At first glance, the company's pitch is an unusual one. After all, who wants to be taxed?
But it also is a clear sign that the online home-sharing service is trying to get out in front of an issue that has pitted the upstart firm against the traditional hotel industry in virtually every city where it does business.
Hotel operators in Indianapolis and across the country complain that Airbnb is playing by a different set of rules, and it's disrupting not only their share of tourism dollars, but also government tax collections.
In Indy, a 10 percent innkeeper's tax helps pay for things such as Lucas Oil Stadium, the Indiana Convention Center and city tourism marketing. And while Airbnb hosts who rent out their homes are required by law to pay these taxes, enforcing compliance among a web of unregulated homeowners has proven difficult nationwide.
For its part, Airbnb insists it's trying to be a good corporate citizen: It has long urged its hosts to follow state and local laws. And it is willing to collect and pay the taxes itself, cutting the host out of the picture entirely. It now has voluntary tax collection agreements with communities in 18 states, including neighboring Illinois and Ohio, but not Indiana.
“We’re doing something that probably no business has ever done before," said Chris Lehane, Airbnb's global head of public policy, in a talk Saturday at the annual meeting of the U.S. Conference of Mayors. "I’m standing up before mayors and saying, ‘Read my lips, we want to pay taxes.' "
If the offer sounds too good to be true, the hotel industry would agree. They say the voluntary agreements fall well short of the level of accountability required of hotels. And they leave unresolved a host of other issues, such as zoning and licensing.
The debate bubbling up in cities across the country is not unlike that of ride-share services Uber and Lyft versus the taxicab industry, or Amazon versus brick-and-mortar retailers. How far should the government go in regulating popular technology-driven services that are upending traditional industries?
So far, Indianapolis leaders have been content to study the debate as it unfolds elsewhere. But as Airbnb's market share continues to grow, the experience elsewhere shows that issue could change in a hurry.
Booming Business, Growing Backlash
With revenues projected to top $900 million in 2015, the San Francisco-based Airbnb in just a few short years has emerged as a major force in the hospitality industry. Founded in 2008, the company now boasts more than 2 million listings in more than 34,000 cities and 191 countries, according to the company's website.Unlike traditional hotel services, the company doesn't own or provide any lodging itself, which arguably shifts the tax burden to its user base. Instead, it serves as a matchmaking service, connecting travelers to hosts, who rent out space in their home, apartment or condo to guests.
But as home-sharing has proliferated, that business model has come under fire from both the hotel industry and neighbors, and government regulators have struggled to keep up with the changing landscape.
Neighbors complain that Airbnb's hosts are degrading their neighborhoods with an influx of unwanted visitors. In some cities, murky zoning laws only add to the frustration. And in places with already crowded housing markets like San Francisco and New York, advocates say rampant home-sharing threatens the availability of affordable rental housing for low-income residents.
In San Francisco, there were 5,500 listings last year, the San Francisco Chronicle reported. In New York City, statistics released by the company show more than 35,000 listings.
Many cities have responded with crackdowns. Just last week, the Chicago City Council passed some of the strictest rules in the nation and imposed a 4 percent surcharge on each transaction. The Chicago Tribune reported that the final version was "dizzylingly complex," with provisions allowing residents in certain areas to petition the council for neighborhood-level bans on home-sharing.
With the growing backlash, the U.S. Conference of Mayors annual meeting in Indianapolis this weekend provided Airbnb a high-profile audience to defend its practices and suggest ways that cities and Airbnb can work together.
It should be noted that Airbnb was the title sponsor of the event, and sponsored its own panel with the mayors of Portland, Ore., and Phoenix on how cities can generate revenue through Airbnb tax collection agreements.
Airbnb's pitch is this: The company has already remitted $42.6 million in tourism-related taxes to cities around the world, and by entering into voluntary tax collection agreements with the company, the 50 largest cities in the U.S. could have collected a total of $200 million last year.
So what's in these voluntary tax agreements for Airbnb?
“Obviously, Airbnb is highly motivated to enter these agreements because then it will smooth the opportunities to enter into better zoning agreements," said Phoenix Mayor Greg Stanton. In other words, Airbnb has a better negotiating position when there aren't questions about whether the service is paying its share of taxes.
'An Uneven Playing Field'
With just over 1,200 listings, Airbnb so far isn't a big enough player in the Indianapolis market to have attracted serious attention from Mayor Joe Hogsett or the City-County Council.But it is something that tourism officials are watching closely — listings are up by around 500 this year.
Look no further than the Indianapolis 500 for an example of how Airbnb fills a need in Indianapolis: With the metro area's 33,000 hotel rooms virtually sold out months ahead of the race this year, visitors were snapping up lodging through Airbnb for hundreds and even thousands of dollars.
"Our job at Visit Indy is to create demand for visitors to come and check into our hotels and generate tax revenue," said Chris Gahl, the senior vice president of Visit Indy, the city's tourism arm.
Gahl said his group hasn't staked out a position on the issue, but it is researching how other cities are handling it.
"We’re conscious that right now it’s an uneven playing field," Gahl said.
Patrick Tamm, president of the Indiana Restaurant & Lodging Association, which represents hotels, is among those pushing for action sooner rather than later. And at the state level, his group has already won at least one skirmish.
This session, the Indiana General Assembly passed Senate Bill 309 clarifying that Airbnb-like services are required to pay the 7 percent state sales tax. In a fiscal analysis, the state Legislative Services Agency wrote that the provision "would likely increase sales tax revenue by a significant, but indeterminable amount."
At the local level, Tamm dismisses Airbnb's voluntary tax collection agreements as unfair.
"There are strings attached to the agreements that should raise red flags for policymakers," Tamm said. While the hotel industry has to keep extensive records and provide data to government regulators, Airbnb has resisted doing so in other cities.
Just this month, a county tax collector in the Florida Keys threatened to file a class-action lawsuit against the firm to force it to disclose information on its hosts, the Miami Herald reported.
"It’s like, ‘here’s my tax, trust me,’ " Tamm said. "Well, we’d like to do that, too. People look at me when I say that like, 'That’s absurd.' And they’re right. It is absurd.”
Airbnb officials say they typically agree to provide the number of home renters and how much money was generated. But they also strive to protect their hosts' privacy, which often means withholding information on hosts and where they're located. That can make it difficult for the government to track the industry and ensure compliance with taxes as well as zoning and licensing laws.
While the panelists spoke highly of their cities' relationship with Airbnb, other city officials in attendance ripped the company, saying they had had a very different experience.
In one exchange, a city official from Madison, Wis., called Airbnb's pitch "a sham."
"We have not had any responses as to tax collections," he said. "We have not had any responses as to inventorying the Airbnbs in our city."
Meanwhile, in Wisconsin and Washington, lawmakers are now looking to pre-empt local zoning laws, which threatens cities' ability to regulate them. Arizona has already done so, overriding regulations Phoenix previously had in place.
Rather than allow Lehane of Airbnb to respond, the moderator quickly moved on. But after another city official levied similar complaints, the mayor of Portland, which generated $1.9 million in Airbnb taxes last year, offered some advice.
"Seeing it from their point of view, it is kind of a pain to have to deal with this many local governments," said Mayor Charlie Hales. "My counsel to you as a fellow mayor is try to get to yes on a reasonable agreement.
"That helped tamp down the interest in pre-emption."
©2016 The Indianapolis Star Distributed by Tribune Content Agency, LLC.
