airbnb and other short-term rental platforms can argue that they are not responsible for what is advertised on their sites or what their users do on their sites, thanks to the Communications Decency Act. This is the case Airbnb is currently arguing in its lawsuit against the City of San Francisco, which approved legislation that would fine Airbnb and its peers for advertising listings of unregistered hosts on their sites.

Other cities in Southern California have taken much more restrictive approaches to short-term rentals. Santa Monica has essentially banned short-term rentals, and Anaheim, in Orange County, is set to ban them as well. Those cities believe short-term rentals are detrimental to their local communities while opponents would argue the opposite.

Los Angeles will be the site of Airbnb’s annual convention for its host community, Airbnb Open, in November.