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What Airbnb's recent move in Hawaii means for its issues in other US states

Sarah Paynter
Reporter

Airbnb agreed earlier this week to disclose host information that would help Hawaii track down unpaid hospitality taxes, after receiving a subpoena from the state.

The agreement is a reversal for the company, which has spent years fighting subpoenas for host information from states and local governments seeking to collect unpaid taxes in locations like Malibu, Napa Valley, and Miami. But experts expect Airbnb to make more agreements of its kind soon, especially as the company plans to go public next year.

“Five years ago, none of this was occurring, but…these types of arrangements [information sharing] will be increasingly common… I’m not a fortune teller, but this [data sharing] is clearly the direction Airbnb is going,” said Rob Stephens, co-founder and general manager of Avalara MyLodgeTax, a tax compliance software used by Airbnb hosts, HomeAway, VRBO and other vacation rental platforms.

Airbnb CEO Brian Chesky appears on stage during the 'The Game Plan: Strategies for Entrepreneurs' Airbnb Open 2016 on November 19, 2016 in Los Angeles, California. (Photo by Kurt Krieger/Corbis via Getty Images) EDITORS NOTE: Image has been digitally retouched

“We are pleased to have reached a compromise with the Hawaii Department of Taxation that provides adequate data to help them enforce against individuals who they suspect may have skirted tax laws, while including safeguards to protect hosts' privacy,” said an Airbnb spokesperson.

Airbnb has traditionally facilitated tax payment itself in a “voluntary collection agreement,” in lieu of disclosing host information. The company began that practice in Portland, Ore. and San Francisco in 2014, then replicated it in over 350 local American governments. But the vacation rental company began giving some listing data to cities like San Francisco, Chicago, Los Angeles, New Orleans via different arrangements by 2017. 

The Hawaii agreement is not unprecedented. The state’s legal action is reminiscent of what happened earlier this year in New York CityBoston, and Portland, Ore. The latest win for Hawaii just gives other states like Florida, where tensions have been high for years, more reason to form new agreements with Airbnb. 

Data sharing may not be enough

But because short-term rental platforms are also unregulated, targeting Airbnb with subpoenas is not a long-term solution, said Stephens.

“This could be one option, but it’s definitely not the only option,” said Russell Schneidewind, lead tax research analyst at H&R Block.

Some local governments, like in Las Vegas, Denver, and Hollywood, have turned to third party compliance companies, like Host Compliance, which identify non-compliant hosts by analyzing the public-facing listings, for help.

"Short-term rental enforcement continues to be difficult... It's easy to obscure your actual address on Airbnb, which makes tracking hosts to specific addresses challenging," said Scott Shatford, CEO of data provider, AirDNA.

Airbnb's decision in Hawaii comes as it continues to face headwinds for being an unregulated business. On Tuesday, the company lost a referendum vote in Jersey City, which is seeking a cap of 60 days on rentals when a homeowner does not live on site and requiring Airbnb hosts to have a business permit, homeowner’s insurance, and undergo property inspections.

The company faces similar short-term rental regulatory requirements in a number of major U.S. cities. “Cities from Buffalo to San Francisco and Boston to Seattle have managed to pass comprehensive short-term rental regulations without punishing tenants or creating red tape and onerous registration systems,” said Airbnb.

“Short-term renting has become so popular and ubiquitous that taxing and regulations have become a big issue,” said Stephens. “As any industry matures, there will be debate about how to regulate that industry.” 

Sarah Paynter is a reporter at Yahoo Finance. Follow her on Twitter @sarahapaynter

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