California Bill Takes Aim at Home-Sharing Websites

SB 593 enforces data reporting and tax collection requirements on online vacation rental businesses such as Airbnb.

by / May 4, 2015
Legislation may require home-sharing businesses to collect taxes and increase data reporting. Shutterstock

New legislation is taking aim at online vacation rental businesses that aren’t collecting and remitting taxes from residents who rent out rooms in their homes.

SB 593, authored by Sen. Mike McGuire, D-Healdsburg, requires companies such as Airbnb, Couchsurfing, Roomorama and others to adhere to local laws with regard to vacation rentals. In addition to charging occupancy taxes, the bill also mandates data reporting on room rate and number of nights stayed by the renter, adherence to local ordinances preventing or restricting certain kinds of short-term stays, and other requirements.

Existing law gives local governments the authority to levy taxes on room occupancies in hotels, homes and other forms of lodging. But according to McGuire, that has gotten more difficult with the spread of home-sharing startups.

The platforms operate by enabling people to list homes, or rooms within homes, for rent. Travelers can find a room, book a stay and pay, all through the home-sharing application.

In an interview with Government Technology, the senator explained that the proliferation of home-sharing has made it difficult for many municipalities to collect the taxes that are owed them. While McGuire applauded the sharing economy as a model that vacation lodging will likely continue to gravitate toward, he was adamant that the loss of tax revenue cannot be permitted to continue.

“It is nearly impossible to collect the bed tax with the current structure that is in place now,” McGuire said. “And we’ve seen that across the state.”

For example, McGuire cited the city of Malibu’s negotiations with Airbnb. The city subpoenaed records from the company, ultimately leading to a settlement last month that requires Airbnb to directly collect tourist taxes from citizens that are sharing their homes.

According to McGuire, 431 cities and 56 out of 58 counties have tourist tax laws on the books. SB 593 – the Thriving Communities and Sharing Economy Act – will simply enable those local governments to have online vacation rental businesses collect those bed taxes on behalf of homeowners, he said. And if vacation rentals are illegal in an area, those companies would be prevented from making bookings.

“All this bill does is make those companies follow local laws,” McGuire added.

Airbnb is opposed to the measure on the grounds that it shouldn’t be required to enforce legal obligations on people who make their rooms and homes available on their platform, according to a bill analysis from the Senate Committee on Transportation and Housing. The company argues that other alternatives exist, centered on having cities and counties research listings on the platforms and aggregating information to act on.

Consumer Watchdog called SB 593 a “blank search warrant” for law enforcement that invades consumer privacy. The group believes the measure requires home-sharing platforms to turn over “unprecedented amounts” of personally identifiable data and would violate privacy expectations of consumers.

Jamie Court, president of Consumer Watchdog, told Government Technology that his group isn’t opposed to mandates to collect taxes. But he explained that what’s being lost over local fights over gentrification and tax issues is the “data dump” of peoples’ financial information.

“It’s a very slippery slope if corporations can be compelled by legislation to turn over this type of private data to local governments absent judicial due process,” Court said. “It will undermine online transactions.”

McGuire, however, said that same data is already required by local ordinances in the state. He explained that each of those laws requires the address of the home business, the number of nights booked and the price for the night – which is far less information than host platforms such as Airbnb require from online vacation rental businesses now. Not to mention there's even more information shared with the federal government by hosts on tax forms each year.

“There are thousands of law-abiding, tax-paying vacation rental owners in the state of California who are already providing this data to cities and counties now,” McGuire said. “This is nothing new.”

SB 593 is currently located in the Senate Governance and Finance Committee. A hearing is set for Wednesday, May 6.

Brian Heaton

Brian Heaton was a writer for Government Technology magazine from 2011 to mid-2015.