Evaluating Airbnb Agreements Western States Association of Tax Administrators October 2, 2017 Dan R. Bucks

Caveat The comments concerning Airbnb agreements with tax agencies generally do not apply to settlement agreements arising from enforcement actions.

Goals for Lodging Taxation Equal Treatment—No Favoritism for One Lodging, Company, Type or Channel Over Others. Tax Revenues Properly and Reliably Collected. Support for the Rule of Law—in Taxation, Housing and Community Planning, Public Health and Safety, and Human Rights.

Essence of Airbnb’s Offer Manatee County (FL) Tax Collector Ken Burton Jr. compared arguments that Airbnb should collect and remit the local bed tax on behalf of all its clients in Manatee to an income tax software manufacturer telling the IRS it will pay taxes owed by its customers without revealing their identities. He noted that the IRS would not permit such an arrangement and his office cannot, either. Sarasota Herald-Tribune, August 21, 2017. And, he could have added, with the IRS agreeing to forgive all back taxes that might be owed by the customers whose identities are kept secret.

Airbnb Agreements: Major Problems Favoritism: Tax agencies sell to Airbnb & its operators a tax and regulatory haven in exchange for an uncertain stream of revenue—with that future cost discounted by grossly unfair amnesty provisions. Unaccountable, unreliable and incomplete revenues: No guarantee that Airbnb collects and pays the proper tax. No guarantee that Airbnb will continue collection. No back taxes owed by lodging operators and little or no future tax collection on their non-Airbnb rentals. Undermines equitable enforcement of a host of tax, regulatory, public safety and human rights laws.

Secrecy Is the Source of Problems Lodging operators kept secret from tax agencies—preventing proper tax audits and operator accountability for unpaid taxes. Agencies often agree to suspend exchange of information with other public agencies that enforce regulatory laws that protect the public. Who is doing business in localities is hidden from the public—an exception to the general rule. Agreements kept secret from public despite no confidential information, but substantial policy content.

Reason for Secrecy The shield of secrecy provided by these agreements enables Airbnb to expand its market share by recruiting illegal hotel operations that violate local planning and zoning ordinances. The secrecy hides these operations from regulatory authorities so Airbnb can unfairly increase revenues. Airbnb announced its tax agreement campaign to “reduce its regulatory risk.” The Airbnb business model is now supplemented by international property management firms that enable global investors to operate illegal hotels on auto-pilot through the firms’ services and Airbnb’s marketing and booking.

Collateral Damage Airbnb agreements undermine regular, bonafide voluntary disclosure agreements and tax auditing through preventing access to true books and records. Airbnb limits on exchange of information have already expanded to an Arizona law blocking sharing of Airbnb information with the IRS and MTC. Larger problems from allowing violations a range of laws: Housing affordability—neighbors with fewer neighbors—risk of criminal activity in hidden short-term rentals.

Solutions End current agreements—and undertake normal enforcement. Require online platforms & local operators to register and file returns, with single payment based on “sale for resale” practices. Adopt laws or rules banning any special audit or exchange of information or inequitable amnesty favors. Ensure public registration to do business by lodging operators. Coordinate tax and regulatory laws—require that business registration by lodging operators include tax registration.

At the Very Least Agencies should publicly disclose Airbnb agreements in response to FOIA/Public Records requests unless they were the result of actual enforcement activities—because they contain no confidential information justifying their secrecy. The public has a right to know the policy-making improperly hidden in these agreements.

For more information contact Dan Bucks at: Questions? For more information contact Dan Bucks at: danbucks@publicrevenues.com For a copy of the report, Airbnb Agreements with State and Local Tax Agencies: A Formula for Undermining Tax Fairness, Transparency and the Rule of Law, see https://www.ahla.com/sites/default/files/Airbnb_Tax_Agreement_Report_0.pdf