

S.F. could get $11M a year when Airbnb collects hotel tax - lladnar
http://www.sfgate.com/default/article/S-F-could-get-11-million-a-year-when-Airbnb-5762838.php

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skuhn
Good thing they got all of their growth and massive valuation stuff out of the
way first, before worrying about pesky details like calculating hotel taxes or
knowing about residency laws.

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.

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dmix
This is new technology entering the market. Of course neither the startups nor
the slow moving legal systems are well prepared to operate in sequence. Why be
critical of either?

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.

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tptacek
That doesn't make sense. The technology is new. The laws aren't. Residency
requirements and hotel licensing rules are something any small-town lawyer
billing $150 an hour could educate a startup on.

~~~
dmix
Right but was the small-town lawyer prepared to work with hotels or the result
of thousands of home-owners with an extra bedroom?

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seeingfurther
Landlords and city governments all across the country are getting wise to
illegal sublets which is naturally contracting the supply of apartments from
folks like myself. (I foolishly rented out my S.F. apt, got caught and
politely asked to leave) Between the crack down and the coming tax wave, I
think AirBnb for the single traveler becomes less attractive both on price and
selection. I already see this happening in New York when I travel there. I'd
rather stay in a hotel for the same price and less hassle. Certainly for a
family or group Airbnb makes more sense. But I can't help thinking the AirBnb
growth slows as it becomes more of a niche option.

~~~
geoelectric
...which is a really big deal, in a rent control area like SF or NY where
breaking lease terms is one of the few ways to get forced out of your current
per-month rent.

~~~
seeingfurther
I was lucky in that I had already moved across country and was using AirBnb
only to be able to cover the rent for the duration of the lease.

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krschultz
I imagine AirBnB will end up paying hotel tax in every locale. That will
complicate their software a bit, but that's not overly burdensome. AirBnB
actually wins in that it removes one of the most quantitative anti-AirBnB
arguments. The other anti-AirBnB arguments are a lot more anecdotal (terrible
renter destroyed our apartment building) and speculative (AirBnB increases
rental property prices for everyone).

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chimeracoder
> speculative (AirBnB increases rental property prices for everyone)

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.

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aianus
I don't think it's fair that renting an apartment for a year is so much
cheaper than renting it for one night. AirBnB closes the gap to its natural
equilibrium level instead of the artificially high one created by zoning laws
and hotel taxes.

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qdog
Renting something for a longer term is usually cheaper because there is less
overhead and risk. Renting a single day requires extra overhead in cleaning
and advertising plus the risk of not having it rented. My guess would be
nightly stays would need to be in the neighborhood of 150% of the monthly
price to make it worthwhile, and possibly much higher if there is a low
season.

~~~
aianus
Yes, of course, that's the natural spread that I was talking about. But that
natural spread is not as large as the difference between a 12 month lease and
a night in a hotel. That's what makes running an AirBnB profitable:
undercutting the hotels and capturing some of that spread as income.

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rhgraysonii
Just a point: Could AirBnB not lobby for something like a tax break on hotels
with excessive vacancy, and then utilize the fact that the rooms are always
available but often sparsely rented (and if this is not true, get a ton of
signups that are horrible via blackhatcheatery and make it look that way
anyways)? They could just get a huge tax break that still considers them a
hotel but abuses the 'normal' understanding of the hotel business model that
they are disrupting.

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?

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jayshahtx
Am I the only one who doesn't think $11M is really going to move the needle
for SF OR AirBnB?

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baddox
I would imagine that a 14% price increase to the end user will absolutely move
the needle. That's massive.

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ryanwanger
Corporations get taxed ~15% + 14% hotel tax. Individuals get taxed ~30%
already on their Airbnb income (plus Airbnb charges the guest 6%-12% and the
host 3%).

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).

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eurleif
If Airbnb hosts want to be taxed as a corporation, is anything stopping them
from simply forming a corporation?

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dkasper
Will Airbnb let you sign up as a corporation?

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jedberg
And the best part (for AirBnB) is that it doesn't affect their profitability
at all -- the money comes right out of the pockets of the renters and owners.

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mslate
Basic economics, AirBnB suffers too:
[http://i.investopedia.com/inv/articles/site/micro3.7.gif](http://i.investopedia.com/inv/articles/site/micro3.7.gif)

~~~
nostromo
Yes, but how much depends on how elastic supply is, which is always an
important consideration with real estate.

[http://peakwatch.typepad.com/photos/research_images/fixed_su...](http://peakwatch.typepad.com/photos/research_images/fixed_supply_and_demand.jpg)

~~~
stefan_kendall3
Given the existence of hotels and craigslist, I'd say extremely elastic.

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Shivetya
to be honest there needs to be a threshold that renters have to pass before
they qualify as a hotel for tax purposes. does a straight rental require a
hotel tax payment or other onerous tax? Do they have to obtain a business
license before they are truly liable to pay the tax? I am not clear on the
idea that AirBnB can pay a tax on behalf of the home owner / property owner.
How is this law worded?

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.

