AirbnbAgreementswithStateandLocalTaxAgencies
AFormulaforUnderminingTaxFairness,TransparencyandtheRuleofLaw
DanR.Bucks
March2017
NoteontheAuthorandThisReport
DanBuckshasservedasDirectoroftheMontanaDepartmentofRevenue(2005-2013)andas
ExecutiveDirectoroftheMultistateTaxCommission(1988-2004).Priortothatheheldexecutive
positionsinbothMontanaandSouthDakotastategovernmentsbackto1971.Hecurrentlyserves
asarevenuepolicyandadministrationconsultantandisacontributortoStateTaxNotes.
ThisreportrepresentshisexpertandindependentevaluationoftheAirbnbtaxagreementswith
stateandlocalagencies.Theanalysis,judgmentsandconclusionsofthisresearchdocumentare
entirelytheworkoftheauthor.
Mr.BuckshaspreparedthisreportwithsupportfromtheAmericanHotelandLodgingAssociation.
TableofContents
SummaryofReport..............................................................................................................................1
SectionA.AirbnbandNeighborhoods:AnIntroductiontotheReport..................................................6
SectionB.AirbnbAgreements:ComparisonwithVoluntaryDisclosureAgreements.............................8
1. WHATARETHEAIRBNBDOCUMENTS?......................................................................................................8
2. INTRODUCTIONTODESCRIPTIONANDANALYSISOFAGREEMENTS..................................................................9
3. VOLUNTARYDISCLOSUREAGREEMENTS...................................................................................................11
4. AIRBNBAGREEMENTS...........................................................................................................................13
a. IntroductiontoAgreementsandTheirProvisions....................................................................13
b. PerplexingStructureandScopeofAgreements.......................................................................17
c. TheFactsNotEstablished—AFailureofBasicAdministrativePractice...................................19
d. AccountabilityLost:AirbnbGainsControlofProcess—OperatorResponsibilityDisappears...21
e. LessonsfromtheVW“Dieselgate”Scandal..............................................................................24
f. PreferentialAmnestyforAirbnbandLodgingOperators.........................................................26
g. MultipleLayersofSecrecy........................................................................................................27
h. UnjustifiedConfidentialityofAirbnbAgreements....................................................................29
i. SummaryofComparisonsofAgreements................................................................................30
5. WHYALLTHESECRECYINTHEAIRBNBAGREEMENTS?...............................................................................31
SectionC.ThePublicImpactoftheAirbnbAgreements......................................................................34
1. TAXPOLICY:FAIRNESSANDALEVELPLAYINGFIELD...................................................................................34
a. UnequalTreatmentofCompliantTaxpayersComparedtoAirbnbandItsOperators.............34
b. UnfairCompetitionforTraditionalLodgingFacilities...............................................................35
c. UnfairCompetitionforCommunityResidents..........................................................................35
2. DEMOCRATICGOVERNANCE:INTEGRITY,PUBLICTRANSPARENCY,ANDIMPROPERFAVORITISM........................35
a. Integrity....................................................................................................................................35
b. TransparencyandPublicParticipation.....................................................................................36
c. DotheAgreementsViolateAgencyAuthoritythroughFavoritism?.........................................37
3. UNDERMININGTHERULEOFLAW...........................................................................................................39
SectionD.CommentaryonShort-TermRentalLegislation..................................................................41
SectionE.AchievingEquityandIntegrityinShort-TermRentalTaxation............................................44
1. ACTIONBYTAXAGENCIES.....................................................................................................................44
a. SupportforPositiveLegislation................................................................................................44
b. AComprehensiveTaxComplianceProgram.............................................................................45
c. PublicParticipationandReevaluationbyTaxAgencieswithAirbnbAgreements...................46
2. ACTIONBYSTATELEGISLATURES............................................................................................................47
3. ACTIONBYCOMMUNITYANDBUSINESSORGANIZATIONS...........................................................................47
Appendix.RatingtheTaxAgreements................................................................................................49
ListofTables
Table1.AirbnbAgreementsbyState—ListedAlphabetically..............................................................13
Table2.ProblematicProvisionsofAirbnbAgreementsbyJurisdiction...............................................16
Table3.ComparisonofTaxpayerResponsibilitiesandBenefitsforVoluntaryDisclosureAgreements
andAirbnbAgreements.................................................................................................................18-19
Table4.SecrecyProvisionsinAirbnbAgreements..............................................................................27
Table5.RatingsofAirbnbAgreementsCombinedwithSupplementalMeasures................................50
GlossaryofTerms
Term
Airbnbagreements
Definition
AnagreementbetweenAirbnbandastateorlocalgovernment,labeled
“VoluntaryCollectionAgreement,”thatpertainstolodgingtaxesamongother
matters.Becauseofthenatureandextentoftheircontent,theyarereferredto
hereinsimplyas“Airbnbagreements.”
Commercial-style
short-termrentalor
lodging
Ashort-termresidentialrentalorlodgingfacilityinwhichtheoperatordoes
notresideand(a)thatisofferedonafull-timebasisyear-roundorduringlong
seasons,or(b)isamulti-unitoperationwithtwoormoreunits.
Home-sharing
Ashort-termresidentialrentalorlodgingfacilityinwhichtheoperatordoes
resideandthatistypicallyofferedonanoccasionalbasistooccupants.
Lodgingoperator
Anownerorlong-termlesseewhooffersandrentsashort-termresidential
rentalorlodgingfacilitytomembersofthepublic.Airbnbreferstolodging
operatorsas“hosts”intheiragreements,but“lodgingoperator”isthe
objectiveterminbusinessandtaxcontexts.
Lodgingoperator
identificationservice
Asoftwarebasedservicethatidentifiesandlocateslodgingoperatorstoassist
governmentswithlodgingtaxandregulatorycompliance.Atleastoneservice
exists,andothersmayemerge.
Occupant
Apersonwhorentsashort-termrentalfromalodgingoperator.Airbnbrefers
tothesepersonsas“guests”intheiragreements,but“occupant”isthe
objectiveterminbusinessandtaxcontexts.
Voluntarydisclosure
agreements
Agreementsbetweenastateandpreviouslynon-complianttaxpayerstobring
themintocompliancewithtaxlaws.Theytypicallyinvolvethepaymentof
someyearsofbacktaxeswithinterest,butnopenaltiesandacommitmentto
paytaxesprospectively,subjecttonormalrequirementsthatapplytoall
taxpayers.TheMultistateTaxCommission(MTC)coordinatessuch
agreementsformultistatetaxpayersworkingwithseveralstatesatonce.
Individualstatesalsoofferagreementsforresidents,in-statebusinessesand
multistatebusinessespreferringtoworkwiththestatedirectly.
SummaryofReport
Subject
ThisreportevaluatestwelvepubliclyreleasedagreementsthatAirbnbhasenteredwithstateor
localgovernmentsthatdirectlyaddresslodgingtaxes,buthaveimpactsonotherstateandlocal
laws.Theagreementsarefromacrossthenationandhaveeffectivedatesrangingfrom2014into
2017.Becauseoftheirvariationsingeographyandtime,thereportassumesthatthese12
agreementsarereasonablyrepresentativeofthelargerbodyofapproximately200agreementsthat
Airbnbhassigned.ThelargemajorityofAirbnbagreementsarebeingheldsecretfromthepublic.
Methodology
TheevaluationisconductedbyexaminingthelanguageoftheAirbnbagreementsinrelationto
voluntarydisclosuretaxagreements,standardsofpublicadministrationanddemocratic
governance,andcompliancewiththelaw.Inonecircumstance,thereportevaluatesa“side
arrangement”describedinaninterviewwithataxagency.Focusingonthelanguageofthe
agreementsprovidesadefiniteandconcretebasisforevaluation.Criticsmayarguethatthis
approachdoesnottakeaccountofverbalunderstandingsorothervariationsfromwrittenlanguage
usedtoavoidproblemscreatedbythetextoftheagreements.Iftheagreementsareadministered
differentlyfromtheirtext,thatlanguageshouldbeamendedaccordingly.
Context
Airbnb,foundedin2008,provideslodgingbysupportingandmarketinganetworkoflodging
facilities.Airbnbstatesthatitoffers3,000,000listingsin65,000citiesin191countries.Airbnb
beganwithandcontinuestocultivateanimageofoffering“home-sharing”rentals—lodgingin
people’shomeswheretheownersorlong-termlesseesreside.Increasingly,however,Airbnb’s
growthisdependenton“commercial-style”operationswheretheholderofthepropertydoesnot
resideinit,butoperatesalodgingbusinessbasedinaseparatehomeoroneormoreapartments
availablefortransientrentalyear-round.“Home-sharing”isoftenlegalunderlocalzoningand
housinglaws.“Commercial-style”transientresidentialrentalsoftenviolatezoningandhousing
laws.
ImmediateActionNeeded
ThereportdetailsmajorproblemsthattheAirbnbagreementscreateintermsof:
• UnjustifiedfavoritismforAirbnbanditslodgingoperators,
• ImproperlycedingtaxauthoritytoAirbnb,
• Grantinghugebenefitstothird-partieswhohavenotsignedtheagreements,
• Unfairtreatmentofothertaxpayers,businessesandcitizens,
• Violatingstandardsoftransparencyanddemocraticgovernance,
• Underminingcompliancewithtaxandregulatorylaws,and
• Spreadingundesirableprecedentsthroughstatelawspatternedaftertheagreements.
Becauseoftheseriousproblemscreatedbytheagreements,thereportrecommendsthattax
agenciesstopsigningAirbnbagreementsandopposelegislationthatwouldincorporatethose
featuresinlaw.Agenciesthathavesignedthoseagreementsshouldreevalutethemandconsider
terminaton.Asabetteralternative,agenciesshouldseeklegislationupdatinglodgingtaxlawsto
ensurepropercomplianceandundertakeacomprehensivelodgingtaxcomplianceprogram.
1
FindingsandImpacts
Majorfindingsinthereportinclude:
• TheAirbnbagreementsaremorethantaxagreements.Theyare,infact,wide-ranging
specialrulesbenefittingAirbnbanditslodgingoperators.Thereisnoproprietaryor
confidentialinformationintheseagreements(oranycomparableonesthathavenotbeen
released)thatjustifywithholdingthemfromthepublic.Thepoliciesintheseagreements
shouldbetreatedasrulessubjecttopublicdisclosure,scrutinyandparticipation.
• Thestructureoftheseagreementsisperplexingandshouldbereviewedforlegality.The
agreementsprovidemajorbenefitstothird-parties,especiallylodgingoperators,whoare
notsignatoriesoftheagreementanddonotcommittoanyperformanceinexchangefor
benefitsreceived.
• TheAirbnbagreementsdonotguaranteeaccountabilityfortheproperpaymentoflodging
taxesbecausetaxagenciescedesubstantialcontrolofthepaymentandauditprocessesto
Airbnb.Theagreementsprovideashieldofsecrecyforlodgingoperatorsthatprevents
theirdiscoverybypublicagenciesandcreatesadefactotaxandregulatoryhavenforthose
operators.
• TheAirbnbagreementsprovideoverlygenerousandunjustifiedbenefitstoAirbnbandits
lodgingoperatorsandoccupantsascomparedtothebenefitsprovidedtaxpayersentering
voluntarydisclosureagreements.Inaccordancewithobservationthat“badpracticesdrive
outgoodones,”thenegativeprecedentsintheAirbnbagreementsthreatentoundermine
theuseofvoluntarydisclosureagreementsthathaveyieldedlargerevenue,taxequityand
compliancebenefits.
• Byagreeingtoprospectivelodgingtaxpayments,theaccuracyofwhichcannotbefully
verified,Airbnb“purchases”fromtaxagenciesashieldofsecrecythatthey“resell”to
lodgingoperatorstoattractmoreownersorlong-termlesseesofresidentialpropertyto
conductAirbnblodgingbusinesses.Thatsecrecyismostvaluableforthecommercial-style
lodgingfacilitiesthatnowfuelAirbnb’sgrowth,butthatarealsomostlikelytoviolate
zoningandhousinglaws.Thus,theagreementsfacilitateunimpededandoftenillegal
conversionsofresidentialpropertyintocommercial-stylelodgingfacilities.Taxagencies
signingtheseagreementsenablethisprocess.
• TheAirbnbagreements,becauseoftheunjustifiedbenefitsprovided,areunfairtotaxpayers
whofileandpaytheirtaxesdiligently.TheagreementsalsoallowAirbnblodgingto
competeunfairlywithtraditionallodgingfacilities.Finally,theagreementsprovideunfair
competitionforcommunityresidentsandcitizensseekingaplacetolive.
• TheAirbnbagreementsconflictwithstandardsofdemocraticgovernancedesignedto
ensureintegrityinpublicpolicyandcivilsociety.Theyfailtoconformtorequirementsof
transparencyandpublicparticipationindecision-making.Theagreementsalsoviolate
agencyauthoritythroughfavoritismofferedAirbnbanditslodgingoperatorsand
occupants.
• Intermsoffavoritism,taxagenciesshouldbeespeciallyconcernedaboutsuspending
exchangeofinformationprocessesrelatedtoAirbnbanditslodgingoperators.Beyond
questionsoflegality,agenciesshouldconsidertheimpactofwithholdinginformationfrom
otheragenciesintermsofadverselyaffectingthecooperationtheyreceivefromother
agenciesinthefuture—cooperationthatisimportanttopropertaxadministrationand
broaderenforcementofotherlaws.
2
•
•
•
TheAirbnbagreementsunderminetheruleoflaw.Theagreementscreaterisksofreduced
compliancewithlodgingtaxlaws,withstateandlocaltaxlawsmoregenerally,andwith
locallanduse,housingandbuildingsafetylaws.
TheAirbnbagreementshaveproducedlegislationinArizonaandconsiderationofsimilar
actioninotherstates.Thelawundermineslocallanduseandzoningregulationsthatmight
affectAirbnbbyseverelynarrowinglocalregulatoryauthority.Thelawmakesthenegative
taxprecedentsintheagreementsvisibleandcreatesincentivesforothertaxpayerstolobby
forthosesamebenefits.Thelawcodifiestheanonymousdatareportingthatundermines
Airbnb’staxaccountability.ItalsoblockstheexchangeofAirbnbinformationwiththeIRS
andtaxagenciesofotherstates.Fortheexchangeofinformationthatdoesremain,thelaw
requiresnotificationofAirbnbofpotentialexchangesandgivesitthepowertoreachinto
thetaxagencyandblockthatexchangeofinformation.
SigningAirbnbagreementsofthetypecoveredhereintroducesharmfulpracticesintothe
publiclifeofstatesandcommunities.LegislationincorporatingAirbnb’sunjustified
privilegesintolawonlyspreadsthedamagefurther.Ifthesepracticesareexpandedinlaw
tootherbusinesses,theconsequencesforstatesandlocalitiesbecomesevere.
Recommendations
• Asnoted,thereportrecommendsthatagenciesstopsigningagreementslikethosecovered
bythisreportandopposeanylegislationthatwouldenactthoseprovisionsintolaw.
Agencieswithexistingagreementsshouldconsiderterminatingthem.
• Taxagenciesshouldseeklegislationupdatinglodgingtaxlawstorequireregistration,
reportingandcollectionandpaymentbyonlinebookingcompaniesandlodgingoperators,
withasinglepaymentprocesscoordinatedasitisforsalestaxesbetweenwholesalers
(here,lodgingoperators)andretailers(onlinebookingcompanies).Giventhecommunity
andneighborhoodimpactsofshort-termrentals,thelegislationshouldincludeapublic
registryoflodgingfacilitiesabovespecificthresholds.Thelegislationshouldstrengthen,
wherenecessary,exchangeofinformationforlodgingtaxesgiventhesignificanceofthat
informationforregulatoryenforcement.
• Alternatively,ifnothingelseisdone,legislationshouldbeenactedthatrequiresonline
bookingcompaniestoprovidethenamesandlocationsoflodgingoperatorstotaxagencies.
• Taxagenciesshouldundertakeacomprehensivecomplianceprogramunderexistinglaw
withthreeelements:(a)joint,multistateauditsofonlinebookingcompaniesforrelevant
taxestodeterminewhetherthecompanieshavealegaldutytofile,collectandpaytaxes,(b)
jointorindividualcontractswithalodgingprovideridentificationservice,atleastoneof
whichcurrentlyexists(HostCompliance),and(c)acampaigntooffervoluntarydisclosure
agreementstolodgingproviderstocomeintocompliancewithlodgingtaxlaws.
• Taxagencieswithexistingagreementsshouldpubliclyreleasetheagreementstotheextent
thattheyincludenoconfidentialorproprietaryinformation.Ifanysuchconfidential
informationispresent,thatinformationshouldberedactedandthenon-sensitivematerial
constitutingpoliciesshouldbereleasedandsubjecttoapublicrule-makingprocessasa
partofareconsiderationprocess.
• Legislaturesshouldenactthelegislationdescribedabove.
• Communityandbusinessorganizationsshouldundertakeconcertedanddetailedopen
recordsrequestsforthereleaseofAirbnbagreements,withredactionforanyconfidential
information.Thegroupsshouldbepreparedtoundertakefollow-uplegalactionifrequests
aredenied.
3
•
•
Whenagreementsarereleased,communityandbusinessgroupsshouldpetitionforany
provisionsthatconstituterulestobesubjecttopublicrule-makingprocesses.Ifrulemakingdoesnotproceedonsuchmatters,follow-uplegalactionshouldbeconsidered.
Thegroupsshouldactivelysupportthelegislativeandadministrativeactionsdescribed
above.
ThereismuchdetailinthisreportconcerningextensiveproblemsoftheAirbnb
agreements.However,thecoreproblemwiththeseagreementsissimplytoomuchsecrecy.Secrecy
allowslodgingoperatorstorunhotelsthatviolatezoninglaws,avoidpublichealthandsafety
standards,andreducethecurrenthousingsupplyforlong-termresidents.SecrecyallowsAirbnb,if
itdecidedtodoso,toavoidaccountabilityfortaxesandeventomakeill-gottengainsfromtax
collection.Airbnbfirstcreatesthesecrecyproblembyhidinglodgingaddressesontheirwebsite,
makingitdifficultforstateandlocalauthoritiestoidentifythefacilitiesandtheirowners.Airbnb
thenoffersagreementsasasolution.Buttheagreementsonlymaketheproblemsworse.The
Airbnbagreementsextendsecrecyfurther,givingitanunfairadvantageinlodgingmarketsby
offeringataxandregulatoryshieldtoaffiliatedlodgingoperators.
Thesolutiontosecrecyistoendit,notextendit,astoomanystatesandlocalitiesare
helpingAirbnbdothroughtheseagreements.Itisstandardpracticetorequiretransparencyfor
businessesoperatinginstatesandlocalities.Publicregistrationtodobusinessisacenturies-old
stapleoftaxation,regulationandlawenforcement.Itisabsurdtoallowanyonetooperatealodging
businessinaneighborhoodandnotregisterthatbusinessinapublicregistry.Itisworsetodeny
zoningofficials,taxcollectors,policeofficersandfirefightersbasicinformationtheyneedtodo
theirjobsregardingissuesrelatedtolodgingfacilities.Itisalsounacceptablethatlong-term
residentswilloftennotknowtheywillbelivingnextdoortotransienthousinginsteadofhaving
neighborstowhomtheycanrelateandrely.Allthatneedstobedoneistorequirelodging
operatorstoregistertheirbusinessespublicly—akintorequirementsforotherin-home
businesses—andtorequireonlinebookingcompanieslikeAirbnbtoprovidealistofitsaffiliated
operatorstostateandlocaltaxauthorities.
ThesolutiontotaxsecrecyforAirbnbisequallysimple.RequireAirbnbtofiletaxreturns
basedonrealdatainsteadofanonymousnumbersthatcouldbefactorfiction.Rejectauditrules
thatleaveauditorsstaringatalreadyfiledreturns,supportingschedulesandunverifiablesheetsof
numbers.RequireAirbnbtoprovideitsrealbooksandrecordsforauditorstoexaminejustthe
sameasallothertaxpayersarerequiredtodo.AnonymousdataandlockingupAirbnb’sbooksand
recordsinvitestaxabuses,evenallowingthecompany,ifitdecidedtodoso,tomakeprofits
charginggueststhefulltaxandpayingstateandlocalgovernmentslesseramounts.Allthatis
necessaryistoaskAirbnbtoplaybythesamerulesfortaxreporting,paymentandauditingthat
applytoeveryoneelse—andforstatesandlocalitiestoconductefficient,effectiveandfairaudits.
Thereisathirdproblemofsecrecy.Toomanygovernmentsaresigningsecretagreements
withAirbnbthatare,intruth,theequivalentoflawsandrules.Agenciesshouldreleasethese
agreements,andifnotmembersofthepublicshouldchallengethissecrecyandrequesttheir
release.Therulesshouldbebroughtintotheopenairandbrightsunshine—aslawsonpublic
participationandstateconstitutionsrequire—sothepubliccanhaveasayonwhetherAirbnbgets
specialruleswithspecialbenefitsorwhetheritwillbeaskedtofollowthesamerulesthatapplyto
4
everyone.ThegovernmentsecrecyneedstoendasmuchasdoesthesecrecyforAirbnbandits
customers.
5
SectionA.
AirbnbandNeighborhoods:AnIntroductiontotheReport
Wefancyourselvesoutlawswhileweshapelawsandconsiderourselvesdisruptivewithout
sufficientconsiderationforthepeopleandinstitutionswedisrupt.Wehavetodobetter,and
wewill--AnilDash,a“technologist”commentingonthetechindustry,quotedbyKrista
Tippettontheradioshow,OnBeing,January12,2017.
AnilDash’swordsareawelcomecorrectiontothetechnologyindustry’scontinuous
celebrationofits“disruptive”capacity.DisruptingoldindustriesthatemployedAmerica’sonce
thrivingmiddleclassisthetechindustry’sfavoredmodeofoperation.Itproceedsbyextracting,not
all,butkeyelementsofthecraftknowledgepreviouslyspreadwidelyamongworkersand
managersintheoldindustries—craftknowledgethatguidedtheiroperationsandsuccess.Thetech
industryextractsthatcraftknowledge,reformulatesandconcentratesitintocomputercode,and
usingthatsoftwaredeploysnewenterprisesto“disrupt”oldindustries.“Displace”isanotherword
fortheprocess.Theknowledgefirstdevelopedintheoldindustriesisturnedagainsttheminanew
form.
Theprocessofdisruptionthroughtechnologyhasconcentratedenormouswealthwiththe
techelite.Ithasalsocreatednewjobs,buttypicallyfewerthanthoselostandoftenclusteredina
fewmetropolitanareas.Theprocesshasbeenlesskindtotheoldindustries’formerworkerswhose
jobshavebeendisruptedaway.Tobefair,theworkers’problemsdonotcomesolelyfrom
technologicaldisruption—globalization(anothertechfavorite)andtaxandlabormarketpolicies
havealsoplayedarole.Buttechnologicaldisruptionisabigpartofthestory.Theresultscanbe
seen,inpart,inthefortyyearsofstagnantorevendecliningrealincomesformiddleclass
households.Theresultscanalsobeseeninthe“populist”angerarisinginthepastyearfrom
communitiesspreadacrossthenation—notablyafardistancefromtechcenters.
Airbnb,acompanyfoundedonlyeightyearsago,andotheronlinecompaniesofferingpeertopeermarketplacesforshort-termrentalcompaniesareinthebusinessofdisruptingthelodging
industry.Airbnbisthepeer-to-peerleaderwith3,000,000listingsin65,000citiesand191
countries.1Somewhatironically,thecompanypublicizesitselfashelpinghard-pressedmembersof
themiddleclassearnextraincomebyrentingsparespaceintheirhomesonanoccasionalbasisto
travelers.Initsearlyyears,Airbnb’simagewaslikelyconsistentwithitsreality.Recentdata,
though,suggeststhatimageisblurringintomythasarisingshareofitsrevenuecomesfrom
commercial-styleoperationsinsteadofoccasionalhome-sharing.OnestudyofAirbnbbookingsin
14majorcitiesindicatesthatfull-timeandmulti-unitoperationsaccountedfor40%ofAirbnb’s
revenuefromOctober2014throughSeptember2015.2
ItisunderstandablethatatsomepointAirbnbandsimilarcompanieswouldreachtheouter
limitsofthenumberofpeoplewhosepersonalcircumstancesaresuchthattheywouldengagein
home-sharing.Toachievefurthergrowthandmarketshare,Airbnbismovingbeyondhomesharingtolistingsofhousesandapartmentsoperatedascommerciallodgingbusinesses.
1“AboutUs-Airbnb,”Airbnb.com.RetrievedJanuary16,2017.
2JohnW.O’NeillandYuxiaOuyang,“FromAirMattressestoUnregulatedBusiness:AnAnalysisof
theOtherSideofAirbnb,”PennStateUniversity,SchoolofHospitalityManagement,January2016.
6
Theconversionofhousesandapartmentsnotoccupiedbytheirownersorlong-term
lesseesintoshort-termlodgingfacilitiescreatesmajorcommunitycontroversies.3Chargesarise
over“illegalhotels”—chargesthataretrueifthefacilitiesviolatezoningordinances,occupancy
standards,buildingandfirecodesandotherhousinglaws.Criticsclaimthisconversionof
residentialpropertyintoshort-termrentalsreducesthesupplyandincreasesthecostofplacesto
liveforordinarycitizens,thusreducinghousingaffordability—especiallyinmarketswithashort
supplyofresidencesrelativetodemand.Othersraiseissuesaboutpublichealthandsafetyissues
affectingresidentialneighborhoodsandstretchingpoliceandotherpublicsafetyresourcesmore
thinlyacrosscommunity.Long-termresidentsareconcernedthatasneighborsarereplacedby
transientvisitors,thehumanrelationshipsandcommunitylifeonwhichtheyrelywillbelost.
Airbnb,foritspart,oftenvigorouslydisputestheseconcernsdirectlyandrespondsindirectlyby
cultivatingabrandimageofsharing,trustandbelonging.
Controversiesovershort-termrentalshaveproducedlitigationandregulatoryand
legislativeactionintheUnitedStatesandonaglobalbasis.Someofthemostwell-knownconflicts
haveoccurredinNewYork,SanFrancisco,Vancouver,BC,andBerlinamongotherlocations.
IntothecontextofcontroversyintheUnitedStates,Airbnbhasinsertedacampaignoffering
stateandlocalgovernmentsagreements,whichitdescribesasprovidingforAirbnb’sprospective
collectionoflodgingtaxesthatapplytoitsrentaltransactionsintheirjurisdictions.Thisreport
analyzestwelveagreementsthathavebeenpubliclyreleased.Airbnbclaimstohaveentered200
suchagreementsandhopestosign500morein2017.4
Theanalysisproceedsbycomparingtheagreementstowell-established“voluntary
disclosureagreements”thatstatesusetosecuretaxcompliancebybusinessesandindividualswho
havenotbeencollecting,filingandpayingtaxes.Theseagreementsarecarefullydesignedto
encouragevoluntarycompliancebynon-filers,whilestillretainingsufficientsanctionstomake
non-complianceunattractiveandensuringfairnesstotaxpayersfullycompliantwiththelaw.We
evaluatetheAirbnbagreementsastowhethertheyservetheirintendedpurposesorotherunstated
purposes,whethertheyarefairoveralltotaxpayersandcommunityresidents,andwhetherthey
conformtostandardsofintegrityandeffectivenessintaxation.Chiefamongthosestandardsisthe
abilityofataxagencytoholdataxpayeraccountableforpayingtherightamountoftaxes.More
broadly,attentionisgiventowhethertheagreementssupporttheruleoflawbyensuringproper
compliancewithallapplicablelaws.Wealsoevaluatetheagreementtodetermineiftaxagencies,in
enteringtheagreements,areadheringtorequirementsfortransparency,publicparticipationin
decision-making,andaccountabilitytothepublic.
3AreportbytheNewYorkAttorneyGeneralprovideswell-organizeddocumentationofcomplaints
aboutcommercial-stylerentalsofferedthroughAirbnb.SeeNewYorkOfficeofAttorneyGeneral,
“AirbnbintheCity,”October2014,availableathttps://ag.ny.gov/pdfs/Airbnb%20report.pdf.
4LeslieHook,“Airbnblookstosecure700taxdealswithcities,”FinancialTimes,November20,
2016.
7
SectionB
AirbnbAgreements:ComparisonwithVoluntaryDisclosureAgreements
1. WhatAretheAirbnbDocuments?
Airbnbdevisesandpresentstotaxagencieswhataretypicallytentotwelve-page
documentscoveringback-taxforgiveness,prospectivepayments,informationaccessandmultiple
othertermsthatproduce,asthisreportdocuments,seriousnegativeconsequencesforsociety.
Airbnblabelsthesedocumentsas“voluntarycollectionagreements,”whichtheymostassuredlyare
not.TheseAirbnb-drafteddocumentsdonotguaranteethepropercollectionoftaxesdue.They
blocktaxagenciesfromverifyingtheaccuracyofAirbnbpayments.Airbnbmaybeseekingto
superficiallytolikenthesedocumentstothehighquality“voluntarydisclosureagreements”that
statesusetobringnon-complianttaxpayersintofullconformitywiththelaw.However,these
documentsprofoundlyunderminesoundtaxadministrationandtheruleoflaw.Fortheseand
otherreasonsdetailedbelow,wewillnotuseAirbnb’smisleadinglabelforthesedocumentsbut
willrefertothemobjectivelyas“Airbnbagreements.”
BeyondnotbeingwhatAirbnbclaimsforthem,theagreementsdonotevenqualifymore
generallyas“taxsettlements.”Ataxsettlementresolvesataxdisputebetweenonetaxpayeranda
taxagencyandoftenincludesproprietaryorconfidentialtaxinformation.Withafewexceptions,
theseagreementsdonotappeartobepromptedbyataxdisputearisingfromanauditorlegal
actionbyataxauthority.Noneoftheagreementsreleasedpubliclyrefertoanysuchdisputesor
containreferencestobeingenteredundertheauthorityoftaxsettlementlaws.Theydonot,astax
settlementsnormallydo,specifyagreeduponamountsofvalues,incomeortaxes.Noneofthe
publiclyreleasedagreements,eveniftheycontainconfidentialityclauses,includeanyproprietary
orconfidentialtaxinformation.Further,theseagreementsarenotsimplybetweenataxagencyand
onetaxpayerbecausetheyprovidesubstantialtaxbenefitstoalargeclassofunknownnumbersof
Airbnblodgingoperatorsandoccupants.Finally,asexplainedbelowtheseagreementsrangefar
beyondthecontentoftaxsettlementsintermsofthescopeoflaws,practicesandpartiesaffected.
WhatisthenatureoftheseAirbnbagreements?RegardlessofhowAirbnbcharacterizes
them,theagreementsare,intruth,rulesthatgrantspecialadvantagestoonetaxpayerandits
customers.Theyarerulesbecausetheyembodymultipledecisionsthatsprawlacrossarangeoftax
policyandadministrativeissues,includingbutnotlimitedto:
• grantingtaxandregulatorybenefitstoaclasscomprisedoflargenumbersofunidentified
beneficiarieswhoarenotsignatoriesoftheagreements,
• creatingunusual,ifnotunprecedented,limitsontaxadministrationthatunderminethe
properaccountabilityfortaxescollected,reportedandpaid,
• limitingtheinformationavailabletootheragenciestoenforcelawsthataffectpublichealth
andsafetyandthequalityofcommunitylife,and
• restrictingtheabilityofthepublicandotheragenciestoknowaboutandparticipatein
decision-makingaboutthepublicpolicyjudgmentsbeingmadeintheagreements.
Theserulesshouldbesubjecttoconsiderationthroughopen,publicparticipationprocesses.
Bringingtheseprovisionsoutoftheshadowsandintothepublicsquareforscrutinyanddebateis
8
evenmorecompellingwhenoneconsiderstheirimpactontaxequity,marketcompetition,the
integrityoftaxadministration,publichealthandsafetyandthewell-beingofcommunityresidents.
Whiletheagreementsare,infact,rules,theyalsorepresentaspecialdeal.Theyallow
Airbnbunusualandlegallyquestionablelatitudetodeterminehowmuchtheywillpayintaxes.
SeveralagreementsgrantspecialtaxamnestytoAirbnblodgingoperatorsandoccupantseven
thoughtheyhaveneitherrequesteditnorsignedtheagreements.Theagreementsprovideseveral
layersofsecrecytoshieldAirbnblodgingoperatorsandoccupantsfromcomplyingwithanarrayof
laws.TheshieldofsecrecyforAirbnbcustomersenablesAirbnbtounfairlyexpanditsmarketshare
withinthelodgingindustryanddiverthousingstockawayfromordinarycitizenswhomerelywant
tofindaplacetolive.
TheAirbnbagreementsspecifytermsthatcutacrossanarrayoftaxpoliciesandpractices
tobenefitAirbnbanditsnetworkoflodgingoperators.Itprovidesgeneralrulesskewedtoserve
privateintereststothedetrimentofthepublicinterest.Disturbingly,toomanytaxagenciesagree
toworkwithAirbnbtoclothetheseeffortsinsecrecylesstheybediscoveredandrespondedtoby
thepublic.Fortunately,effortstokeeptheseagreementssecrethasnotbeenentirelysuccessful.
2. IntroductiontoDescriptionandAnalysisofAgreements
ThissectionofthereportcomparesandcontrastsAirbnbagreementswithvoluntary
disclosureagreements.Voluntarydisclosureagreementshavebecomeahighlysuccessful,equitable
andfiscallyadvantageousmethodforbringingnon-complianttaxpayersintocompliancewiththe
law.Voluntarydisclosureagreementsarethe“goldstandard”oftaxcomplianceagreements.We
willmakethiscomparisonforthreereasons:
• Ithelpstounderstandhow,despitesomesimilarities,theAirbnbagreementsdiverge
radicallyfromandextendbeyondthebesttaxcompliancepracticesembodiedin
voluntarydisclosureagreements;
• IthelpsrevealthetaxinequitiescreatedbytheAirbnbagreements,and
• ItdisclosestherealfunctionoftheAirbnbagreementsisnottoensuretheproper
paymentsoftaxes,buttohelpAirbnbexpanditsshareofthelodgingmarketatthe
expenseofcompetitors.
Theanalysisinthesesectionisnotthefullstory.Thissectionfocusesonprovidingageneral
knowledgeoftheAirbnbagreementsandexploringhowtheymeasureupagainstthetaxequity
standardofequaltreatmentofsimilarlysituatedtaxpayers.InSectionC,wewillconsiderthe
broaderimpactsoftheAirbnbagreementsoneconomiccompetition,effectivetaxadministration,
democraticgovernance,andtheruleoflaw.
Therearesomesurfacesimilaritiesbetweenthesetwotypesofagreements.Boththe
Airbnbagreementsandvoluntarydisclosureagreementsfacilitatepaymentsfortaxesnotcurrently
beingcollected.Bothtypesofagreementsappeartohaveasimilarframework:arecitationoffacts
bythepersonorbusinessfollowedbyconcessions,usuallybythetaxagencytoinducethetax
collectionpayments.Evensomeofthewordsareborrowedfromvoluntarydisclosureagreements
foruseintheAirbnbagreements.Oncebelowthesurface,however,thetermsvarysignificantly
betweenthetwo.
9
ThegreatestsimilaritiesbetweenthevoluntarydisclosureagreementsandtheAirbnb
agreementsarefoundnotintheirtermsbutinthecircumstancesofthepersonsandbusinesses
benefittingfromthetwotypesofagreements.Alodgingoperatorlocatedinataxingjurisdiction
whoexceedslodgingtaxreportingthresholdsandwhofailstofileandpaylodgingtaxesisinan
identicalsituationasaresidentorbusinesslocatedinthetaxingjurisdictionwhofailstofileand
payincomeorsalestaxes.Theselodgingoperatorsownpropertyandareconductinglodging
businessinthetaxingjurisdiction.Undertheprincipleoftreatingtaxpayersinidentical
circumstancesequally,thenetbenefitsreceivedfromataxagreementshouldbethesamefora
lodgingoperatornon-compliantwithlodgingtaxesasitisforapersonorbusinessnon-compliant
withsalesorincometaxes.ThereisnoreasonAirbnboperatorsandoccupantsshouldbetreated
morefavorablythantaxpayerswhoparticipateinvoluntarydisclosureagreements.
ThereisalsoasimilaritybetweenAirbnbandmultistateormultinationaltaxpayers
enteringvoluntarydisclosureagreements.UnderU.S.constitutionalstandards,out-of-state
companiesmusthavesufficientcontactswithastateforthatstatetorequirethecompanyto
collect,fileandpaytaxes.Ifthenatureofacompany’scontactswiththestatemeetconstitutional
tests,thecompanyissaidtohavenexuswiththestateandis,therefore,subjecttothestate’s
jurisdiction.Multistatebusinessesthatseekvoluntarydisclosureagreementsforincomeorsales
taxesaretypicallythosewhosecontactswithastatemakeitsubjecttoeitherdefiniteorprobable
jurisdictionforthatstate’staxes.
Airbnb’scontactswithmanystatesappearsufficientconstitutionallytorequireittocollect,
fileandpaystatetaxes.ThecaseforAirbnbhavingnexuswithstatesissubstantial:
1. Airbnb’sbusinessandearningsintheUnitedStatesarefullydependentonitsaffiliation
withlocallodgingoperators,5
2. Airbnb,byitsownstatementsonitswebsite,contractswithphotographers,translatorsand
otherproviderswhoprovideservicesinsupportoflodgingwithinthestates,6and
3. Airbnbisservingasanegotiatingagentforitslodgingoperatorsandoccupantsfortax
agreementsinmoststates.
IfAirbnbmadeaproperdisclosureoffactsorifitweresubjecttoanexusaudit,itislikelythat
otherfactssupportingnexuswouldbefound.BecauseAirbnbandmultistatebusinessesseeking
voluntarydisclosureagreementsaresubstantiallysimilarinconstitutionalterms,itisproperto
comparethetwo.
Observerswilllikelynotethat,onstatelawgrounds,Airbnbmaybelessobligatedtocollect
andpaylodgingtaxesbecausethoselawshavenotkeptupwithchangingtechnologyandbusiness
operations—thusfailingtoensurethatlodgingprovidedtoconsumersthroughbusinessnetworks
organizedviaautomatedsystemsistaxedfairly,efficientlyandeffectively.However,thatstatutory
5Stateshavesuccessfullyasserted“affiliatenexus”regardingout-of-statecompanieswithin-state
affiliateswheretheaffiliatesarelesscentraltotheout-of-statecompanythantheAirbnblodging
operatorsaretoAirbnb.Airbnbcannotconductitsbusinesswithoutthein-statelodgingoperators
andtheirproperty.
6See:https://www.airbnb.com/help/article/414/should-i-expect-to-receive-a-tax-form-fromairbnb?topic=248.
10
problemcanberemediedbystatesorlocalitiesthroughlegislativeaction—abetteralternativethan
enteringseriouslyflawedtaxagreementsthatdamagethepublicinterest.Analytically,itis
necessarythatthisstatutoryissuebeheldinabeyancesothatthepublicandpolicy-makerscansee
thedifferenceinthechoicebetweenlegislativelyupdatinglodgingtaxesandtheadministratively
adoptedAirbnbagreements.
3. VoluntaryDisclosureAgreements
Whilevoluntarytaxdisclosureagreementshaveexistedinsomeformforalongtime,states
haveusedthemmoreextensivelysincethelate1980s.Changesininterstatebusinessoperations
combinedwithambiguitiesinthecircumstancesunderwhichstatescouldtaxinterstateeconomic
activityproducedgreateruseoftheseagreements.TheMultistateTaxCommission(MTC)
contributedsignificantlytothetrendbyestablishingtheNationalNexusProgram,which
coordinatesdisclosureagreementsbetweeninterstatebusinessesandmultiplestates.States
typicallyofferwithintheirstatessimilaragreementstonon-filingresidentsandlocalbusinesses.
Statevoluntarydisclosureagreementshaveproducedimpressiveresults.Intenyearsfrom
FY2006-2015,theMTC’svoluntarydisclosuresproducedover$197millioninback-taxpayments
notincludinginterestorfuturetaxpayments.7Usingaconservativemethodology,thereport
estimatestotalrevenuesfromthesemultistateagreementslikelyexceeded$500millionoverthis
decade.8Theseamountsdonotincludethemajorrevenuesproducedbyindividualstatevoluntary
disclosureprogramsforresidentsandlocalbusinesses.Incomparison,thetwelveAirbnb
agreementsproducedexactly$0inback-taxpayments.WhileotherAirbnbagreementsremain
secret,thelikelihoodthoseagreementsproducedmaterialback-taxpaymentsislowgivenAirbnb’s
negotiatingposture.TheprospectsoffuturerevenuesfromAirbnbagreementsneedstobe
discountedbythefactthat,asdiscussedinSectionE,statesandlocalitiesincreasinglyhavethe
meansavailableforcollectingtaxesononlinelodgingrentals.Statesshouldbemindfulthatterms
theyagreetoforAirbnbagreementscouldunderminesettledpracticesforvoluntarydisclosure
agreementsandplaceatriskthesubstantialrevenuesgainedfromtheirvoluntarydisclosure
programs.
Becauseoftheirexpandeduse,stateshaveadoptedformalprocedures,rulesandevenlaws
togovernandguidevoluntarydisclosureprograms.Theobjectivesofthelegalframeworkforthese
agreementsistoensure(a)theintegrityoftheagreementprocessand(b)equitabletreatmentof
taxpayersinsimilarcircumstances.Thedevelopmentoftheselawsandruleshaveprovided
opportunitiesforpublicinputintothepoliciesgoverningtheseagreements.Individualstatesand
theMTCmakesubstantialeffortstoensurethereispublicknowledgeofvoluntarydisclosure
agreementsandthestandardtermsgenerallyoffered.Voluntarydisclosureagreementsarewellgroundedinlawandadministrativepracticeandareequitableandeffective.
Statevoluntarydisclosureprogramsstrikeabalanceinofferingpreviouslynon-compliant
taxpayerssomelimited,carefullycircumscribedrelieffrompenaltiesandsomeback-tax
7CompiledfromMultistateTaxCommissionAnnualReportsforapplicableperiods.
8Futurerevenueswerecalculatedatone-thirdofbacktaxpaymentsreceivedeachyearextended
overremainingfutureperiodsinthedecade.ContinuingrevenuesintheFY2006-15periodfrom
MTCagreementssignedinyearspriortoFY2006wereexcluded,makingtheestimatemore
conservative.InterestwasestimatedusingtheIRSlargecorporateunderpaymentrateof5%.
11
payments—butnotsomuchastobeunfairtotaxpayerswhohavelongbeencompliantwiththe
laws.Thevoluntarydisclosureprogramsarecarefullydesignedtonotofferrelieffromthepainof
back-taxpaymentstothedegreethatmakesnon-complianceamoreattractivechoicethan
compliance.Thus,voluntarydisclosureprogramssupportequitablecompliancewiththelaw.
Akeyelementofavoluntarydisclosureagreementisthetaxpayer’sdisclosureoffacts
previouslyunknowntothetaxagency,whichissensitiveinformationcontrarytothetaxpayer’s
interests.Thesefacts(a)establishwhythetaxpayershouldlikelyhavebeenfilingandpayingtaxes
forpriortaxperiodsand(b)certifythattaxpayerhasnotpreviouslybeencontactedbytaxing
authoritiesandis,thus,comingforwardvoluntarily.Importantly,thisrepresentationoffactsis
subjecttoauditandverificationbythetaxagencyand,ifitismateriallyinaccurate,thetaxagency
canwithdrawthebenefitsoftheagreementandimposethepenaltiesandassessmentsforegone
underitsterms.
Havinganaccurateandcompletedisclosureoffactssubjecttoverificationisessentialfora
taxagencytodeterminethepropertreatmentofthetaxpayer.Further,whilethisinitialdisclosure
offactsisheldconfidentialbythetaxagencytofacilitatetheagreement,futureinformationfiledby
thetaxpayerintaxreturns,includingthetaxpayer’sidentity,willbesubjecttosharingwithother
publicagenciespursuanttolawsandinformationexchangeagreements.Inshort,beyondtheinitial
agreement,thetaxpayergainsnocontinuingsecrecyfromotheragencies.
Thetypicalvoluntarydisclosureagreementrequiresthetaxpayertoregister,fileandpay
taxesforaprior“look-back”period(typicallythreeyears)andallfutureyearssubjectfullytothe
taxlaws,rulesandproceduresofthejurisdiction.Importantly,theagreementpreservesthe
authorityofthetaxagencytoconductaproper,independentauditofthetaxpayer’sbooksand
recordsforthe“look-back”periodandfutureyears.Yearspriortothe“look-back”periodcanbe
subjecttoauditifthetaxpayer’sdisclosureoffactswasnottrueorcomplete.
Statesapplytougherrequirementsinsometypesofcases.Whentaxpayershavecollected
butnotremittedemployerwithholdingtaxesorsales/usetaxes,stateswillgenerallyrequirethe
taxpayertopayallthecollectedbutunremittedtax—pluspenalties—foraslongatimeasthe
failuretopayoccurred.Thesefunds,oncecollectedfromemployeesandcustomers,areheldin
trustforthestateanddonotbelongtothetaxpayer.
Finally,exceptforpass-throughentitytaxpayers,voluntarydisclosureagreementsdonot
provideanydirectbenefitstopartiesotherthantheirsignatories.Forpass-throughentities,many
stateswillrequireonlytheentitytoenterandsignthevoluntarydisclosureagreement,andnotits
owners.Fortheirportionofthetaxliabilityofthepass-through,theownersshareinthecostsand
benefitsoftheentityenteringadisclosureagreement.Thisexceptionislimitedtotheunique
structureandcomplexityofpass-throughbusinesses.
Thekeyelementsofcurrentpracticesregardingvoluntarydisclosureagreementsare
summarizedasfollows:
• Theyareoftengroundedinaformallegalframeworktoensureintegrityandequity.
• Thepublichasknowledgeofandaccesstovoluntarydisclosureprograms.
12
•
•
•
•
•
•
•
Theessentialelementforthetaxpayertosecureanagreementisadisclosureoffacts
unpromptedbyanyagencycontactsandthatremainssubjecttoverificationbythetax
agency—thusensuringitscompletenessandaccuracy.
Ifthedisclosureismateriallyinaccurate,thetaxagencycancanceltheagreementand
reclaimorcancelitsbenefitstothetaxpayer.
Thedisclosureoffactsisprotectedfromsharingwithotheragenciesiftheyare
accurate,buttherearenolimitsonsharingthetaxpayer’sfuturetaxreturnandaudit
informationwithotheragencies.
Thetaxpayercommitstotimely,futuretaxpayments.
Thetaxpayercommitstoback-taxpaymentswithinterestfora“look-back”periodof
typicallythreeyears,withapotentiallylongerperiodpluspenaltiesapplyingto
collected,butunremittedtaxesheldintrustforthestate.
Thetaxpayerisfullyaccountabletothetaxagency,whichretainsitsnormalsupervisory
andenforcementauthority,auditandotheradministrativetools.
Withapossibleexceptionforpass-throughentityowners,nopartiesbenefitfrom
voluntarydisclosureagreementotherthanthesignatoriesthemselves.
4. AirbnbAgreements
a. IntroductiontoAgreementsandTheirProvisions.Thissubsectiondescribes
provisionsoftwelvedifferentagreementsbetweenAirbnbandstateorlocaltaxagencies.States
andlocalitieshavereleasedtheseagreementsundervariouscircumstances.Someagreementsare
inthepublicdomainbecauseofstatepublicmeetinglaws.Taxagencydecisionsoropenrecords
requestsaccountforothersbeingreleased.TheagreementsarebetweenAirbnbandthefollowing
jurisdictionsbystatelistedinTable1.
State
California
Florida
Maryland
NewMexico
Oregon
Table1.AirbnbAgreementsbyState—ListedAlphabetically
Agreement
EffectiveDate
HumboldtCounty
July1,2016
CityofPalmDesert
July1,2016
CityofSanJose
February1,2015
FloridaDept.ofRevenue—State&22Counties
December1,2015
HillsboroughCounty
February1,2017
PinellasCounty
December1,2015
PolkCounty
February1,2017
MontgomeryCounty
July1,2016
CityofSantaFe
August1,2016
CityofTaos
August1,2016
MultnomahCounty(exceptCityofPortland)
July1,2014
WashingtonCounty
July1,2016
13
Collectively,thesedocumentsrepresentasampleofthelargernumberofagreements
Airbnbclaimstohaveexecutedwithstatesandlocalities—agreementsrunningto200perrecent
AirbnbstatementsmadetotheFinancialTimes.9
Table2onpage16displaysproblematicprovisionsintheAirbnbagreementsincategories
byjurisdiction.Theseprovisionstypicallydepartfromandextendwellbeyondestablishedtax
practices.Theyareconsideredproblematicbecausetheprovisionsweakenaccountabilityfortax
payments,createtaxinequities,shieldlodgingactivitiesfromregulations,orgenerateconfusion.
Thefourcategoriesaretaxadministrationbenefits,back-taxamnesty,confidentialityand
informationbenefits,andmiscellaneous.
Themiscellaneouscategoryisnotusedforsubstantiveevaluationpurposes.Itisincludedto
notetheironythatalthoughalltheagreementsprovidebenefitstothirdparties—Airbnb’slodging
operatorsandoccupants—tenoftheseagreementsincludemisleadinglanguageclaimingthereare
nosuchthird-partybeneficiaries.
Thepresenceofaprovisionintheagreementforajurisdictionisindicatedbyacolorhighlightedcellwithacharacterinside.Adifferentcolorfamilyisusedforeachcategory.Within
eachcategory,therearethreelevelsofshading.Thedarkestcolorwiththeuppercase“X”indicates
thattheprovisionisastrongformofthelanguage.Theseconddarkestcolorwiththelowercase“x”
indicatesalesserversionoftheprovision,butstillonethathasasignificantimpact.Thelightest
colorindicatesthepresenceofaprovisionthatisambiguousorhasaminorimpact.
Intermsoffrequencyofprovisions,thoseinvolvingtaxadministrationaremostoften
presentintheagreements.Incompleteand/orinaccuraterecitalsandrequiringauditstouse
anonymousdataareinalltheagreements.BlockingauditoraccesstoAirbnb’sbooksandrecords,
limitingauditsoflodgingoperatorsandoccupants,andexemptinglodgingoperatorsfrom
registrationarethenextmostfrequentprovisions.Back-taxamnestyprovisionsareincluded58%
ofthetime.Confidentialityandinformationbenefitsareincluded40%ofthetime.
ToanalyzetherelativedegreetowhichjurisdictionsprovidebenefitstoAirbnbandits
lodgingoperatorsandoccupants,weclassifythembythenumberofcategoriesforwhicheach
jurisdictionprovidesbenefits.Theclassificationisindicatedbythenumberintheyellowhighlightedrowatthebottomofthetable.Level1indicatesthejurisdictionprovidesbenefitsin
oneofthecategories.Level2indicatesthejurisdictionprovidesbenefitsintwocategories,and
level3denotesbenefitsprovidedinallcategories.Thehigherthenumber,theworsethe
agreement’simpactonthepublicinterest.
Thereareafewjudgmentsinvolvedintheclassification.PalmDesertisgroupedinLevel1
jurisdictionseventhoughitoffersaminorprovisioninasecondcategory.MultnomahCounty
providesbenefitsinthreecategories.However,itsback-taxamnestyprovisionisofmediumimpact,
itstaxadministrativebenefitsarelessfavorabletoAirbnbthanotheragreements,anditdoesnot
compromiseinformationexchange.ThesefactorsresultinclassifyingMultnomahinLevel2.
9LeslieHook,“Airbnblookstosecure700taxdealswithcities.”
14
Fouritemsspreadacrossvariousagreementswarrantcomment.First,therowlabeled,
“DefinestheTaxBase,”referstotaxbaseinterpretationsandcalculationproceduresincludedinthe
FloridaandMultnomahagreements.Theirpresenceisnotedbecausetheyareexamplesof
provisionsthatconstituterulesthatshouldbeproposedthroughrule-makingprocesses.
Second,the“asterisk”forauditlimitsforlodgingoperatorsandoccupantsforHillsborough
Countyisthenetresultof(a)languagerestrictingauditsforoperatorsandoccupantsasinother
agreementscounter-balancedby(b)addedlanguageintheagreementthatcountyofficialsbelieve
givethemauthoritytoauditoperatorsandoccupantswhenwarranted.
Third,threeoftheagreements—Florida,SantaFeandMultnomah—requiretaxofficialsto
receivewrittenconsentfromAirbnbbeforetalkingtothemediaaboutitsagreementswithAirbnb.
Thisprovisionbreaksthechainofcommandspecifiedbylawthatrunsfromtheagencythrough
electedofficialstothepublicandhandssupervisionoftheagencyovertoAirbnbformedia
inquiriesabouttheagreement.
Fourth,inPinellasCounty,theagreementrequiresthetaxagencytogivenoticetoAirbnb
thatanotherpublicagencyhasrequestedinformationaboutAirbnboritslodgingoperators.Ifthe
taxagencyprovidesthatnotice,itmayalertAirbnbanditslodgingoperatorstoapending
investigationorreviewbyaregulatoryagency.Thatnoticecouldunderminetheregulatory
agency’sefforts.Itseemsquestionablefortaxofficialstoinformaprivatebusinessofinvestigations
byaseparatepublicagencythatmayaffectthatbusinessoritscustomers
15
Table2.ProblematicProvisionsofAirbnbAgreementsbyJurisdiction
California
Florida
Maryland
NewMexico
Oregon
Humboldt PalmDesert SanJose FL+22Co's. Hillsborough Pinellas Polk Montgomery SantaFe Taos Multnomah Washington
TaxAdministrationBenefits
Incomplete/InaccurateRecitals
X
X
X
DefinesElementsofTaxBase
X
x
x
x
X
X
x
X
x
x
X
Books&RecordsExcludedfromAudits
X
X
x
X
X
X
X
X
X
X
*
X
AuditLimitsforOperatorsorOccupants
X
x
*
X
*
X
x
X
X
X
X
X
AnonymousData--Returns&Audits
X
X
X
X
X
X
X
X
X
X
X
X
Audit/AssessmentLimits--CertainTaxPeriods
X
NoOperatorRegistrationforAirbnbTrans.
X
x
X
X
X
X
*
X
X
X
X
X
X
X
X
X
X
Back-TaxAmnesty
AmnestyforAirbnb
X
X
AmnestyforOperators&Occupants
X
X
X
X
X
x
X
Confidentiality&InformationBenefits
AgreementConfidential
X
X
X
X
X
NegotiationsConfidential
X
X
X
X
X
X
X
X
X
X
NoticeofFOIARequests-Agreement
X
X
Notice/ConsentforMediaDiscussions
X
ReturnsConfidential--SeparatefromLaw
x
ExemptionfromInformationExchange
x
*
X
X
X
X
X
X
X
X
X
3
X
3
NoticeofInformationExchange
X
Miscellaneous(NotIncludedinCategoryCount)
NoThirdPartyBeneficiaries
ProblematicCategoriesIncludedinAgreement
X
2
X
1
X
1
X
1
2
16
X
3
X
1
X
2
2+
X
2
Thesubsectionsbelowevaluatetheseagreementscollectivelyasacompositeofprovisions,
whichessentiallymeanslookingatascenarioof“maximumimpact.”Thatisthenecessaryand
reasonableresultofwantingtoconsiderallthemajorfeaturesthatappearinanyoftheAirbnb
agreements.Thecompositeviewisalsojustifiedandrealisticbecausethreeofthetwelve
agreementssubstantiallyconformtothe“maximumimpactscenario”andrepresentalltheissues
raisedbytheagreements.
b. PerplexingStructureandScopeofAgreements.TheAirbnbagreementshavea
perplexingandlikelyunprecedentedstructureinwhichAirbnbbargainsforandsecuresextensive
monetary,proceduralandregulatorybenefitsforitscustomers—lodgingoperatorsand
occupants—whodonotsigntheagreements.Manyofthesebenefitshidetheidentityofoperators
fromregulatoryandlawenforcementagencies.Nonetheless,thelodgingoperatorsandoccupants
commitnolegally-bindingperformancetothetaxagencyandarenotevenknowntotheagency.
Wehavenotedalimitedinstanceofanon-signatoryimpactinvoluntarydisclosure
agreementsforpass-throughentities.Thatexceptionarisesfromownershiprelationshipsdefined
bystatutorylaw,includinglawsonpass-throughtaxation.Thesubstanceinvolvedinthisexception
isnarrowandinvolvesdistributingthetaxeffectonapass-throughentityamongtheownersofthe
business.Nonewburdenorbenefitiscreatedintotalsumfortheownersbeyondtheburdenand
benefitsecuredbythepass-throughentityitself.
Incontrast,theredoesnotappeartobeaclearbasisinlawforincludingAirbnb’s
customers—locallodgingoperatorsandoccupants—inataxagreementsignedonlybyAirbnb.
Thereisnospecificlegalauthoritycitedintheseagreementsforthetaxagenciestostructurean
agreementthatprovidesmajorbenefitstonon-signatory,localbusinesses.Thescopeofthe
benefitsforAirbnbcustomersrangebeyondthebenefitsprovidedAirbnbintheagreements.The
customerbenefitsarenotgovernedbyprovisionsoflawand,infact,oftenconstituteexceptionsto
orexemptionsfromthelaw.Theexceptionstolawbeginwithsuspendingregistrationfortax
purposesoftheselocallodgingoperators.Publicregistrationisacenturies-oldmethod
fundamentaltoadministeringtaxes,regulationsandotherlaws.ThebenefitsforAirbnb’s
customersgrowfromthereandsignificantlyshieldAirbnb’slodgingfacilitiesfromregulatoryand
lawenforcementauthorities.
ThestructureandscopeoftheAirbnbagreementsraiseamultitudeofquestionsthat
shouldbethesubjectofvigorouspolicyandlegaldebate.Twoquestionsthatarisealmost
immediatelythatshouldgivetaxagenciespauseabouttheseagreementsarethefollowing:
• Isitproperforataxagencytograntexclusive,wide-rangingbenefitstolocalbusinessesin
agreementsthatthosebusinessesdonotsignandtowhichtheyarenotlegallybound?And,
• Isitalsoproperforataxagencytoenteragreementsthatweaken,withrespecttothese
localbusinesses,theimplementationoflawsadministeredbyotheragencies?
SpecialNoteonTable3:Theremainingsubsectionsbelowcompareindetailspecific
featuresoftheAirbnbandvoluntarydisclosureagreements.Ausefulreferenceforthatdiscussion
isTable3below,whichsummarizeskeydifferencesamongtheagreements.
17
Description
TaxabilityFacts
ConstitutionalNexus
StatutoryApplicability
Table3.ComparisonofTaxpayerResponsibilitiesandBenefits
forVoluntaryDisclosureAgreementsandAirbnbAgreements
TaxpayersinVoluntary
Airbnb
Operatorsandoccupants
DisclosureAgreements
in
in
AirbnbAgreements
AirbnbAgreements
Taxpayersareprobablyor
clearlysubjecttostate’s
jurisdiction.
Taxlawsforwhichthe
disclosureismadeapplyto
thetaxpayer.
Taxpayerishighlylikelyor
clearlysubjecttostate’s
jurisdiction.
Lodgingtaxlawsmayor
maynotapply;legislation
canremedytheissue.
Taxpayerisclearlysubject
tostate’sjurisdiction.
Lodgingtaxlawsapplyto
taxpayer—collection
requiredabovethresholds.
TaxabilityConclusion:Taxpayersareequalornearlyequalintheirtaxabilitystatusonconstitutionalgrounds.Where
statutesdonotapplytoAirbnb,thosestatutescanbeupdatedtoapply.Thereisastrongcasefortaxagenciestotreat
thesetaxpayerssimilarly.
TaxpayerResponsibilities
FactualRepresentations
Mustmakeacompleteand Makesrecitalsoftheirown Taxpayerdoesnotreciteor
accuratedisclosureoffacts, determination;not
disclosefactsofanykindin
subjecttoverification.
requiredtobecomplete
theagreements.
andaccurate;notsubjectto
verification.
Back-TaxPaymentswith
Taxpayerstypicallypay
Noagreementrequires
Noagreementrequires
Agreements
threeyearsofpriortaxes
Airbnbtomakeback-tax
lodgingoperatorsor
(Seerelatedfeatureof
plusinterest.Penalties
payments.
occupantstomakeback“Back-Tax”Forgivenessin
forgiven.Harsher
taxpayments.
TaxBenefitssection
treatmentmayapplyfor
below.)
taxescollectedbut
unremitted.
FutureTaxCompliance
Taxpayermustregisterfor, Taxpayermustregister,file Taxpayersexemptfrom
timelyfileandpayfuture
andmakefuturepayments, registering,filingand
taxes,subjecttofullaudit
onfavorabletermsthatdo payingtaxesonAirbnb
accountabilitytothestate.
notrequirefull
bookings,butrequiredfor
accountability.
non-Airbnbrentals.
LegalCommitmentto
Signstheagreementand
Signstheagreementand
Doesnotsignthe
Agreement
mustabidebyitsterms.
mustabidebyitsterms.
agreement,butreceives
benefitsfromit.
TaxpayerResponsibilitiesConclusion:Theresponsibilitiesbornebythetaxpayerenteringavoluntarydisclosure
agreementarehugeincomparisontoresponsibilitiesbornebyoperatorsandoccupantsundertheAirbnbagreements,
eventhoughtheirtaxpayercircumstancesareequal.Inaddition,thevoluntarydisclosuretaxpayerbears
responsibilitiesthataremoreextensivethanAirbnbbearseventhoughtheirconstitutionalcircumstancesaresimilar.
TaxpayerBenefits
Back-TaxForgiveness
Incaseswheretaxpayer
Infiveagreements,Airbnb Insevenagreements,
wasanon-filerandhad
receivesamnestyforback
operatorsandoccupants
nexuspriortothelast
taxes,interest,orpenalties. receiveamnestyforback
threeyears,taxpayer
taxes,interest,orpenalties
benefitsfromtax
Mostoftheother
onAirbnbbookingsonly.
forgivenessforperiods
agreementsaresilenton
priortolastthreeyears.
back-taxliabilitiesfor
Fivesplitbetweenthose
Example:Ifataxpayerhad
Airbnb,andnonerequire
unclearaboutoperators’
nexusforfiveyears,the
back-taxpayments.
back-taxliabilitiesfor
earliesttwoyearsare
Airbnbbookingsandthose
forgiven—buttaxesand
preservingrightstothem.
interestarepaidforthe
Noback-taxpaymentsare
mostrecentthreeyears.
required.
18
TaxpayerBenefits—Continued
FutureFilingExemption
No.
LimitsonorExemptions
fromAudits.
No.Fullaccountability
underauditsapplies.
Confidentialityof
Agreement.
Yes,duetoconfidentialand
proprietaryinformation,
includinginformation
contrarytothetaxpayer’s
interests.
Yes
Confidentialityof
negotiations.
LimitsonInformation
Exchange.
Onlyinitialdisclosureof
factsandidentityisexempt
fromexchangewithother
publicagencies.Allfuture
taxandidentity
informationsubjectto
exchange.
Yes,totheextent
confidentialityisrequired
bylaw.
No.
Yes.Auditsalwayslimited
toanonymousdata;nearly
alwayslimitedtoreturns
andsupportingdocuments
forthereturns;some
agreementslimitperiodsof
auditsandassessments.
Yes,manyagreements
includeconfidentiality
clausedespiteno
confidentialorproprietary
informationbeingpresent.
Yes.
Fiveagreementslimitor
exemptinformation
generatedunderthe
agreementfromexchange
withotherpublicagencies,
unlessrequiredbylaw.
Yes,forAirbnb
transactionsinallbutone
agreement.Secrecyallows
avoidanceofregisteringfor
othertransactions.
Mostagreementsexempt
operatorsandoccupants
fromauditsfor
transactionscompleted
throughtheAirbnb
platformforperiodsthe
agreementiseffective.
Yes,manyagreements
includeconfidentiality
clausedespiteno
confidentialorproprietary
informationbeingpresent.
Yes,despiteoperatorsnot
beingagreementparties.
Fiveagreementslimitor
exemptinformation
generatedunderthe
agreementfromexchange
withotherpublicagencies,
unlessrequiredbylaw.
ConfidentialityofTax
Yes.Someagreements
Yes.Someagreements
InformationfromPublic
providebroader
providebroader
Disclosure
confidentialitythanlaw.
confidentialitythanlaw.
TaxpayerBenefitsConclusion:Thebenefitsenjoyedoperatorsandoccupantsarehugecomparedtobenefits
receivedbyvoluntarydisclosuretaxpayerseventhoughtheircircumstancesarethesame.Thestrictlytax-related
provisionsfavoroperatorsandoccupantsoverthevoluntarydisclosuretaxpayers,andthelong-termsecrecyshieldfor
operatorsandoccupantsfromcompliancewitharangeoflawsisasubstantial,addedadvantage.Thetaxbenefits
enjoyedbyAirbnbaresignificantascomparedtothebenefitsreceivedbyvoluntarydisclosuretaxpayersintermsof
back-taxtreatment.Airbnb’staxbenefitsareevenmoreextensiveifAirbnbtakesadvantageoftheirabilityunderthe
agreementstounderreportandunderpaytaxes.Finally,Airbnb’sbenefitsarehugeintermsofarisingmarketsharein
thelodgingindustryarisingfromsecrecyprovisionsthatshieldAirbnboperatorsandoccupantsfromcompliancewith
arangeoflaws.
OverallConclusion:Forbothburdensandbenefits,Airbnbanditsoperatorsandoccupantsreceivesubstantially
morefavorabletreatmentthandosimilarlysituatedtaxpayersenteringtraditionalvoluntarydisclosureagreements.
c. TheFactsNotEstablished—AFailureofBasicAdministrativePractice.TheAirbnb
agreementsfailtoestablishcompleteandaccuratefactsaboutAirbnb,itslodgingoperators,and
occupantsnecessarytomakingproperdecisionsconcerningtheirtaxtreatment.Worseyet,tax
agenciesrelinquishthepowertodeterminerelevant,truefactswhiletheagreementsareineffect.
Indoingso,theseagenciesfail,toanextraordinarydegree,standardsofsoundadministrative
practice.Establishingfactsintaxcasesisacriticalfirststeptoensuringthatanagencyappliesthe
lawcorrectlyandequitably.Voluntarydisclosureagreementsdothatjobwell.TheAirbnb
agreementsdonot.
19
TheAirbnbagreementspresentAirbnb’s“recitals,”astatementoffacts—butnotafull
disclosureofitsbusinessoperationsintherelevantjurisdiction.Unlikethetaxpayer’sdisclosures
involuntarydisclosureagreements,theserecitalsdonotappeartoincludeanyinformation
contrarytoAirbnb’sinterests.Nordotheyrevealproprietaryinformation,whichistypically
necessarytounderstandthenatureandextentofacompany’sbusinesscontactswithastateor
locality.TherecitalssummarizelargelypublicinformationabouttheAirbnboperations,muchof
whichcanbegleanedfromtheirwebsite.Airbnb’srecitalsoftenincludeabriefoperational
descriptionofpaymentprocessingthatappearstoconformtostandardpracticesforlodging
transactions.Inothercases,therecitalsdescribewhatAirbnbdoesnotdoinajurisdictionorthe
limitednatureoftheiractivitiesintermsofwhatAirbnb“only”does.
HereareexamplesofsomemissingpiecesinAirbnbrecitalsrelevanttotaxagency
decisionsonissuesintheproposedagreements:
• ThenumberofAirbnb’slodgingoperatorsandnumberofoccupant/nightsinthe
jurisdiction;
• Informationaboutthenumberandscaleofoperatorscategorizedbytype(homesharingvs.commercialstyleoperationsthatareseason-long,full-timeormulti-unitin
nature),byamountofrentalrevenues,frequencyofrentalsandsizeoffacilities;
• Airbnb’sengagementofcontractorswhoprovidephotographic,translationandother
servicesinvariousjurisdictions;10
• ThefactthatAirbnbservesasanegotiatingagentonbehalfoflodgingoperatorsand
occupantstosecuremajorbenefitsontheirbehalfintheagreements,and11
• TheidentityofthelodgingoperatorsAirbnbproposestoreceivebenefitsfromthe
agreeementssotheagencycandetermineiftherearepriortaxviolations,delinquencies
orothercircumstancesthatwoulddisqualifytheoperatorsfromthosebenefits.
Thetypesofissuestowhichtheinformationlistedaboveisrelevantinclude,butarenotlimitedto:
• WhetherAirbnbanditsoperatorsqualifyforthefavorabletaxtreatmentsought;
• Theamountofback-taxforgivenessandotherbenefitsbeinggrantedtoeach;
• Theextentofpublichealthandsafety,housingandothercommunityissuesthatwould
beaggravatedbymaintainingsecrecyofoperatorsandsuspendinginformationsharing
withotheragencies,and
• Theimpactoftheagreementsontheabilityoftheagencytoensurepropercollectionof
taxesbyAirbnborthelodgingoperators.
10Airbnb’swebsitereferencesservicesitprovidesthroughcontractors.OnereferencetoAirbnb
contractors,forexample,islocatedat:https://www.airbnb.com/help/article/414/should-i-expectto-receive-a-tax-form-from-airbnb?topic=248.
11
Thebenefitstolodgingoperatorsinclude,amongothers,back-taxamnesty;exemptionsfrom
registeringfor,reportingandpayingcurrenttaxes;immunityfromaudits,andsecrecyprovisions
thatpreventthetaxagencyandotherpublicagenciesfromknowingtheidentitiesoflodging
operatorsandoccupants.Airbnb’snegotiatingroleforlodgingoperatorsisseparateanddistinct
fromtheroleitdescribesinitsTermsofServicesofbeingabletoregisterandcollectlodgingtaxes
dueontransactionsbookedthroughitswebsite.
20
Thefactthatagenciesmayhavedisregardedtheseissuesinenteringtheseagreementsdoes
notlessentheneedfortheagreementstohaveacompleteandaccuratedisclosureoffacts.Tothe
contrary,establishingthefullandtruefactsfirstisnecessarytoensurethatthetaxagency
consciouslyconsidersallrelevantissues.Taxagenciesshouldnothavesoreadilyagreedtothe
inadequateandsuperficialinformationthatAirbnbhasofferedinitsrecitalsoffact,butshould
haveinsteadinsistedonfulldisclosuresofinformation.
Theneedfortaxagenciestosecuretheidentitiesoflodgingoperatorsdeservescomment,
consideringAirbnb’sfocusonkeepingtheinformationsecret.12Itisnecessaryandreasonablefor
taxagenciestoknowoperatoridentitiesbecausetheyareconductingbusinesswithintheir
jurisdictionsandmaybesubjecttovarioustaxes,includinglodgingtaxesiftheymeetthe
applicablethresholds.Specifically,theagenciesneedtoknowoperatoridentitiesto:
• Determineifthereareanycircumstancesinalodgingoperator’staxhistoryandstatus
thatwoulddisqualifytheoperatorfromtaxbenefitsfromtheagreements;
• Collectapplicablebacktaxesnotforgivenundertheagreementordueuponbreachof
theagreement;
• Ensurethatoperatorsareincompliancewithrelevant,futuretaxobligations,13and
• Maintainanadministrativeprocessthatenablescross-checkingAirbnb’staxreturns
andpaymentsagainstthelodgingoperators’records.
Thelatteritemiscomparabletodualregistrationbywholesalersandretailersforsalestaxes,with
wholesalersmakingsaleswithouttaxappliedthroughuseofasaleforresalecertificate.
TheitemsoffactomittedfromAirbnb’sagreementsmaysimplybethetipoftheiceberg.To
securefullandtruefacts,taxagenciesshouldalsohaveinsistedthatAirbnb’srepresentationsbe
subjecttoverificationbytheagency.Theagreementsdonotauthorizeagenciestocheckthefacts
Airbnbpresents.Further,aswillbediscussedlaterinthisreport,theagreementseffectivelyblock
agencyaccesstoAirbnbbooksandrecords—accessnecessarytocheckonthevalidityofthefacts.
Further,iffoundmateriallyinaccurateorincomplete,Airbnband/oritslodgingoperatorsshould
besubjecttoconsequences,suchaspaymentofbacktaxesandpenaltiesandcancellationofother
agreementbenefitsgrantedundertheagreement.Thus,theagreementsdonotrequireAirbnbtobe
eitheraccurateorcompleteinitsstatementoffacts.Inexplicably,taxagenciessurrendertheir
authoritytosecurefullandtruefactsaboutAirbnboperations.Indoingso,theagenciescannot
ensuretheintegrityoftheagreementorequitabletreatmentofothertaxpayers.
d. AccountabilityLost:AirbnbGainsControlofProcess—OperatorResponsibility
Disappears.TheagreementsrequireAirbnbtocommittocollectingandreportinglodgingtaxeson
aprospectivebasisforfuturetaxperiods.However,unlikeallothertaxpayers,includingthose
enteringtraditionalvoluntarydisclosureagreements,Airbnbisnotrequiredtomeetregular
12Contrarytoitsnegotiatingposture,Airbnb’stermsofservicespecificallyauthorizeAirbnbto
disclosetheidentitiesoflodgingoperatorsandoccupantsifAirbnbdecidestocollectlodgingtaxes
onAirbnbbookingsinajurisdiction.
13TheAirbnbagreementsprovidethatlodgingoperatorsareresponsibleforcollectingandpaying
taxes,forbackandfutureperiods,onnon-Airbnbtransactions.Withouttheidentityofthelodging
operations,theseprovisionsareanemptypromise.Supplyingoperatoridentitiesisareasonable
requirementtoensureimplementationofthisagreementlanguage.
21
standardsofaccountabilitytothetaxagencyfortheamountstheycollectfromlodgingoccupants
andthensubsequentlypay.TheagreementsdonotguaranteethatAirbnbwillreportandpaythe
correctamountsoftax,butinsteadallowitlatitudeindeterminingtheamountsitwillpay.Finally,
theagreementslargelyrelievelodgingoperatorsthatmeetthethresholdsfortaxfilingoftheirlegal
obligationtocollectandpaylodgingtaxes.
Adisclaimerisinorderhere.Thissubsection,andothersthatappearelsewhere,discuss
provisionsintheAirbnbagreementsorfeaturesofAirbnbproceduresthatwouldallowAirbnb,ifit
chosetodoso,tounderreportorunderpaytaxesorotherwiseabusethetaxsystem.Discussingwhatis
possibleundertheagreementsorcompanyproceduresdoesnotinanymannersuggest,implyor
assertinanymannerthatAirbnbis,infact,underreportingorunderpayingtaxesorengagingin
improperorillegalactivitiesofanykind.Theanalysisconductedhereisaimedonlyatidentifyingthe
potentialforproblemstooccur,butprovidesnoinsightintowhethertheproblemsareoccurring.
TheunusualandunprecedentedprovisionsthatdiminishAirbnb’saccountabilityforthe
taxestheyremitinclude:
• TaxagenciesareallowedundertheagreementstoauditAirbnb’staxreturnsand
supportingdocuments(oftenqualifiedasdocuments“filed”withthetaxagency),but
notAirbnb’sbooksandrecords—effectivelyblockingauditorsfromverifyingthe
accuracyofitsreturnsandpayments.14
• TaxagenciesarestrictlylimitedtoauditingonlyAirbnb-suppliedanonymous
transactiondatathatdonotidentifythelodgingoperatorsandtheirrentallocations,
makingitpossibleforthedataandthetaxreturnstheygeneratetobefictional.
• Mosttaxagenciesarealsoeffectivelyprohibitedfromauditinglodgingoperatorsand
occupantsforAirbnbtransactionsduringtheperiodswhenAirbnbassumes
responsibilityforcollectionandpaymentofthelodgingtaxes—thusblockingtheuseof
operatororoccupantrecordstoverifytheaccuracyofAirbnb’sreturnsandpayments.
TaxagenciesareessentiallyallowedtoconductauditsofsecondaryinformationAirbnb
constructs—taxreturns,supportingdocumentsandanonymousdata—andthatinformationmayor
maynotbalancewiththeactualtransactionsandtaxesinthejurisdiction.Whethertheconstructed
informationrepresentsfactorfictioncouldbeonlybedeterminedbylookingatAirbnb’sfullbooks
andrecords,andthatisblockedintheseagreements.Withpermissiontouseanonymousdataand
toprepareschedulesandreturnsbasedonthatdata,Airbnbhasgainedtheabilitytodetermine
whatitwillpayintaxes.Ithasessentiallywrestedcontrolofthetaxprocessfromtheagenciesand
secureditforitself.
14
Taxagenciesaretypicallyauthorizedbylawtoauditthebooksandrecordsoftaxpayersto
determinetheaccuracyoftaxreturnsandpayments.TheAirbnbagreementsdonotreference
auditsofAirbnb’sbooksandrecords,butinsteadbeingconducted“onthebasisofreturnsand
supportingdocumentation.”Ifanargumentismadethatthelanguagedoesnotliterallyprohibit
accesstoAirbnb’sbooksandrecords,therebuttalistwo-fold.First,ifthatisnotintent,whythe
absenceofthestandardreferencetoauditingbooksandrecords?Second,iftaxauditorswereto
accessAirbnb’sbooksandrecords,theywouldlikelydiscovertheidentitiesoflodgingoperators
renderingmootAirbnb’sprovisionrequiringtaxagenciestoauditonlyanonymousdata.The
anonymousdataprovisionconfirmsthatconductingaudits“onthebasisofreturnsandsupporting
documentation”isdesignedtopreventaccesstoAirbnb’sbooksandrecords.
22
Airbnbdoesnotgainenoughcontroloverthetaxprocesstosendzerodollarstothetax
agencies.Thatwouldinviteinstantsuspicion.ButAirbnbdoesgainenoughcontrolthatitcould
chose,ifitdecidedtodoso,tomakeaprofitfromtaxmanipulationwithminimalriskofdetection.
RecallthatthetaxmoneyinvolvedheredoesnotcomefromAirbnb’searnings.Itcomesfromtaxes
paidbyguestswhentheyrentlodging.Undertheagreements,Airbnbcouldchargegueststhefull
amount,butsendlesstothetaxagencieswhilepocketingthedifference.
ThereisnoevidencethatAirbnbhasengagedinthismanipulation.Thepointisthatthereis
ariskthatitcouldoccur.Thebestwaytodetectanddeterthistypeofabuseisforauditorstohave
accesstoAirbnb’sbooksandrecords,andthataccessdoesnotoccurundertheseagreements.
Theagreementseliminatetheclearresponsibilityoflodgingoperators,iftheyexceedfiling
thresholds,tocollectandpaylodgingtaxesonAirbnbbookings.Operatorsareexemptedfrom
registeringfor,filingandpayingtaxes.Theiridentitiesarekeptsecretfromtaxandotherpublic
agenciesthroughlayersofmeasuresincludingtheanonymousdataprovisions.Asdiscussedbelow,
theyaresubstantiallyimmunefromauditsifataxagency,bychance,didfindthem.These
provisionsnotonlylessenaccountabilityfortaxesonAirbnbbookings,butalsomakeitmore
difficultfortaxagenciestoidentifytheseoperatorstoreportandpayothertaxestheyowe.The
firstpartiesresponsibleunderlodgingtaxlawsfortaxpaymentsareeffectivelyrelievedofthat
responsibilitybytheseagreements.
Thelanguagevariesamongtheagreementsregardingrestrictionsontaxagenciesauditing
lodgingoperatorsandoccupantsforAirbnbtransactions.Severalagreementsprovidethattax
agenciesmayaudit“hostsandguests”aftertheconclusionofanauditofAirbnbwith“thematters
unresolved.”Thatlanguageislikelyineffectiveinallowingauditsoflodgingoperatorsbecauseits
setsupaCatch22situation.WithtaxauditslimitedtoAirbnb’ssecondarydata(returns,schedules
andanonymousdata),theauditsmayneverproduceadiscrepancyoranyissuetoresolve
whatsoever.Beginningwithafileofanonymousdataforthejurisdiction,Airbnbcouldconstruct
supportingschedulesandreturnsthatbalancecompletelytotheanonymousdataregardlessof
whetherthatdataistrueoffalse.Usingitssoftwareexpertise,Airbnbcouldkeeptheseitemsin
sync,ensuringthattherearenounresolvedauditissues.Atthatpoint,thelanguageofthe
agreementblockstaxagenciesfromauditingthelodgingoperatorsandoccupantsorguests,which
wouldotherwiseserveasindependentinformationtodiscoverproblemswiththereturns,
schedulesordataconstructedbyAirbnb.Thus,languageauthorizing“hostandguest”auditsafter
an“unresolved”Airbnbauditismeaningless,makinglodgingoperatorsimmunefromaudits.
Three(Humboldt,TaosandWashingtonCo.)oftheagreementslimitAirbnbauditsand
assessmentsto12monthsoutofeithera48-monthperiod(intwoagreements)ora36-month
period(inoneagreement).Itiscommonpracticefortransactiontaxesfortaxauditorstosamplea
limitedsetoftransactionstogenerateerrorratesandapplythoseratestothefullauditperiodto
generateacompleteassessment.Thatdoesnotappeartobethecaseintheseagreements.These
agreementslimitnotonlytheauditbutalsotheassessmenttothe12-monthperiod.Thelanguage
suggeststhedatafromthe12-monthperiodwouldnotbeextrapolatedtoproduceanassessment
coveringtheentire48-monthor36-monthperiods.Thatwouldeliminateassessmentsfor75%of
thetimefortwooftheagreementsand67%ofthetimefortheother.FortwoagreementsAirbnb
couldbeconsistentlyunderreportingovera48-monthperiod,butitwillbeassessedfor
underreportinginonly12ofthosemonths.Inthatcase,Airbnbwouldgettokeep75%ofan
23
impropergainfromunderreporting.Theagreementsarealsosilentonwhogetstoselectthe12monthperiod:Airbnb,thetaxagency,orbothconcurring.
Thefractionalauditandassessmentlanguageinthesethreeagreementsmakesnosense.A
fourthagreement(Polk)confirmsthisconclusion.Thatagreementalsoprovidesforauditsand
assessmentslimitedto12monthsoutof36.However,itincludesadditionallanguagethat
specificallyallowstheagencytoprojectfromthe12-monthresultstoproduceanassessmentover
thefull36months,subjecttoAirbnb’sdiscretionarychoicetoallowthatextrapolationorrequire
theagencytoauditfortheadditionalmonths.Inotherwords,Airbnbcanchecktoseeifthe
extrapolationortheactualauditwouldyieldalesserpaymentanddirectthefinalauditprocess
basedonthatcomparison.Theabsenceofthisextrapolationlanguagefromtheotherthree
agreementswouldappeartoconfirmthattheirassessmentsarelimitedtofractionaltimeperiods.
Incontrast,taxpayersenteringvoluntarydisclosureagreementsremainsubjecttohaving
theirbooksandrecordsexaminedbytaxagencies.Theyaregrantednoexceptions,exemptionsor
immunityfromwhatthelawrequiresintermsofprospectivetaxreporting.Inshort,theyremain
fullyaccountabletothetaxagencyfortheamountstheycollect,reportandpay.Theydonotgain
controlofthetaxprocess,whichremainsinthecustodyofthetaxagencyasintendedbythelaw.
e. LessonsfromtheVW“Dieselgate”Scandal.Theremaybesomediscussionoverthe
conclusionthattaxagencieswillnotbeabletoholdAirbnbproperlyaccountableforthetaxesit
choosestopay.Thatconclusionisbasedonthetextoftheagreementsthemselves.However,we
havelearnedthatAirbnbhasofferedatleastonetaxagencyskepticaloftheanonymousdataaside
agreementtoassuagethoseconcerns.Thatsideagreementconsistsoftheoffertoallowthetax
agencyaccesstoAirbnb’ssoftwaresystemtotestandobserveitsoperation.Atitsdiscretion,the
taxagencywillbeabletologon,initiatealodgingtransactionandobservethetransactiongetting
translatedintoanonymousdatawithIDnumbersattached.15Thetaxagencycanseethatthe
transactionitentersresultsinthecorrectamountoftaxandgetsproperlyrecordedinthe
anonymousdatasystem.Whatcouldgowronghere?
TheansweristhesamethingthatallowedVolkswagentocheatonitsemissionstestingfor
dieselcars.TheEPAusesa“testandobserve”systemforautoemissions.Vehiclesarehookedupto
testingequipmentandtheemissionsaremeasured.TheproblemisthatVolkswagenprogrammed
itsdieselcarstoknowwhentheywerebeingtested,sowhenthetestingbeganasignalwassentto
theengine’scomputerthatturnedonthecar’sfullemissionscontrolsystem,andthecarpassedthe
test.Whenthecarwasnotbeingtestedandobserved,theengine’scomputerdialedbackthe
emissionssystemtoalower,inadequatelevelofcontrol.
Thesamethingmighthappenhere.WeassumethatAirbnblikelydoesnotopenitssoftware
systemsimplytoallowanyonetoobservebookingsbeingtranslatedintoanonymousdatafortax
reportingpurposes.Rather,weassumethatAirbnbcreatedaspecialfeaturethatallowsan
15ThisdescriptionofthetestprocessforAirbnbtransactionscomesfromaninterviewwith
HillsboroughCountytaxofficials.AsnotedinAppendixA,theHillsboroughCountyTaxCollector,
DougBelden,hasnegotiatedthebestagreementamongthetwelvereviewedhere.Anyerrorsor
misunderstandingsconcerningthetestsystemareentirelymyown.Anyskepticismexpressedhere
aboutthe“testandobserve”systemdoesnotsubtractfromthefeaturesoftheHillsborough
agreementthatrepresentimprovementsoverotheragreements.
24
authorizedtaxagencytoopenawindowintoAirbnb’ssoftwaretoviewthedatagettingtranslated.
Tostartthetaxagencytest,thesoftwareneedsasignaltoopenthewindow.Thatsignaltoopen
thewindowintothesoftwaresystemwouldbecomparabletothesignalthatthesoftwareinVW
dieselcarsrecognizedwhentheywerehookedtoemissionstestingequipment—asignalthat
turnedonthefullemissionscontrolequipment.Thesignaltoopenthetaxagency’sobservation
windowintotheAirbnbreservation/accountingsystemcouldalsosimultaneouslysignalAirbnb’s
systemtoactivateaversionofthesoftwarethattranslatesbookingtransactionsfullyand
accuratelyintoanonymousdata(orsimulatesthatoccurring).Oncethetaxagency,comfortedby
theobservations,turnsoffthetestandclosestheobservationwindow,thesystemcouldturnback
onadifferentversionofitssoftwarethatskimsoffpartoftheguests’paymentsandrecordslower
levelsoflodgingrentandtaxintheanonymousdatausedonlyfortaxreportingpurposes(butnot
forfinancialaccountingormanagementpurposes).
ThepurposeofthisdiscussionisnottosuggestthatAirbnbdoesorwouldprogramits
softwareinthismannerorengageintaxcheating.Nosuchaccusationsarebeingmadehere.
Instead,thepurposesareonlytodescribe:
• whatistechnologicallypossible,
• thatwhatAirbnbhasofferedasa“fix”forobjectionstousinganonymousdatamaynot
beareliable“fix,”and
• thatanotherwisereputablemultinationalcompanyhasnotoriouslyviolatedlawsby
usingproceduresandsoftwarestructuresanalogoustowhatAirbnbappearstohave
proposedtoataxagency.
Iftheexplanationofhowthesoftwaremightoperatesoundsliketheequivalentoftheoldfashioned“twosetsofbooks—oneforthetaxpeopleandoneforeveryoneelse,”thatiscorrect.
Onlyinthiscasetheseparatebookswouldbehiddeninsidesophisticatedsoftwarethatmakestheir
discoveryharder.However,thatisexactlywhattheanonymousdataprovisionintheAirbnb
agreementsinvites—twosetsofbooks.WhetherAirbnbacceptsthatinvitationisunknown.If
problemsweretoarisewithAirbnb’staxreporting,thetaxagencieswouldneedtorecognizethat
theyhavehelpedcreateanysuchproblemsthemselvesbyfailingtopreservetheabilitytoaudit
Airbnb’struebooksandrecords.
RelevanthereishowWestVirginiaUniversityscientistsdiscoveredtheproblemwithVW
dieselcars.Theydiscoveredtheproblemsbydevelopingequipmenttomeasureemissionsinreal
worldconditionsasthevehicleswerebeingdriven,bypassinganysignalstotheemissionsystem
thatatestwasoccurring.16Theydidnotdecodethesoftwareresponsibleforthedeception.They
discoveredtheactualproblembydoingtheequivalentofwhattaxauditorsdo:theylookedatthe
actual“booksandrecords”tofindthetruthofwhatwasoccurring.Thelessonhereisthataflawin
theAirbnbagreementsisnotsimplytheuseofanonymousdatabutalsotheprohibitiononauditor
accesstoinformationnecessarytocompleteafullandproperaudit.IftheWestVirginiascientists
wereoperatingundertheequivalentoftheAirbnbagreements,theywouldnothavebeenallowed
tomeasurethevehicleemissionswhilethecarswerebeingdriven.Instead,theywouldhavebeen
leftwiththeequivalentofexaminingdatageneratedthroughtheEPAtestingprotocols.Thatisa
16See:http://www.npr.org/2015/09/24/443053672/how-a-little-lab-in-west-virginia-caught-
volkswagens-big-cheatandhttps://en.wikipedia.org/wiki/Volkswagen_emissions_scandal.
25
fundamentalriskforthepublicinterestintheAirbnbagreements:thepotentialthatfalsedata
couldbecreatedthattaxauditorscannotcompareagainsttrue,realworldinformation.
f. PreferentialAmnestyforAirbnbandLodgingOperators.Ascomparedtothethree
yearsofbacktaxesplusinteresttypicallyrequiredbyvoluntarydisclosureagreements,severalof
theAirbnbagreementsprovideamnestytolodgingoperatorsandmanytoAirbnbaswell.The
amnestygrantedtoeitherisoverlygenerouscomparedtothestandardvoluntarydisclosure
agreement.Thatisespeciallytrueforlodgingoperatorswhohavefailedtocomply,butreceive
amnestywithoutvolunteeringtocollecttaxesprospectively.AmnestyforAirbnbandlodging
operatorscreatesariskthatvoluntarydisclosuretaxpayerswilldemandsimilartreatment,
upsettingthecarefulbalancethathasmadevoluntarydisclosureagreementsasuccessful
compliancetool.Amnestygrantedtoeveryonesubstantiallyremovestheincentivefornoncomplianttaxpayerstobegincomplyingwithtaxlaws.
FiveoftheagreementsprovideamnestytoAirbnbforalltaxes,interest,penaltiesorother
associatedchargesforallpriorperiods.ThreeagreementsaresilentonAirbnb’sliabilityfortaxes
inpriorperiods,statingonlythatAirbnbwillbeginningcollectingandremittingasoftheeffective
dateoftheagreement.PalmDesertandMontgomeryCo.includelanguagereservingrightsofthe
partiestodisputeclaims,whichimplieseithertheexistenceoforpotentialforclaimsforprior
periods.HillsboroughandPolkCountiesexplicitlypreservespriorclaimsanddonotreleaseAirbnb
of“existingclaims,causeofaction,orindebtedness.”However,noneoftheAirbnbagreements
specificallyrequirethreeyearsofback-taxpaymentswithinterestasisthecaseforthetypical
voluntarydisclosureagreements.
Sevenoftheagreementsgivecompleteamnestytolodgingoperatorsandoccupantsfrom
backtaxes,interestandpenaltiesonAirbnbbookings.Unlikevoluntarydisclosureagreements,
noneoftheAirbnbagreementsrequirelodgingoperatorstopayanyback-taxpaymentsforprior
non-compliance.Incontrast,voluntarydisclosureagreements—whichdealwithnon-compliant
taxpayersinsimilarcircumstances—typicallyrequirethetaxpayerstopaythreeyearsofbacktaxes
withinterestuponenteringtheagreements.Ofcourse,thefactthattherearenoback-taxpayments
requiredofAirbnblodgingoperatorsandoccupantssimplyhighlightstheincredibledefectofthese
agreementsinprovidingbenefitstopartieswhoarenotsignatoriesandthuscannotberequiredto
fulfillanyresponsibilitiesinexchangeforbenefitsreceived.
TheotherfiveAirbnbagreementsthatdonotgrantamnestyvaryregardinglodging
operatorandoccupantliabilityfortaxesinpriorperiods.Theyrangefrombeing(a)silentto(b)
unclearto(c)attemptingtopreservethoseliabilities.Sincenoneoftheseagreementsprovideany
toolsforcollectingthesetaxesfromoperatorsoroccupants,thelanguageislargelymeaningless.
Grantinglodgingoperatorsandoccupantsanamnestyassevenoftheagreementsdois
perplexinggiventheseverepenaltiestaxlawstypicallyimposeonnon-complianttaxpayerswho
havepreviouslyfailedtofilereturns.Forsuchtaxpayers,thereisoftennostatuteoflimitations.
Thatmeanstaxpayerswhohavefailedtofilereturnscanberequired,ifdiscoveredbytax
authorities,topaytaxes,interestandpenaltiesforaslongasthetaxpayerengagedintaxable
activitiesandtheamountofsuchtaxescanbereasonablyestimated.Grantingamnestytooperators
andoccupantswhohavefailedtofileandpaytaxesisahugeinjusticetoanynon-filingtaxpayer
whohasbeenrequiredtopayextensivebacktaxes,interestandpenaltiesfornon-filing.More
importantly,grantingamnestytonon-filersunderminestheincentivesfornon-compliancewith
26
taxesgenerally.Iftaxauthoritieswillnotrequireanybacktaxes,interestorpenaltiesforfailingto
fileandpay,whyshouldataxpayereverbeginpayingatax?
g. MultipleLayersofSecrecy.TheAirbnbagreementsarestartlingintermsofthedegree
towhichtheyconstructashieldofsecrecyprotectinglodgingoperatorsandoccupantsfrom
becomingknowntolocalauthorities,especiallythoseresponsibleforlocalregulationsandlaw
enforcement.Theextensivesecrecyoftheseagreementscontrastswiththeverylimitedprovision
involuntarydisclosureagreementsthattemporarilydefersthesharingoftheidentityofataxpayer
withotheragenciesuntilthetaxpayerbeginsfilingtaxreturns.
Secrecyforlodgingoperatorsbeginsevenbeforethereareagreementsbecauseoftheway
Airbnbdesignsitswebsite.Itdoesnotidentifytheaddressofapropertypriortoaguestbookinga
transaction.A2015memofromtheHumboldtCounty(CA)Treasurer-TaxCollectortotheCounty
SupervisorsnotedthattheAirbnbplatformmakesitnearlyimpossibletoknowthelocationsofthe
rentals,thuscreatingataxcollectionproblem.Hestated,“Notknowingthelocationoftherentals
facilitatedbyAirbnbmakescollectioneffortsunreasonablydifficultandtoocostlytocollect.”17
WithtaxcollectionproblemsbeingcreatedbyAirbnb’ssecrecypractices,thetaxcollectorreported
heaskedAirbnbtohelpsolvethetaxcollectionissue.Airbnbresponded,ofcourse,withaversionof
itstaxcollectionagreementthatpreservesthatsecrecyandprovidesmanyotherbenefitstoits
lodgingoperatorsandoccupants.
BecausesecrecyplaysacentralroleintheissuessurroundingAirbnb,wesummarizein
Table4thesecrecyprovisionsthatrunthroughtheAirbnbagreementsanddiscusstheminsome
detailhere.Thesesecrecyprovisionsareredundantandonlyafewarenecessaryinanyagreement
toachieveastrongbarriertopublicauthoritiesdiscoveringtheidentityoflodgingoperators.
Table4.SecrecyProvisionsinAirbnbAgreements
Provisions
Numberof
ForLodging
Agreements
Operators
AirbnbWebsite—OperatorSecrecy
Everywhere1
Yes
OperatorIdentity&FactsHidden
12
Yes
AirbnbFactsIncomplete
12
N/A
RegistrationExemption
9
Yes
2
AuditExemption
9-11
Yes
AirbnbBooks&RecordsOff-limitsinAudits
11
Yes
AnonymousDataforAudits
12
Yes
ReturnInformationConfidential
4-63
Yes
InformationExchangeBlocked
5
Yes
AgreementConfidential
6
Yes
NegotiationsConfidential
6
Yes
ForAirbnb
N/A
N/A
Yes
No
No,butlimits
Yes
Yes
Yes
Yes
Yes
Yes
1ApplieseverywhereAirbnboperates.Websitedoesnotdiscloserentaladdressespriortobooking.
2Languagevariesinagreements,producingvariableinterpretationsofaffectedagreements.
3Languagevariesinagreements,producingvariableinterpretationsofaffectedagreements.Lawsinjurisdictions
provideforreturnconfidentiality,butondifferenttermsthanstatedinagreements.
17JohnBartholomew,HumboldtCountyTreasurer-TaxCollector,MemorandumtoBoardof
Supervisors,“TransientOccupancyTaxandAirbnbInc.CompliancewithCountyOrdinances,”July
17,2015,p1.
27
TheHumboldtCountyTreasurerwascorrect.Theproblemoflodgingoperatorsecrecy
originatesinAirbnb’ssoftwaredesignthatdoesnotdiscloseanoperatoraddressuntilabooking
transactionismade.Theconsequence,inthepastatleast,hasbeenthatstatesandlocalitiesfaced
highcoststoidentifythelodgingoperatorsintheabsenceofreadyaccesstotheaddresses.18
Astonishingly,Airbnbissuccessfulinleveragingthetaxproblemitcreatedintolegalagreements
thatprovideaheavyshieldofsecrecypreventingpublicagenciesfromknowingwhoisconducting
lodgingbusinessesintheirjurisdictions.
Afterthewebsite,thefirstlayerofsecrecyforlodgingoperatorsarisesfromthenatureof
therecitalsoffacts.Iftherecitalsoffactsweretruedisclosures,astheyareinthevoluntary
disclosureagreements,taxagencieswouldrequireAirbnbtoincludealistorelectronicrecordof
lodgingoperatorsintheapplicablejurisdictions.Thatwouldbeespeciallyappropriategivenallthe
benefitsthattheagreementsprovidetothenon-signatorylodgingoperators.However,therecitals
unfortunatelyarenottruedisclosures,andalltheagreementsfailtoidentifythelodgingoperators
whoreceivetheagreement’sbenefits.Further,astothedisclosureofAirbnb’soperationsinstates,
therecitalsoffactsareincompleteandnotfullysubjecttoverificationbecauseofthelimitsontax
agenciesauditingAirbnb’sbooksandrecords.
Thesecondlayerofsecrecyinvolvestwinprovisionsthatexemptlodgingoperatorsfrom
registeringand/orbeingauditedforAirbnbtransactions.Asnotedearlier,governments
historicallyhaveusedpublicregistrationtoadministertaxes,regulationandlawsenforcement
activities.Notrequiringlocallodgingoperatorstoregisterpubliclyisaradicaldeparturefrom
establishedpracticesofpublicadministration.Intermsoftaxation,wehavenotedtheimpactof
theseprovisionsoneliminatingoperatorrecordsasacross-checkonAirbnb’sreportingand
reducedaccountabilitybytheoperatorsthemselvesforcollectingandpayinglodgingtaxesthey
maycontinuetoowe.Beyondthat,theabsenceofoperatorregistrationalsoreducestheabilityof
non-taxregulatoryandlawenforcementagenciestoidentifyandensurethatlodgingoperatorsare
incompliancewitharangeofnon-taxlaws.Afewagreementsretaintheselodgingoperator
registrationandauditrequirements,mostdonot.
ThethirdlayerofsecrecyinvolvesthelimitsintheagreementsonAirbnbaudits.Thereare
twopartstothislayeraswell.OneprovisionpreventsauditorsfromreachingpastAirbnb’stax
returnsandsupportingschedulestoexaminingAirbnb’sbooksandrecordswheretheycould,
amongotherinformation,securetheidentityoflodgingoperators.Thesecondprovisioninthis
layeristherequirementthatauditorsuseonlyanonymousdatafortheiraudits,furthershielding
theidentityoflodgingoperatorsandoccupants.Theseprovisionsarehighlyunusualand
significantlyreduceAirbnb’saccountabilitytotaxauthorities.Theanonymousdataprovisionis
includedinallagreements,andthelimitonaccessingAirbnb’sbooksandrecordsisinallsaveone.
Thefourthlayerofsecrecywouldseemroutineandinvolveslanguageintheagreements
requiringconfidentialityofreturninformation.Thatisafrequentprovisioninlawinanyevent.
However,thelanguageintheagreementsdoesnotappeartofollowatleastsomeofthelawsonthe
subject.Theagreementlanguageisbroadlystatedandcouldcreateconflictswiththelawin
individualjurisdictions.Further,thereturnconfidentialitylanguageintheagreementsfailsto
distinguishcarefullybetweenprohibiteddisclosuretothepublic,butallowabledisclosurefor
18Thissetoffactsmaybechangingwithadventofsoftwareservicesthatclaimtobeabletoidentify
Airbnblodgingoperators.WewilldiscussthoseservicesinSectionEofthisreport.
28
officialpurposestootherpublicagencies.Thepresenceofthislanguageappearstobeasourceof
confusionandapossibleefforttocreateaseparatebasisforconfidentialityclaims.
Thefifthlayerofsecrecyisunusualbecauseitinvolvesanagreementbythetaxagencyto
notexchangeinformationaboutAirbnb,lodgingoperatorsandoccupantswithotherpublic
agenciesforofficialpurposeseventhoughtheagenciesareauthorizedtoreceivethatinformation.
Exemptionoftheagreementandanytaxpayerreturnandauditinformationfrombeingexchanged
withotherpublicagenciesthroughthenormalnetworkofinformationsharinglawsand
agreements.Thislayerofsecrecyhelpsshieldinanunprecedentedwaylodgingoperatorsand
occupantsfrombeingaskedtocomplywitharangeofstateandlocallawsandregulations,suchas
zoningandoccupancystandards,andlawenforcementoversight.
Someagreementsaddinsulttoinjuryregardinginformationexchangewithotheragencies
bypreventingthesharingoftheagreementitselfwithotherpublicagencies.Theeffectofthis
restrictionistokeepsecretfromthoseagenciesthefactthatthetaxagencyiswithholdingfrom
theminformationaboutAirbnb,itslodgingoperatorsandoccupants.
Thereareauxiliaryprovisionsinsomeoftheagreementsrelatedtothesecrecyprovisions.
TheyincludearequirementinseveralagreementsforAirbnbtobenotifiedinadvanceoffreedom
ofinformationorpublicrecordsrequestsconcerningtheagreement.Threeagreementsrequire
advancednoticeandconsentbyAirbnbbeforethetaxagencyofficialsrespondtomediarequests
concerningtheagreement.AnotheragreementrequiresnoticeinadvancetoAirbnbofany
informationrequestsfromotherpublicagenciesconcerningtheagreements.
Theextensiveshieldofsecrecyfromtaxandregulatorylawshasobviouseconomicvalueto
thelodgingoperatorsandtoAirbnb,ifinnootherwaythanfacilitatingtheconductoflodging
businessesinareasprohibitedbyzoninglaws,occupancystandards,andbuildingorfirecodes.The
AirbnbagreementsthatincludetheseprovisionsenableAirbnblodgingoperatorswhooperateany
illegallodgingfacilitiesintheapplicablejurisdictionstodosowithoutreceivingthenecessary
approvalsfromstateorlocalauthorities.Anysuchfacilitiesthatoperateillegally,nonetheless,
expandAirbnb’srevenueandmarketshare.
Thereisnothinginthevoluntarydisclosureagreementsthatcomparestothesesecrecy
benefitsintheAirbnbagreementotherthanpossiblythetaxagencykeepingconfidentialtheinitial
disclosureofculpablefactsbythetaxpayer.Thetaxpayerunderavoluntarydisclosureagreement
mustregisterandpaytaxesbothprospectivelyandforthreeprioryears.Thevoluntarydisclosure
taxpayerisfullysubjecttoauditsandmustprovideaccesstotheirbooksandrecords,without
exception,sothatthetaxagencycandetermineifthetaxpaymentswereproperlymade.Beyond
anygeneralconfidentialityfrompublicdisclosureenjoyedbyalltaxpayers,thereisnoextrasecrecy
oranonymityprovidedtovoluntarydisclosuretaxpayers.Importantly,therearenoexclusions
fromsharingthetaxpayer’staxreturnandauditinformationwithotherpublicagencies.The
voluntarydisclosureagreementsdonotshieldtaxpayersoverthelongtermfromcomplyingwith
anytaxorregulatorylaws.
h. UnjustifiedConfidentialityofAirbnbAgreements.Finally,someofthemostcurious
provisionsarethosethatseektomaketheagreementanditsnegotiationsconfidentialinfiveofthe
twelveagreements,allofwhicharenowpubliclyreleased.Secrecyfortheagreementisasserted
29
eventhoughtheredoesnotappeartobeanyconfidentialorproprietaryinformationinthenowpublicagreements.
Theevidencethatthereisnothingconfidentialorproprietaryintheseagreementscomes
fromthereleaseofthetwelveagreementsdescribedandanalyzedinthisreport.Collectively,these
twelveagreementsincludeallthevariationsofcontentcoveredhere,includingthevariousformsof
therecitalsoffactsbyAirbnb.Intermsoftheiroriginalstatus,sevenoftheagreementsdonot
includeaconfidentialityclausefortheagreementitself.ThreeofthesearefromCalifornia,which
hasstrongopenrecordsandopenmeetinglaws.TheCaliforniaagreementsappeartohavebeen
postedpubliclypriortopublichearingsandmeetingsduringtheirapprovalbyauthoritiesthere.
ThecontentoftheCaliforniaagreements,includingfactsaboutAirbnb,isnotsignificantlydifferent
fromotheragreementswithlanguageassertingtheirconfidentiality.Iftheseagreementspublished
inCaliforniacontainedproprietaryorconfidentialinformation,stepswouldhaveneededtobe
takentoprotectthatinformationfromdisclosure.Thefactthatnosuchstepsweretakenconfirms
theabsenceofconfidentialorproprietaryinformationinthoseagreements.Similarpublic
processesmayalsohavetakenplaceinsomeoftheotherstates.
Forfiveotheragreementsthatarepubliclyreleased,languageispresentwhichassertsthe
agreementisconfidential.Thetaxagenciesapparentlyreviewedtheiragreementsandrealizedthat
thereisnoconfidentialorproprietaryinformationoranythingelseintheagreementsthatjustifies
thattheybekeptsecret.Thereleaseofthesedocumentswithoutredactionsfortaxpayerfactsor
othersensitiveinformationisproofthatthereisnothingintheseagreementsthatjustifies
confidentialityforthedocuments.
Incontrast,voluntarydisclosureagreementsareconfidentialbecausetheycontain
confidentialtaxpayerinformationandproprietaryinformation,includinginformationthatis
otherwisecontrarytotheinterestsofthetaxpayer.Itisessentialtounderstandthatvoluntary
disclosuredonotinclude,unlikeAirbnbagreements,secretlanguageonpolicy.Infurthercontrast
toAirbnbagreements,thepoliciesinvolvedinvoluntarydisclosureagreementsaretypically
publiclyknownandembodiedinrules,lawsorboth.Therehavebeensubstantialopportunitiesfor
thepublictoparticipateinthedecisionstooffervoluntarydisclosureagreements.Thepresenceof
thatconfidentialinformationinvoluntarydisclosureagreements—andtheabsenceofpolicy
content—justifiesthoseagreementsbeingheldconfidentialbytaxagencies.
i. SummaryofComparisonsofAgreements.TheAirbnbagreementsprovideAirbnband
itslodgingoperatorsandoccupantshugebenefitsascomparedtothosereceivedbytaxpayers
enteringvoluntarydisclosureagreements.
Airbnbreceivesamnestyforback-taxpaymentsinexchangeforpermissiontocollect,
reportandpayfuturelodgingtaxesunderlaxstandardsofaccountability.Theagreementsenable
Airbnbtodefinethetaxauditprocessintermsthatundermineitsindependenceandeffectiveness.
Ingeneral,Airbnbgainssubstantiallatitudeindeterminingtheamountoftaxesitwillremittotax
agencies.Mostimportantly,itsecuresashieldofsecrecyforitslodgingoperatorsthatcreatesade
factotaxandregulatoryhavenforthem.Overall,theaudit,reportingandsecrecyprovisionsinthe
Airbnbagreementsextraordinarilyintrudeintoandunderminethenormaltaxadministrative
processestothepointofraisinglegalandconstitutionalquestionsexploredinSectionC.
30
Incomparison,voluntarydisclosureagreementstypicallyrequiretaxpayerstopaythree
yearsofbacktaxeswithinterestandtoadheretothesamestandardsofaccountabilityasother
taxpayers.Disclosureagreementsdonotprovideanybenefitstothetaxpayer’scustomers.They
alsodonotintrudeinto,undermineordisruptstandardtaxadministrativeprocesses.
AirbnblodgingoperatorsandoccupantsarenotevenpartiestotheAirbnbagreements,yet
theyreceivebenefitsfromthem.Lodgingoperatorsdonotidentifythemselvestotaxagencies,do
notdiscloseculpablefacts,donotcommittoanyleveloftaxcomplianceoragreetobelegally
boundbyanyoftheagreements’terms.Voluntarydisclosuretaxpayersarerequiredtofulfillall
theseresponsibilities.Shockingly,inexchangefornocommitmentsbylodgingoperatorsand
occupants,alltheagreementsprovidebenefitstothem.19Mostoftheagreementsgivesubstantially
greaterbenefitstolodgingoperatorsandoccupantsthanstatesprovidetovoluntarydisclosure
taxpayers.Beyondamnesty,agreementsprovideexemptionsfromregistrationsandtaxreporting,
immunityfromauditsandmultiplelayersofsecrecybenefitstolodgingoperatorsandoccupants—
againwithoutanyofthemrequestingthebenefitsorcommittinganyperformanceinexchange.
Theseprovisionscanbestbeviewedasanoutrightgiftbythetaxagencyespeciallytothelodging
operators.
Thegreatdisparityinthetaxtreatmentof(a)Airbnb,itslodgingoperatorsandoccupants
ascomparedto(b)voluntarydisclosuretaxpayersisinequitableandcannotbejustified.Ontax
equitygroundsalone,theAirbnbagreementsshouldberejected.Beyondthat,Airbnbagreements
underminecompliancewithregulatorylaws.Indeed,theagreementswiththeirmultiplesecrecy
provisionsassisttheconversionofresidentialpropertyintocommercial-styleshorttermrentalsin
violationoflocalzoningandhousinglaws.ThesebroaderimpactsshouldfurtherdisqualifyAirbnb
agreementsfromconsideration.
Taxagencieswoulddowelltorecallthattheydonotadministertaxlawsinavacuum.They
dependoninformationtheysecurefromotheragenciesconcerninggeneralbusinessregistrations,
professionalandoccupationallicensing,unemploymentandworker’scompensationrecords,
buildingpermitsandmore.Otherpublicagenciessupportthetaxsystem.Thus,itisdisturbingto
findprovisionsintheseagreementsthatcutoffthenormalflowofinformationfromtaxagenciesto
otherpublicagenciesforofficialpurposes—andfornoapparentreasonotherthanAirbnbseeksto
disruptthatflow.Worseyet,thelanguageofsomeagreementsappearstokeepeventhefactofthis
disruptionoftheflowofAirbnb-relatedinformationsecretfromthoseotheragencies.Suspending
exchangeofinformationprocessesattherequestofataxpayerrisksreducingcooperationbyother
agencieswiththetaxsystemtothedetrimentofeffectivetaxadministrationovertime.
5. WhyAlltheSecrecyintheAirbnbAgreements?
Amajorquestionremainsastowhytheextensivelayersofthesecrecyshieldforlodging
operatorsandoccupantsareincludedintheagreementsgiventhattheoperatorsandoccupantsare
notpartiestothem.Thesecrecyshieldforlodgingoperatorsandoccupantshappensbecause
Airbnbleveragesitspledgetocollectfuturelodgingtaxes—evenifthatcollectionisflawed—into
secrecyconcessionsforitscustomersandaffiliates.Typicalvoluntarydisclosureagreementsdonot
19EventhebestagreementsfromataxequitystandpointprovideAirbnblodgingoperatorsand
occupantswiththebenefitofhidingtheiridentities,addressesandtaxdatafromthetaxing
agenciesthroughtheanonymousdataprovision.
31
haveclausesthatstate,ineffect,whatmanyoftheAirbnbagreementssay:
IfTaxpayerAcollectsandpaystaxesinthefuture,theTaxAgencywillgrantTaxpayerA’s
Customersamnestyfortheirbacktaxesandsecrecyfortheiridentitiesandlocalities.If
despiteagreeingtonotaccessanydirectrecordsthatcanidentifytheCustomers,theTax
AgencyhappenstolearnwhotheCustomersare,theTaxAgencywillnotshareinformation
abouttheCustomerswithotherPublicAgenciesthatwouldnormallyreceiveitforofficial
purposesunderexchangeagreements.Further,theTaxAgencywillkeepthisagreement
anditsnegotiationssecretsothattheotherPublicAgenciesdonotevenknowthatpotential
informationabouttheCustomerswillbewithheldfromthem.
Airbnb’sleveragingofitscommitmentstomaketaxpaymentsintobenefitsforitscustomersisa
keydifferencebetweentheAirbnbandvoluntarydisclosureagreements.Voluntarydisclosure
taxpayersdonotleveragetheiragreementtocomplywiththetaxlawsintobenefitsfortheir
customers,butAirbnbdoes.Whyisthatthecase?
Theanswermaywellbethatthereisaself-limitingflawinAirbnb’sbusinessmodel,
popularizedinitsadvertising,thatitissimplytryingtohelppeopleearnalittleextraincomeby
rentingoutsomesparespaceintheirhomestootherpeople.Thereisaninherentlimitinthe
numberofpeoplewho(a)haveextraspaceintheirhomesand(b)arewillingtorentthatspaceout
tostrangers.ForAirbnbtogrow,theyneedtorecruitasmanyfull-time,morethanhalf-timeor
multipleunit(2ormoreunits)operatorsaspossible.Thesefacilitiesareessentiallycommercial,
instead,occasionallodgingoperations.Theymaybeseenwithinneighborhoodsasconverting
residentialhousingintodefactohotels,andreplacingneighborswithatransientpopulation.Many
ofthesecommercial-styleoperationsmayviolateoccupancystandards,buildingandfirecodes,or
zoningregulations.Theseoperatorswouldnotwanttobeidentifiedtopublicagencies.Iftheycan
alsoberelievedoffilinglodgingtaxesordeclaringtheirrentalincomeonincomereturns,thatisall
tothegoodaswell.So,Airbnb“purchases”fromtaxagenciesashieldofsecrecythatthey“resell”to
lodgingoperatorstoattractmoreownersorlong-termlesseesofresidentialpropertytoconduct
Airbnblodgingbusinesses.
Theshieldofsecrecyfromtaxesandregulationslikelyhaslesssignificanceforhomesharing—theoccasionallodgingoperatorrentingoutaroomafewnightsamonth.Home-sharing
isoftenallowableunderzoningandhousinglaws,soalsodoesnotneedtobehidden.Secrecyhas
moresignificanceandappealforthosewhoarerentinglodgingcontinuouslythroughvacation
periodsoryear-roundandformultipleunitoperations.Thesearecommercialoperationswhere
theownerdoesnotliveintheproperty.Theseoperationsmorelikelyrunafoulofzoningor
housinglaws,andthushidingtheirlocationisquitevaluabletotheirowners.Otherwise,local
authoritiesmayshutthemdown.Thereisalsomorerentalincomeatstakeherethanwithhomesharing.Commercial-styleoperationscurrentlyrepresentAirbnb’sgreatestrevenuegrowth.20
Airbnbiscompetingwithtraditionallodgingcompaniesformarketshareintheshort-term
rentalmarket.Itisalsocompetingwithpeopleforlivingspace.Airbnbcannotmaximizeitsgrowth
andvalueunlessitconvertsexistingowner-occupiedandlong-termrentalhousing,including
apartments,intocommercial-styleshort-termlodgingrentals.Airbnb’sdriveforgrowthand
marketsharetranslatesintoachievingtheseconversionsfromlong-termresidencestoshort-term
20O’NeillandOuyang,“FromAirMattressestoUnregulatedBusiness.”
32
rentalsasquicklyaspossible.Theseconversionswouldcertainlybeslowedandmanywouldnot
occuriftheywererequiredtoundergoreviewtoensuretheirconsistencywithzoning,occupancy,
andbuildingandfirecodesbeforetheyoccur.Insteadofsupportinganysuchlocalreviews,Airbnb
hasopposedrequirementsfortheirlodgingoperatorstoregisteraslodgingbusinesses.Further,it
hasdesignedthesetaxagreementsasvehiclesforgainingcreditforcollectingtaxesfromguests,
whileconstructingashieldofsecrecyovertheidentityandlocationoflocallodgingfacilitiesto
avoidapplicableregulations.Airbnbhasevenacknowledgedthattheseagreementsareimportant
toreducingits“regulatoryrisk.”21Theshieldofsecrecyfacilitatesunimpededandoftenillegal
conversionsofresidentialpropertyintocommercial-stylelodgingfacilities.Unfortunately,by
enteringtheseagreements,taxagenciesbecomeunwittingpartnerswithAirbnbinenablingthis
process.
21LeslieHook,“Airbnblookstosecure700taxdealswithcities.”
33
SectionC
ThePublicImpactoftheAirbnbAgreements
ThepriorsectiondescribesandanalyzesindetailthefeaturesofAirbnbtaxagreementsin
contrasttothevoluntarydisclosureagreementsthatarethe“goldstandard”ofagreementsto
encouragepropercompliancewithstatetaxlaws.Thissectionpullstogethertheprioranalysisand
addstoitinrelevantandsignificantways.Theobjectivehereistoproduceconclusionsinthree
broadareasofpublicpolicy:taxpolicy,democraticgovernanceandunderminingtheruleoflaw.
Thetaxpolicysummaryhereisrelativelybriefbecausemuchofthematerialhasbeendiscussedin
detailinSectionB.Thereviewofdemocraticgovernanceissuesismoredetailedbecauseitwasless
welldevelopedpreviously.TheimpactoftheAirbnbagreementsontheruleoflawistheoutcome
oftheissuesdevelopedinthetaxpolicyanddemocraticgovernancediscussions.
1. TaxPolicy:FairnessandaLevelPlayingField
Intermsoffairness,wewillsummarizefindingsconcerningtheAirbnbagreementsinthree
areas:
1. DotheagreementstreatcomplianttaxpayersfairlyincomparisontoAirbnbandAirbnb’s
lodgingoperatorsandoccupants?
2. Dotheagreementsestablishalevelplayingfieldbetweentraditionallodgingbusinessesand
AirbnbandAirbnb’slodgingoperatorsandoccupantswithrespecttobothtaxesand
regulations?
3. Isitfairandreasonabletosubjectordinaryresidentsseekingaplacetolivetoface
competitionforhousesandapartmentsfromillegalcommerciallodgingoperations?
a. UnequalTreatmentofCompliantTaxpayersComparedtoAirbnbandItsOperators.
Theagreementsareunfairtotaxpayerswhofileandpaytheirtaxesdiligently.Theyareunfairas
welltonewlycomplianttaxpayerswhohaveenteredtraditionalvoluntarydisclosureagreements,
payingthreeyearsofbacktaxeswithinterestandremainingfullyaccountableforfuturetaxes.The
agreementsprovideoverlygenerousbenefitstolodgingoperatorsandoccupantsintermsof
completeforgivenessforunpaidbacktaxesonAirbnbtransactions,anexemptionfromanyfuture
taxresponsibilitiesonthosetransactions(evenfromfilingreturnsasacheckonAirbnb’sfilings)
andsecrecyprovisionsthatshieldlodgingoperatorsfrompropercompliancewithanyregulatory
lawsapplyingtotheirshort-termrentalbusiness.Thereisnodoubtthatlodgingoperators,ifthey
meetfilingthresholds,shouldbecollectingandpayinglodgingtaxes.Iftheyfailtodosotheyshould
berequiredtopaybacktaxesalongwithappropriatesanctions.Forgivingbacktaxescompletely
removestheincentivethatanynon-complainttaxpayerwouldhavetocomeintocompliance.Being
allowedtoavoidapplicablenon-taxregulationsandlawsisunacceptableandinappropriateinatax
agreement.
Airbnbitselfmayormaynothavebeenrequiredtohavecollectedandpaidtaxesforprior
periodsduetooutdatedstatutes,whichshouldbecorrectedasapriorityoveranyagreements.
However,theagreementsstillgrantoverlygeneroustreatmenttoAirbnbbecause,duetoalackof
adequatecontrolsandaccountability,itcaneffectivelydeterminetheamountoffuturetaxesthey
willcollectandpay.TheagreementscouldevenallowAirbnb,ifitchosetodoso,tomakeaprofit
ontaxcollections,chargingoneamounttoguestsandsendingalesseramounttotaxauthorities
withnorealriskofdiscovery.Othertaxpayersdonotgettosettheirowntaxesandavoid
accountabilityforwhattheyreportandpay.Further,Airbnbbenefitsevenmorefromthesecrecy
34
provisionsfortheirlodgingoperatorsbecauseitexpandstheirnumberoflodgingoperators,
revenuesandmarketshare.Thisauthorisunawareofanyotherbusinesstaxpayerreceiving
comparablepreferentialregulatorysecrecyfortheircustomers.Again,providingadefactoshield
fromregulatoryenforcementisinappropriateinataxagreement.
b. UnfairCompetitionforTraditionalLodgingFacilities.TheagreementsallowAirbnb
lodgingtocompeteunfairlywithtraditionalhotels,thusfailingtoestablishalevelplayingfieldfor
competitionbetweenthetwo.TheunjustifiedadvantagesgainedbyAirbnblodginginclude
forgivenessofbacktaxesonAirbnblodgingwithtraditionalhotelsthathavebeencollectingand
payingtaxes.Further,theadvantagesincludegrantingAirbnbtheabilitytodeterminehowmuchit
willcollectandpayinfuturelodgingtaxes,extendingeventotheabilitytomakeaprofitoffthe
collectionifitchoosestodo.Finally,theagreementsthroughthesecrecyprovisionsforlodging
operatorscreatearegulatoryhavenforAirbnblodgingwhentraditionalhotelsarerequiredto
complywithalllawsandrulesapplicabletolodgingfacilities.Theagreements,ineconomicterms,
discriminateagainsttraditionalhotelsandinfavorofAirbnblodging.
c. UnfairCompetitionforCommunityResidents.Societyprovidesthroughzoningand
otherpoliciesresidentialneighborhoodsasplacesofprivatereposeandrelaxation.Theyareplaces
wherepeoplecanraisetheirfamilies,sendtheirchildrentoschool,andcareforeachotherintimes
ofneed.Theyarewherepeopleengageincommunityandcivicactivitiesandexercisetheirpolitical
andreligiousrightsascitizens.Fortheseandotherworthwhilepurposes,societytypicallyseeksto
ensurethestabilityofresidentialareas.Competitionforhousesandapartmentsisstructuredto
proceedamongcitizenswhobringpersonalresourcestosecuringaplacetolive.Whenlong-term
residencesareconverted,quiteillegally,intodefactocommerciallodgingproperties(beyond
occasionalhome-sharing),thecompetitionforhousingandapartmentsismanifestlyunfairto
committedcitizens.Thatisbecausecommerciallodgingfacilitiescanfinancethepurchaseorlongtermleaseofresidencesthroughtheanticipatedfuturestreamofrevenuefromshort-termrentals.
Citizensarelimitedtotheirownpersonalincomeandassets.Theanticipatedfuturestreamof
lodgingrevenueswilloftenswampthepersonalresourcesofordinarycitizens.Increasingly,
residentialneighborhoodsintendedforcitizenswillbeplacedoutoftheirreach.Overtime,
neighborhoodswillceasetoberesidentialdespitebeingdesignatedforthatpurposebylocal
zoningandhousinglaws.Itisfundamentallyunfairtoallowtechnologyandprivatecapitalto
illegallyunderminelocallawsonlanduseplanningandregulationdesignedtoprotectthe
characterandintegrityofresidentialneighborhoods.Notaxagencyshouldentertaxagreements
thataidandabetthatprocess.
2. DemocraticGovernance:Integrity,PublicTransparencyandImproperFavoritism
Intermsofachievinghighstandardsofqualityinpublicadministrationandgovernance,
willsummarizetheagreementsintermsofthesequestions:
1. Dotheagreementsmeetstandardsofintegrity?
2. Dotheagreementssupporttransparencyandpublicparticipationindecision-making?
3. Dotheagreementsviolateagencyauthoritythroughfavoritism?
a. Integrity.Theagreementshaveanoverlyflexiblerelationshiptothetruth,discard
proceduresdesignedtodiscoverthetruth,andcondonepotentialbehaviorthatlacksintegrity.
35
Considerfirstsomesimplemattersoffact.TherecitaloffactsbyAirbnbarecertainly
incompleteandmaybeinaccurate,butthereisnomechanismintheagreementsforverifyingthe
truefacts.Tenoftheagreementsstatethattherearenothird-partybeneficiaries,buttheyeach
grantbenefitstothenon-signatoryAirbnblodgingoperatorsandoccupantswhoare,infact,thirdpartybeneficiaries.
Second,theagreementsinseveraldifferentwaysclaimtobeonething,butintruthare
somethingelse.Theagreementsclaimtobeabouttaxes,buttheirrealpurposeappearstobethe
constructionofashieldofsecrecyforAirbnblodgingoperatorsthatprotectsthemfromcomplying
withvariouslanduseandhousinglawstotheeconomicbenefitofthelodgingoperatorsandAirbnb
itself.Theagreementssuperficiallyappeartobetaxsettlements,butthey(a)donotciteanylegal
authorityconfirmingthenatureandbasisoftheagreements,(b)donotgenerallyariseoutofatax
disputethatjustifysettlements,and(c)arenottaxsettlementsatall,butdisguisedrulestailoredto
benefitAirbnbanditscustomers.Finally,severalofthedocumentsclaimtobeconfidential,butdo
notcontainevenoneiotaofconfidentialandproprietaryinformation.Uponreviewthese
documentslabeled“confidential”havebeenreleasedpubliclybecause,intruth,theywerenever.
Third,theagreementscontainprovisionsthatcondonepotentialbehaviorthatlacks
integrity.TheuseofanonymousdataandthebaronexaminingbooksandrecordsinviteAirbnb,if
itweretochoosetodoso,tounderreportandunderpaytaxes.Theseare“collectionagreements”
thatdon’tguaranteepropercollection.Theshieldofsecrecyforlodgingoperatorsputinplaceby
manyoftheseagreementsisdesignedtofacilitatenon-compliancewitharangeoflaws.Theworst
oftheseagreementsareavirtualhandbookforbadbehavior.
Finally,thereisamajorfeatureofmostoftheagreementsthatstrainscredibility.Itis
difficulttounderstandhowitispossibleformostoftheagreementstooffersubstantialtaxand
regulatorybenefitstoAirbnblodgingoperatorsandoccupantswhoarenotpartiestothem.Cantax
agenciesgivespecialgiftstoanentireclassofunknownbusinessesorindividualswhocommitto
noperformanceinreturnandwhoseonlydistinctive,butcommonfeatureisthattheyare
customersofonebusiness?Canthisreallybetrue?
Taxagreementsshouldhaveintegrity.Theynotshouldgetthefactswrongfromthe
beginning,atleastwithoutthemeansfortheircorrection.Theyshouldnotclaimtobeonething,
butactuallydosomethingelse—inthiscasesomethingelseinmanydifferentways.Theyshould
notopenapathwaytobadbehavior.Theyshouldnotcontainprovisionsthatarenotcredible.Yet
thatiswhatmanyoftheseagreementsdo.
b. TransparencyandPublicParticipation.Wehavealreadyestablishedthatnoneofthe
twelveagreementscontainanyconfidentialinformation,eventhoughfiveofthemcontaina
provisionstatingthattheagreementisconfidential.Fortunately,thetaxagenciesforthesefive
agreements,uponreview,concludedthattheagreementswerepublicdocumentsandshouldbe
releaseddespitetheconfidentialityprovision.Thatisalsolikelytobethecasewithalarger
numberoftheagreementsaroundthenationthatstillarebeingwithheldfrompublicview.Airbnb
hasbeencampaigningfromstatetostateandcitytocitywithsimilarlanguage.Thatlanguage
containsnoconfidentialinformationaboutAirbnb,buttothecontrarycontainspolicylanguage
grantingamnesty;establishingrulesforadministrationandauditing;suspendinginformation
exchangeprocesseswithotherpublicagencies,andendowingbenefitstoageneralclassof
unidentifiedtaxpayerswhoarenotsignatoriestotheagreement.Thatinformation,mostassuredly,
36
underanyreasonablereadingofopenrecordslawsshouldandmustbereleasedtothepublic.In
thefewcaseswhereanagencymayhaveincludedspecificconfidentialtaxreturninformation,
investigationresultsorproprietaryfacts,thatinformationcanberedacted,andtheremainderof
thelanguagethatconstitutespolicy,rulesofadministrativepractice,affectsotheragenciesand
grantsbenefitstoataxpayerclassshouldbepubliclyavailable.Giventhecontentofthetwelve
agreementsreleasedtodate,thereisnoexcuseforagenciestofailtoreleasetheremainderofthe
agreements,providedanytrulyconfidentialinformation,ifitoccurs,isredacted.
Thepolicysubstanceoftheagreementsalsorequiresthemtobeadoptedasrules.Howcan
adocumentthatprovidesnewtermsfortaxamnesty,establishesadministrativeandaudit
procedures,deniesaccessbyotheragenciestootherwisestandardtaxinformation,andcreatesa
classoftaxpayerstoreceiveafloodoftaxandregulatorybenefitsbeanythingotherthanarule?If
thesubstantivecontentisnotenough,thesocietalimpactofthiscontentontaxequity,market
competition,theruleoflaw,theintegrityoftaxadministration,andthequalityoflifeand
affordabilityofhousinginresidentialneighborhoodsdemandsthattheseprovisionsbeproposedas
rules.Agenciesorlocalauthoritiesshouldconductpublichearings,provideforwrittencomments
andconsiderallinputbeforeanyoftheseprovisionsareadoptedasrulesandtranslatedinto
agreements.Foranyexistingagreementsthathavenotbeensubjecttopublicparticipation,
agenciesorlocalauthoritiesshouldundertakeappropriateremedialactionanddecision-making.
c. DotheAgreementsViolateAgencyAuthoritythroughFavoritism?Thereareatleast
threespecificareasintheagreementswheretaxagencies,legislativeoversightauthoritiesandthe
publicshouldcarefullyconsiderquestionsofwhethertheactionstakenundertheagreements
contravenelegalauthority.Thequestionsinvolvewhetherthelawauthorizesthegrantingof
favorabletreatmenttoAirbnboritslodgingoperatorsandoccupantsthatisnotavailabletoother
taxpayers.Ofcourse,theanswerstothesequestionswillvaryamongstatesandlocalities
dependingonstateconstitutionsandapplicablestateandlocallaws.
Thethreeareasinvolve(a)taxbenefits,especiallyback-taxforgivenessandexemptions
fromtaxregistration,reportingandaudits,providedtoAirbnb’slodgingoperators,(b)exempting
Airbnbinformationfrominformationsharingarrangementsand(c)improperlycedingcontrolof
taxingauthoritytoAirbnb.
ThefirstquestioninvolveswhetheragencieshaveauthoritytoprovideAirbnblodging
operatorsandoccupantswithbenefits,especiallyback-taxamnesty,throughagreementstowhich
theoperatorsandoccupantsarenotaparty.Typically,back-taxreliefisonlygiventoparties
directlythroughagreementsinwhichthepartiesparticipateandcommittoalevelofperformance
justifyingwhateverreliefisgiven.Isitpossibletogivereliefoutsideadirectagreement?Ifthe
answeristhatthereliefisjustifiedbecauseAirbnbcommitstofuturecollection,whythenaren’t
customersofothertaxpayerswhoentervoluntarydisclosureagreementsandagreetocollectalso
givenback-taxrelief?WhydoAirbnb’scustomersgetreliefwhenTaxpayerX’scustomersdonot?
Isthereanotherequaltreatmentissuehereinthatthestandardback-taxreliefistorequirethree
prioryearsoftaxeswithinterest?IntheAirbnbagreements,acompleteamnestyforprioryearsis
provided.Whatistherationaleandauthorityforgrantingcustomerreliefatall?Ifreliefisgranted
toAirbnb’soperators,isthereawaytostructureittorequirethreeyearsofbacktaxeswithinterest
insteadofnobacktaxesatall?
37
Parallelquestionscanberaisedabouttheexemptionoflodgingoperatorsfromtax
registration,reportingandaudits.
Thesecondareaofquestionsiswhethertaxagencieshavetheauthoritytoselectively
withholdinformationsecuredfromonetaxpayerfromotherpublicagencieswithwhichit
exchangesinformationforofficialpurposes.Fiveoftheagreementshavesometypeoflanguage
limitingtheexchangeofinformationwithotheragencies,withoneoftheagreementsbeingless
restrictivethantheothers.22Thelanguagevariesamongtheagreements,andtheunderlying
exchangeofinformationlawsandagreementsalso,ofcourse,vary.Thus,itisdifficulttoanalyze
theseprovisions.However,theoverallthrustistoprohibitexchangesofinformationunlessthey
arerequiredbylaworareforpurposesoftaxcollection(includinglegalproceedingsrelatedtotax
collection),withthetaxcollectioninsomeagreementslimitedtoonlythelodgingtaxesthatarethe
subjectoftheagreement.Thereisthestrongpotentialforconfusionoverwhat“requiredbylaw”
means,especiallyinthecaseswherethelawpermitstaxagenciestoexchangeinformationwith
otheragenciesandhaveenteredexchangeofinformationagreementswhichrequirethose
exchangestooccur.Whilethatisanimportantcomplication,itisnotthefocusofthediscussion
here.
Thefocushereisonthequestionofwhetheragencies,underexchangeofinformationlaws
andagreements,canselectivelywithholdinformationfromonetaxpayersourcewhilesupplying
informationfromallothertaxpayersources.Dotheagreementstoexchangeinformationwithother
publicagenciesallowinformationtobewithheldpurelybasedontaxpayeridentity?Whatisthe
rationalbasisfortaxagenciestonotprovideinformationthatoriginateswithAirbnbasopposedto
informationfromallothertaxpayers?IsthewithholdingofAirbnbinformationanarbitrary,
preferentialact?Iftheseorsimilarquestionscannotbeansweredsatisfactorily,thenthetax
agenciesneedtoconsiderwhethertheyhaveexceededtheirauthorityinagreeingtothelimitson
exchangeofinformationwithotheragencies.
ThethirdquestioniswhethertaxagencieshavecededcontroltoAirbnbtopotentially
determinetheamountoftaxesitwillpay.Thatcedingofcontroloccursbecauseoftheegregious
auditlimitsthatbaraccessbytaxagenciestoAirbnbbooksandrecordsandthatrequiretheuseof
anonymousdata.ThoseauditlimitseffectivelyallowAirbnbtodecidewhatitwillpayintaxes
becauseunderpaymentswouldnotbediscovered.Twotypesofprovisionscomeintoplay.Many
stateshave“nosurrenderoftaxauthority”clausesintheirstateconstitutions.Montana’sclause
readsasfollows:“ArticleVIII—RevenueandFinance,Section2.Taxpowerinalienable.Thepower
totaxshallneverbesurrendered,suspended,orcontractedaway.”Inaddition,stateand/orlocal
governmentsmaydefinethedutiesandauthorityoftheirtaxagenciestoincludebeingresponsible
fortakingactionstoensurethattaxpayerscomplywiththelawsofthestateorlocalgovernments.
Suchstatutesimplythattheagenciesshouldnottakeanyactionsthatallowtaxpayerstofailto
complywiththelaws.Thespecificquestionthatneedstobeexplored,ifsuchconstitutionaland
statutoryprovisionsarepresent,wouldbe,“Doescedingeffectivecontroloftaxestobepaidto
Airbnbintheseagreementsconstitute(a)a‘surrender’or‘contractingaway’ofthestate’staxing
authoritytoaprivatepartyor(b)anactionknowinglytakenbyataxagencytoallowataxpayerto
22TheStateofFlorida,PinellasCounty,MontgomeryCounty,andSantaFeagreementsprohibit
exchangesofinformationwithpublicagenciesbeyondcertainallowableexchanges.Humboldt
Countyislessrestrictivebylistingcertainallowableexchangesandremainingsilentonother
exchanges,whichareprohibitedonlybyimplication.
38
failtocomplywiththelaw?”Iftheansweris“yes”toeitherpartofthequestion,thatwouldappear
torequireamodificationoftheAirbnbagreementtoensurethatthetaxagencyhassufficient
accesstobooksandrecordstoensureAirbnbisproperlycomplyingwiththetaxlaw.
If“surrendering,suspendingorcontractingawayoftaxingauthority”soundslikean
abstractlegalconcept,beassureditsrootsarefoundinpublicrevulsionovertaxfavoritism.The
ideaofincludingthistypeofprovisioninstateconstitutionsemergedinthelate19thcenturyduring
the“RobberBaron”eraofU.S.history.Muchofthepublicwasupsetoverpublicofficialsmakingtax
dealswithpowerfulcorporationsandwealthyindividualsthatgavethemspecialbenefitsatthe
expenseofeveryoneelse.Thelanguagewasintendedpreciselytostopspecialtaxarrangements
thatconstitutefavoritism.
Unfortunately,incontemporarystateandlocaltaxadministrationthereiscontinuous
pressuretoreachcompromiseswithtaxpayersthat“anti-surrender”clausesinstateconstitutions
and“dutytotakeactiontoensurecompliancewiththelaw”statutesgetbypassedoroverlooked.
However,theAirbnbagreementsrepresentanextensivesurrenderofcontroloverauditprocesses
toataxpayersuchthattheseover-archingconstitutionalorstatutoryprovisionsdesignedtoensure
equityandintegrityintaxcompliancecannotbeignored.
3. UnderminingtheRuleofLaw
TheAirbnbagreementsdonotsupport,butinfactunderminetheruleoflaw.Wewilllook
atareasofimpactoncompliancewiththelaw:lodgingtaxes,stateandlocaltaxesingeneral,and
locallanduselawsandregulations.
Regardinglodgingtaxes,thecorrosiveimpactoftheagreementsoncompliancewiththelaw
arisesfromtherestrictionsintheagreementsontheabilityoftaxagenciestoconductstandardtax
auditsofAirbnb’sbooksandrecords.WehavenotedatlengthhowAirbnbcouldeffectively
determinewhattaxesitwillcollectandpaytostateandlocalauthoritiesbecausethelimitsontax
auditsmakeitimpossibleforagenciestoholdAirbnbaccountable.Otherprovisionsinsome
agreementsrequireAirbnbtoreporttoeachoperatorandoccupanttheamountchargedintaxes
mightfurtherencouragethisprofiteering.So,therightamountcouldgetcollectedbutnotpaidto
authorities.Thediscussiononpages24-26explainshowAirbnb’stechnologicalassurancethatthe
righttaxamountsarecollectedandpaidmaynotbereassuringatall.Wedon’tknowwhatchoices
Airbnbwillmakeundertheagreementsconcerningcompliancewithlaw.Ifitmakesthewrong
choices,theruleoflawsuffers.
Thecontentoftheagreementsthemselves,asmoreofthemarepubliclyreleased,will
createnewpressurestounderminegeneralcompliancewithalltypesofstateandlocaltaxes.The
pressurewillmostlycomeintermsoferodingtheeffectivenessofvoluntarydisclosureagreements
thatcarefully,buteffectivelyencouragenon-complianttaxpayerstocomeintotaxcompliance
withoutreducingtheincentivesformosttaxpayerstocomplyinthefirstplace.Theformulaof
havingtaxpayershonestlydiscloseallrelevantfactssubjecttoverification,paythreeyearsofback
taxeswithinterestbutnotpenalties,andcommittofuturecompliancewithfullaccountabilityhas
workedtosteadilyimprovecomplianceandgenerateimpressivesumsofrevenueforstateand
localgovernments.Bycomparison,agencies“giveaway”moreundertheAirbnbagreementswhile
theyarenotlikelytoyieldtherevenuethatthevoluntarydisclosureagreementshaveinthepastor
shouldinthefuture.Theword“should”isusedherewithrespecttothevoluntarydisclosure
39
agreements,becauseoneofpotentialadverseeffectsoftheAirbnbagreementsistoendangerthe
futureoftheseextraordinarilyvaluableagreements.
ThereisathreatoftheAirbnbagreementsunderminingtraditionalvoluntarydisclosure
agreementsbecausewhenlaidsidebyside,theAirbnbagreementsarehugelygenerousintherelief
grantedtonon-complianttaxpayers,primarilytheAirbnblodgingoperators,ascomparedtothe
taxpayersenteringvoluntarydisclosureagreements.Asanunfortunateprecedentthatcouldbe
appliedinothertaxcontexts,theAirbnblodgingoperatortreatmentissogenerousthatitremoves
mostincentivesfornon-complianttaxpayerstoevercomplyuntiltheyareabouttobediscovered
bytaxagenciesandtheylobbyorlitigateforAirbnb-styleterms.TaxpayerswilllookattheAirbnb
termsvs.thevoluntarydisclosuretermsandsay,“GiveustheAirbnbdessertplease.”Andifthetax
agenciesresist,attorneysmaystartlookingforwaystofilelawsuitstosecureAirbnbterms.
ThethreeprovisionsintheAirbnbthatareirresistibletotaxpayersare(a)zeroback-tax
paymentsforpasttaxyearsforlodgingoperators23andoccupants,(b)controloftheaudit
process—nobooksandrecordsauditedandanonymousdataused,and(c)anexemptionfrom
informationsharingwithotherpublicagencies.OncetheAirbnbagreementtermsgetknown,why
wouldn’ttaxpayersapplypressuretosecurethem?Indeed,whywouldn’tavoluntarydisclosure
taxpayerhavingpaidaheftythreeyearsoftaxeswithinterestfileforrefundanddemandonequal
protectiongroundstoreceivethesametreatmentasAirbnb’slodgingoperatorssecured?Ina
Gresham’slawfortaxadministration,badpractices(Airbnbagreements)willdriveoutgood
practices(voluntarydisclosureagreements).24Intheprocess,theAirbnbagreementswill
underminecompliancewithstateandlocallawsgenerally.Theruleoflawwillloseagain.
ThefinalareawheretheAirbnbagreementswillunderminetheruleoflawisregarding
locallanduse,zoning,housing,occupancyandbuildingsafetylaws.Asdescribedearlier,theAirbnb
agreementsthatcreateshieldofsecrecyforlodgingoperatorswilleffectivelyallowandenablethe
growthillegalhotelstooperateintraditionalresidentialareas.Isitpossiblethatthegoalisto
underminecompliancewithlocallanduseandhousinglawsenoughtochangetherealityonthe
groundtosufficientlythatiflawsareenactedtostoptheconversionstocommerciallodging,those
lawswill“grandfather”inplacetheillegalhotels?Ifthatoccurs,changewouldhaveoccurred
improperlyattheexpenseoftheruleoflawwiththosewhoviolatedthelawgettingrewarded.
23Itistheback-taxtreatmentoftheAirbnblodgingoperatorsthatwillbereferencedbyvoluntary
disclosuretaxpayers.Theseoperators,withtheirindisputableconstitutionalandstatutory
obligationtohavepaidpriortaxes,offersthedisclosuretaxpayersthebestpointofcomparison.
Thedisclosuretaxpayerseitherhadtheidenticalobligationtopaytaxesasthelodgingoperatorsor
alesserobligation,yettheirvoluntarydisclosureagreementsrequirethreeyearsofbackpayments
andtheoperatorspaynone.
24StatetaxagenciesthathavesignedAirbnbagreements,butarealsoactiveinofferingvoluntary
disclosureagreements,suchasthosecoordinatedbytheMultistateTaxCommission’sNational
NexusProgram,mayfindthemselvesatthe“pointofthespear”facingclaimsofinequitable
treatmentofAirbnblodgingoperatorsascomparedtovoluntarydisclosuretaxpayers.
40
SectionD
CommentaryonShort-TermRentalLegislation
Statelegislaturesandlocalmetropolitanareashavebegunconsideringandenacting
legislationapplicabletoshort-termrentals.Theactionsthusfarappeartobelimitedandclusterat
twodifferentdirections.Onecategoryoflegislationisaimedatprohibitingorreducingtheshorttermrentalofapartmentsthatarenotoccupiedbyapermanentresident.Legislationinthis
categoryhasbeenenactedinSanFranciscoandNewYorkthatseekstolimitwhatofficialsinthese
areasviewastheconversionoflong-termapartmentsintoshort-termhotels.Maintainingan
affordablesupplyoflong-termrentalsisamotivatingfactorforthisclusteroflegislativeactivity.
Rulesprohibitingadvertisingofsuchrentals,feesandfinesarepartofthediscussionand
controversyaroundthistypeoflegislation.
Asecondclusteroflegislation,enactedorproposed,isaimedinanoppositedirectionandis
representedbylegislationenactedinArizonain2016(SB1350)that(1)severelynarrowsthe
groundsonwhichlocalgovernmentscanregulateshort-termrentals,(2)allowsonline
marketplacestocollectandpaytaxesforthelodgingoperators,butonlyinreturnsthatdonot
identifythelodgingoperators,and(3)exemptsthereturnssubmittedfromamajorportionof
informationexchangelaws.Thelatterincludesprohibitinginformationsharingwithlocal
governments,otherArizonastateagencies,otherstategovernmentsandtheInternalRevenue
Service.Forthelimiteddisclosurethatisallowed,theonlinemarketplacemustgivewritten
consenttothedisclosure.TheAmericanLegislativeExchangeCouncil(ALEC)hasapprovedan
evenlessspecificmodelbillbasedontheArizonalegislation.
TheArizonalawandproposalspatternedafteritpromotetheexpansionofshort-term
rentals,includingtheconversionoflong-termresidentialhousingintolodgingrentals.The
strongestprovisionsoftheArizonalawarethosethatpreemptlocalgovernmentauthorityto
regulateshort-termrentalsandthatexpandthesecrecyofshort-termrentalinformationthrough
limitsonpublicagenciesexchanginginformation.Ironically,theArizonabillstillallowslocal
governmentstoregulateshort-termrentalsbasedonpublichealthandsafety,butprohibitsthe
statefromacquiringinformation(lodgingoperatoridentities)andsharingitwithlocal
governmentsthatwouldassistcities,townsandcountiesinprotectingpublichealthandsafety.The
ArizonalawispatternedaftertheprivacyandinformationexchangelimitsintheAirbnb
agreementsandservestheAirbnbformulaofexpandingitsmarketsharebyattractingmore
lodgingoperatorstosignupbecausetheygainashieldfromfederal,state,andlocalenforcementof
laws—bothtaxandregulatoryinnature.
WhatshouldalarmstateandlocaltaxagenciesisthegrowthintheextentofAirbnb-type
restrictionsoninformationexchangeinArizona’staxlaw.Thereisnowaprecedentinstatelaw
wherebyonenarrowbusinessinteresthaslimitedtheinformationprovidedtothestate’stax
agencyandhasprohibitedeventhatsmallamountofinformationfrombeingsharedwithcities,
towns,andcounties,otherstateagenciesinthatstate,taxagenciesofotherstates,andtheIRS.
Informationsharingamongtaxagenciesisacriticalfoundationofeffectivetaxadministrationand
complianceintheUnitedStates.TheArizonalawmaywellhaveopenedthefirstcrackinthat
foundation.Taxagencieseverywhereshouldtakenoteofthisdevelopmentandrallyeventsto
41
preventitfromoccurringagain.Mostcertainlyagenciesshouldnotencouragethespreadof
exchangeofinformationrestrictionsfurtherbysigningmoreAirbnbagreements.
AlsoofconcernintheArizonalawisthat,forwhatexchangesofinformationremain,Airbnb
andotheronlinebookingcompaniesmustconsenttotheinformationsharinginadvance.Thatlaw
expandsaprocess,firstappearinginthePinellasCountyagreement,whichrequiresnoticeto
Airbnbofinformationexchangesforofficialinvestigativeorenforcementactivityunderway.Under
thePinellasterms,thecountyissupposedtoallowAirbnbsufficienttimetotakelegalactionto
preventthatsharingfromoccurring.Further,nothinginthatagreementstopsAirbnbfrom
spreadingtheknowledgeitlearnsaboutinvestigativeorenforcementactivitieswithitsoperators.
TheArizonalawsparesonlinecompaniesthetroubleofgoingtocourttoblockinformationsharing
bygivingthemapprovalauthorityoverwhetherthetaxagencycanshareinformationifother
publicofficials.TheimplicationsofthePinellasprovisionforprivateinterferencewithpublicaction
wasbadenough,buttheArizonalawisevenworse.
Thequestionstaxagenciesshouldaskthemselvesinclude,“Whatwillbethenextgroupof
taxpayersthatlobbiesthelegislaturetogainthesameexemptionsfrominformationexchanges?”
Wedonotknowtheanswertothatquestionyet.However,iftheprecedentcontinuestoexpand
andspread,stateagenciesknowthatitcanhaveaseriousnegativeeffectontaxcompliance.
ProhibitingexchangesofinformationwithotherstategovernmentsandtheIRSstartstocutoffa
statefromvitalinformationitusesinitstaxauditandcomplianceactivities.Further,ifmorestates
expandlimitsoninterstateexchangeofinformation,itcouldhaveseriousimplicationsforthe
viabilityofcooperativecomplianceprogramssuchasthosemaintainedbytheSoutheastern
AssociationofTaxAdministrators,theMultistateTaxCommissionandotherorganizations.
Anotherquestiontoaskis,“WheredidtheArizonalegislaturegettheideathattheselimits
oninformationexchangewereOKtodo?”Welikelyknowtheanswertothatquestion.Legislators
wereprobablyadvisedthattheselimitsoninformationexchangearefinefromataxadministrative
standpointbecausealargeandgrowingnumberofstateandlocaltaxagencieshavealreadysigned
Airbnbagreementsinwhichtheyagreetolimittheexchangeofinformationwithotherlocal,state
andfederalagencies.Taxagenciescantrytoobjectthattheagreementstheysigneddidnotlimit
exchangeswithotherlocal,stateandfederaltaxagenciesorthoserequiredbylaw.However,
criticaldetails,asevidencedbytheArizonalaw,likethatgetlostinthelegislativeshuffle.Whenthe
ballstartsrollinginmorestateswithotherselecttaxpayerslobbyingforandsecuringlimitson
theirinformationbeingexchangedfortaxandregulatorypurposesandthewholenetworkof
exchangeprocessesamongtheseveralstatesandtheIRSbeginstounravel,taxagencieswillonly
beabletoblamethemselvesforsigningAirbnbagreements.Thesheernumberofagreements
beginstocoveruptheirunderlyingflawsthroughasenseofinevitability,whichmaybeanelement
ofAirbnb’sstrategy.
Thesameistrueforlocaltaxagenciesthatsignedtheseagreementsthatfocusoncollecting
relativelymodestsumsoflodgingtaxrevenues,whiledisregardingtheneedsofregulatoryand
publicsafetyagenciesforinformationtodotheirjobs.Whatthatdisregardhasturnedintointhe
Arizonalawispreemptionoftraditionalzoningtoolsusedtoprotectthenatureofresidential
neighborhoods.Althoughminimallocalregulatoryauthorityforpublichealthandsafetyis
preservedintheArizonalaw,thestatetaxagencyisprohibitedfromsharingonlinemarketplace
42
informationwithalllocalagencies—notsimplyzoningoffices,butalsopolice,fireandotherpublic
safetyofficials.Soevenwherelimitedlocalauthorityforpublichealthandsafetyissavedfrom
preemption,informationthatsupportstheexerciseofthatauthoritywillnotbeprovided.
Taxofficials,stateandlocal,shouldstepbackandlookattheprocessthatisoccurring.It
beganwithAirbnbcreatingsoftwarethatkeepssecrettheaddressesoflocallodgingfacilities.The
secrecygrewandspreadthroughtheagreementsthatstateandlocalagenciessigned.Itisnow
beginningtospreadintothelegislativearenawherelawsaremadetoextendthesecrecyandcutoff
theflowofinformationthroughthecirculatorysystemofinformationthatgiveslifetopublic
administrationatvariouslevelsandlocalesofgovernment.Andsomeoflegislationisnotjust
cuttingofftheflowofinformation,butalsoeatingawayanddestroyingtheauthoritytouse
informationtoachievewhathadbeenpreviouslypublicpolicygoalsimportanttocitizens.
Taxagenciesshouldstop—absolutelystop—signingtheAirbnbagreementsthatarefullof
provisionsthatareunacceptableandunfair.Theyarebadenoughontheirterms.However,asthe
agreementsareextendedintolegislation,therearenowclearwarningsignsthatunacceptable
agreementscanturnintolegislationthatthreatenstheequityandintegrityofstateandlocaltax
systems,theprotectionofpublichealthandsafety,andqualityofcommunitylife.
Onceagenciesstopsigningtheseagreements,thecommunityofstateandtax
administrators—workingwithlegislatorsandmembersofcivilsociety—shouldturntothetaskof
ofguaranteeingfairandequitabletaxcollectionwithoutdamagingsideeffects.Thatisthesubject
ofthenextandfinalsectionofthisreport.
43
SectionE
AchievingEquityandIntegrityinShort-TermRentalTaxation
Thechallengesofequitableandeffectivetaxandregulatoryadministrationforonline
lodgingrentalsarerelativelysimple.TheyhavebeencomplicatedbyAirbnb’sonlinesecrecy
practicesandtheiragreementswhichdomoreharmthangoodanddivertpolicyawayfromthe
publicinterest.Allthetoolsofqualitytaxadministrationareinplace.Onlyoneadditiontothe
toolkit—emergingfromthetechnologythatproducedtheonlinebookingindustryitself—maybe
advisable:engagingsoftware-basedservicesthatidentifyandlocatelodgingoperators.
Thebasicstrategyforstateandlocalgovernmentsisthree-fold:(1)donoharmtosoundtax
practices,(2)updatelodgingtaxlaws,ifneeded,toclearlyincludeonlinebookingcompaniesand
theircustomers,thelodgingoperators,onequaltermswithallothertaxpayers,and(3)enforce
currenttaxlawsasfairlyandeffectivelyaspossible.
Wewilldiscusswhatshouldbedonebydifferentparties:taxagencies,legislativebodies
andprivateparties—communitygroupsandlodgingbusinessesworkingtogether.Forthese
groups,thefirststepofdoingnoharmmeansthesamethingforeveryone.Doingnoharmmeans
rejectingtheframeworkoftheAirbnbagreementsandanylegislationthatattemptstoratifythat
frameworkanditsspecialinterestprovisionsintothelaw.
1. ActionbyTaxAgencies
a. SupportforPositiveLegislation.Fortaxagencies,beyondnotsigningAirbnb
agreementsoragreeingtoitsframeworkinlegislationorrules,atoppriorityshouldbetowork
withlegislativebodiestoupdatetheexistinglodgingtaxstructuretoreflectcurrentmarket
circumstancesonanequitablebasis.Thatwouldinvolveupdatingdefinitionstoplacereportingand
collectiondutiesonboththeonlinebookingcompaniesandthelocallodgingoperators,with
mechanismsforcoordinatingtaxcollectionbetweenthetwo.However,bothonlinecompaniesand
theoperatorsshouldbearreportingresponsibilitiessotherearenogapsincollectionbecause
operatorscantakebookingsthroughdifferentmeans.Further,thereportsfrombothlevelscan
serveasacheckoneachother.25Thelegislationshouldprovideforapubliclyavailableregistryof
lodgingoperatorsandreportingbytheonlinecompaniestothetaxagenciesoftheidentityand
locationoftheiraffiliatedoperators.Thelegislativebodywillwanttoaddressthepolicyquestion
ofthetaxationorexemptionofbookingfees,andthetaxagencyshouldbepreparedwith
informationandadviceonthattopic.
Giventhesubstantialcommunity-levelimpactsofonlinelodgingrentalsandtheirdispersed
nature,careshouldbetakentoenhanceandnotreducetheflowofinformationfromstateorlocal
25
Thismeasureisquitelikehowsalestaxesarehandledwheretheretailer/marketer(Airbnb)
handlesthesaleandtheproductisdeliveredorfulfilledbyawholesalerwhoisservingasa“drop
shipper”(lodgingoperators).Dualregistrationandrecord-keepingisrequiredinthiscontext,and
soshoulditbeinthecaseofAirbnbanditslodgingoperatorstoensureintegrityandaccuracyin
lodgingtaxreporting.
44
taxdepartmentstolocalregulatoryandlawenforcementagencies.Ifstatesalreadyhavea
structureoflocally-administeredlodgingtaxes,thenatureandmodestsizeofonlinebooking
operationsshouldnotentailaradicalcentralizationofresponsibilitiesatthestatelevel.Thatstep
coulddisrupttheinformationneededforeffectiveenforcementoflocalzoningandhousing
regulationsandconvenientavailabilityofinformationforlawenforcementandotherpublicsafety
authorities.Further,otherthanthenatureofthesoftwareplatform,theactuallodgingrentalsthat
areoccurringareusuallyofsmallscaleandaredispersedincommunities.Ifanything,local
knowledgeandrelationshipsbecomemoreimportantinthiscontext,favoringcontinuationofany
existinglocaladministration.Finally,regardlessofthelevelatwhichtaxesarecollected,care
shouldbetakentoevaluateifexchangeofinformationlawsneedtobeupdatedtoensurean
adequateandtimelyflowofinformationfromtaxagenciestootherpublicagenciesforofficial
purposes.Makenomistake,thisconsiderationistheexactoppositeofwhatAirbnbhasattempted
withitsagreementsandnowlegislativeefforts(ArizonaanditsALECmodel)thatattemptto
suspendordisruptinformationexchangeprocesses,includingbyallowingprivatepartiestoonline
companiesinterferedirectlyinthem.Therightthingtodoistostrengthen,notweaken,those
exchangeofinformationprocesses.
Additionallegislationthatcouldbepursuedeitherseparatelyfromoraspartoftheupdate
ofthelodgingtaxlawsshouldrequireonlinelodgingmarketplacestoprovidethenameandrental
locationsoftheirlodgingoperations.Thislegislationwouldsubstituteforcontractingforalodging
operatoridentificationservicediscussedbelow.ThelegislationwouldbepatternedafteraColorado
lawthatrequiresdirectmarketstoprovidecustomerinformationtoassistinusetaxcollection.
Thatlegislationwasapprovedbythe10thCircuitCourtofAppeals,andtheU.S.SupremeCourt
declinedtoreviewthecase,sothecircuitdecisionstands.Othercircuitsmighttakeanotherview,
butmanyexpertsconsiderthatunlikely.
b. AComprehensiveTaxComplianceProgram.Stateandlocalagenciesshouldundertake
effectiveprogramsaimedatsecuringequitablecompliancefromonlinebookingcompaniesand
locallodgingoperators.Whereverpossible,opportunitiesforcoordinatedorjointactionshould
occur.Twomultistateeffortsmaybeparticularlyhelpful.Thefirstwouldbemultistateauditsof
onlinebookingcompaniestodeterminewhether,undertheConsitutionandstatutes,theaudited
companieshavealegaldutytofile,collectandpayvarioustaxes,includinglodging,salesand
corporatetaxes.Localgovernmentsshouldbeencouragedtoparticipateaspartnerswiththeir
statetaxagenciestosecurethebenefitsofthateffort.Thevehicleforsuchauditswouldbethe
MultistateTaxCommission(MTC).
Thesecondmultistateeffortwouldtheexplorationofajointcontractamongmultiplestates
andlocalgovernmentsofsoftware-basedservicestoidentifylocallodgingoperatorsandtheir
locations.Aspreviouslynoted,thereisonesuchprovider,HostCompliance,andotherscould
alwaysemerge.26Ifexplorationofjointcontractingdoesnotyieldefficiencies,costsavingsorother
26Seehttps://hostcompliance.comfortherangeofservicesofferedbythiscompanyfromwhich
governmentscanselectthetypestheyprefer.Theservicesincludeidentifyingandlocatinglodging
operators,providingassistanceinsecuringtaxandregulatorycompliance,analyzingdatafor
decision-makingregardingshorttermrentals,andotheractivities.Becauseitsservicesareusefulto
taxandregulatoryagencies,suchagencieswithinajurisdictioncouldpotentiallysharecosts.
45
advantages,itcouldyieldusefulinformationforindividualstatesandlocalgovernmentstoproceed
withcontracts.Becausethisserviceisdesignedtoassistbothtaxandregulatorycompliance,the
baseoffundingatthelocallevelmaybeabletobringtogethertheresourcesofseveralagencies.
Thisactivityshouldbeexploredrapidlyatthenational,stateandlocallevels,becauseeffective
identificationoflodgingoperatorscanyieldasubstantialchangeinthecircumstancesstateand
localgovernmentsfacewithregardtodispersedlodgingbookedthroughonlinecompanies.
Agencieshavebeenstymiedbynotbeingabletoidentifythelodgingproviders,andthisalternative
canquicklychangethatpicture.Again,theMTCcouldbeaskedtocoordinateresearchand
informationgatheringonthistopic,buttheyshouldbeaskedtodosoonanexpeditedbasis.
Withmoreinformationaboutboththeonlinebookingcompaniesandtheidentityoflocal
lodgingoperators,stateandlocalagenciescanproceedwithappropriatecompliancestrategies.The
promptacquisitionoftheidentitiesandlocationsoflocaloperatorscouldenablethelaunchof
voluntarydisclosureprogramsusingthetraditionalvoluntarydisclosureagreements(notthe
Airbnbagreements).Asix-monthprogramwithadvertisingmightoccurwithlodgingoperators
giventheopportunitytosignuptocollectfuturetaxesandpaythreeyearsofbacktaxeswith
interest,butnopenalties.Attheendofwhateveropensign-upperiodmightbeset,agenciesshould
bepreparedwithnewidentificationinformationinhandtobegincontactstorequirecompliance.
Thevoluntarydisclosureagreementsareagoodexampleoftheexcellenttoolsthattax
administratorsalreadyhaveavailabletoconvertnon-complianttaxpayersintotaxpayers.An
unfortunatedangerofthisentireAirbnbepisodeisthattheAirbnbagreementswiththeirfeatures
damagingtotaxadministrationthreatentounderminevoluntarydisclosureagreementsas
taxpayerssubjecttoincome,salesandcorporatebusinesstaxesdemandthesametreatment.Itis
timefortaxagenciestotakeafirmstanceandrejecttheAirbnbformulawithitseliminationofback
taxpayments,amnestyforthetaxpayer’scustomers,taxpayercontroloftaxreporting,audit
processusinganonymousdataandnoaccesstobooksandrecords,anditssecrecyforthetaxpayer
andthetaxpayer’scustomers.Iftaxagenciesfailtorejectthoseagreements,theymaypotentially
facelawsuitsandaggressivenegotiationsthatwillerodetheintegrityandequityofstatetax
systemsandpossiblycostpublictreasuriesmultipletimestheamountoftaxescollectedthrough
lodgingtaxes.
IfAirbnborotheronlinebookingcompaniesseekagreements,theappropriateresponseis
toofferthematraditionalvoluntarydisclosureagreement,makingcleartheAirbnbagreementsare
unacceptable.Iftheyobjectthatthecurrentlodgingtaxesdonotapplytothemand,therefore,a
back-taxpaymentfromthemisnotorder,thenthecounteristoasktheirassistancewiththe
voluntarydisclosureprocessfortheirlodgingoperators.Theycouldcirculatethoseagreementsto
theirlodgingoperatorsandrequestthattheycommunicatewiththestateorlocaltaxagencybefore
thedeadlineforvoluntarydisclosureofferscloseanddirectcontactsbeginbythetaxagency.
c. PublicParticipationandReevaluationbyTaxAgencieswithAirbnbAgreements.Tax
agenciesthathavesignedtheAirbnbagreementsshouldreconsiderthem.Asafirststep,these
agenciesshouldreleasetheiragreements,exceptforredactionofanyconfidentialorproprietary
information.Ifthetwelveagreementsarerepresentative,itisdoubtfulthatanyinformationwill
needtoberedacted.Iftheagenciesdonotreleasetheagreementsontheirowndecisions,they
shouldrespondaspositivelyastheycantoopenrecordsrequest.
46
Asasecondstep,agenciesthathavesignedagreementsshouldbesubjectedtoapublic
participationprocess.Policyprovisions,likethoseidentifiedinthisreport,shouldbenoticedas
rulesforpublichearingsandcommentsorotherrelevantpublicprocess.Anyprovisionslimiting
exchangeofinformationwithotheragenciesshouldbeapartofthesamepublicprocess.The
learningfromthispublicprocesswouldbeameansofre-evaluatingtheagreements,leadingto
cancellation,suspensionorre-negotiation.
Finally,eveniftheagreementsremaininplace,agenciesshouldjointheaudit,host
identificationandvoluntarydisclosureeffortswithotheragenciesasdescribedabove.These
agenciesshouldusetheresultsasbesttheycantoimprovecompliancefromtheirlodging
operatorsfortransactionsmadebyanymeansorplatforms.
2. ActionbyStateLegislatures
Thetopicoflegislativeactionwasaddressedabove,andtheidenticalideasapplyhere.They
willbementionedhereinabbreviatedform.Legislativebodiesshouldconsiderlegislationthat
bringsonlinebookingcompaniesandlocallodgingoperatorsintothestructureofthelodgingtax
lawsasoperatorsrequiredtocollect,reportandpaytaxes.Asexplainedabovebothlevelsinthese
transactionsshouldreportsothatthereturnscanbeacheckoneachother.Theresponsibilityfor
paymentcanbecoordinatedsothatonlyonelevelinthetransactionpaysthetaxwiththeother
takingacreditagainsttaxesdue.Localoperatorsmayalsohavetaxestocollectandpaybecausenot
alltheirrentalsmaybecoveredbyonlinecompaniescollectingthetax.
Legislaturesshouldgivecarefulattentiontoimprovingtheexchangeofinformation
betweentaxagenciesandregulatoryandlawenforcementagenciesthatdealwithshort-term
rentals.Restructuringofthelodgingtaxesinwaysthatwoulddisrupttheflowofinformationto
localnon-taxagenciesshouldbeavoided.Apublicregistryoflodgingoperatorsiscriticalsothe
publicaswellaslocalagenciesknowwherelodgingfacilitiesarelocatedthatareoperatingin
residentialareas.Mostimportantly,nolegislationshouldbeenactedthatratifiestheunfortunate
Airbnbagreementsorthatincorporatestheirprovisions.Legislaturesshouldconsidercarefullyany
requestsforadditionalresourcesfromtaxagenciestorespondtolodgingtaxcomplianceneeds.
Legislaturesshouldalsoenactlegislationorincorporateitinlodgingtaxupdatestorequire
onlinebookingcompaniestoprovidenamesandpropertylocationsfortheirlodgingoperator
customers,asdiscussedinthesubsectiononactionsbytaxagencies.
Mostimportantly,legislaturesshouldrejectanylegislation,suchastheArizonalaw,that
ratifiestheAirbnbagreements.
3. ActionbyCommunityandBusinessOrganizations
Communitygroupsandbusinessassociationsconcernedwiththeimpactsofshort-term
rentalsinneighborhoodsandfairnessinthetaxsystemhaveseveralactionstheyshouldconsider.
Thefirstisaconcertedefforttofileopenrecordsrequestsofadetailednaturetosecureabroader
sampleofagreementsforpublicscrutinyanddiscussion.Requestscanbetailoredforreleaseof
documentscomparabletotheseagreementsthataredevoidofanyconfidentialorproprietary
information.Therequestshouldexpressawillingnesstoacceptredactionofanypartof
47
agreementsthatmayincludesomeconfidentialinformationtofacilitatethereleaseofinformation
thatisnotconfidential.Ifrequestsaredenied,considerationshouldbegiventofollow-uplegal
actiontosecurepublicdisclosureofAirbnbagreements.
Whenorganizationsmakeopenrecordsrequests,theyshouldalsoconsiderrequestingthe
recordsofanycommunicationswithAirbnbintheprocessof(a)negotiatingtheagreements,(b)
notifyingAirbnbaboutopenrecordsrequestincludingtheonebeingmade,(c)notifyingand,if
applicable,seekingconsentfromAirbnbformediacommunicationsabouttheagreement,(d)
notifyingand,ifapplicable,seekingconsentfromAirbnbforinformationsharingwithotherpublic
agencies,and(d)anyothercommunicationswithAirbnbconcerningtheadministrationofthe
agreement.
Whenagreementsarereleasedandiftheyarefoundtocontainprovisionsthatconstitute
rules,petitionsforrule-makingonthoseprovisionsshouldbefiledwiththesignatoryagencies.If
rulesareproposed,thegroupsshouldactivelyparticipatetoindicateindetailtheproblemswith
thepoliciesembodiedintheagreements.Ifrule-makingisnotundertakeninspecificcaseswhere
agreementsclearlyincluderulesmaterial,thenlegalactionshouldbefiledtoseekrulemakingby
theagency.
Theseorganizationsshouldalsoactivelycontacttaxagenciesurgingthemtotakethe
administrativeactionsdescribedabove,toactivelysupportpositivelegislationupdatinglodgingtax
laws,toresistsigningAirbnbagreements,andtoconductafiscalanalysisoftheimpactofAirbnb
agreementsiftheydisplacevoluntarydisclosureagreementsandotherwisespreadthroughthe
administrationofother,moresignificantrevenuesourcesthanlodgingtaxes.
Communityandbusinessorganizationsshould,ofcourse,alsofocusonstatelegislatures
andrequestthatproperlegislationbeenactedupdatinglodgingtaxestoprovidefortheirequitable
andeffectivecollection,apublicregistryoflodgingoperators,andeffectiveexchangeofinformation
withlocalregulatoryandlawenforcementagencies.
48
Appendix
RatingtheTaxAgreements
ThisappendixpresentsaratingofthetwelveAirbnbagreementsalongwithtwoversionsof
voluntarydisclosureagreements.ThisratingprocesscanbeusedtoevaluateAirbnbagreementsin
otherjurisdictionsiftheirprovisionsarerelativelycomparable.
Theratingscaleusesthesecategories:excellent,good,conditionallyacceptable,
unacceptable,andterrible.NoneofthetwelveAirbnbagreementsbythemselvesareratedas
acceptable.Fourofthetwelveagreementsareratedasconditionallyacceptable,meaningtheycan
becomeacceptableifcombinedwithadditionalmeasurestoimprovetheirequity,integrityand
effectiveness.Fiveagreementsareratedasunacceptable,andthreeasterrible.
Althoughtheratingsmayappearcriticaloverall,somejurisdictionshavedoneanexcellent
jobofnegotiatinginadifficultenvironmentinwhichAirbnbhasactivelypromotedagreements
contrarytothepublicinterest.OfficialsfromHillsboroughandPolkCounties,FL,andthePalm
DesertandSanJose,CA,havedoneanexcellentjob.Ofthesefour,theHillsboroughCounty
agreementrepresentsthegreatestprogressoverall.
Unfortunately,noneofthesefouragreementsachievetransparencyinlodgingoperator
registration,collectbacktaxesdue,orwrestcontrolofthetaxandauditprocessfromAirbnb.
Undertheothereightagreements,circumstancesareworse.Backtaxesremain
unnecessarilyforgivenforlodgingoperatorsinsevenagreementsandforAirbnbinfive.Lodging
operatorsarerewardedfornon-compliance,andthepublicispermanentlyshort-changed.Mostof
theseagreementshardenthesecrecyforlodgingoperators—makingmoredifficultthejobof
regulatoryagenciesinholdingthesefacilitiesaccountableforimpactsoncommunities.Mosthelp
expandAirbnb’smarketsharebyofferinglodgingoperatorsastrongershieldofsecrecyallowing
themtoescapelocaldetectionandregulation,andAirbnb’sabilitytoavoidtaxaccountabilitywill
onlyincreaseasitsmarketpresencegrows.TheseagreementshelpAirbnbgrowinthewrongway
andthusexacerbatetheproblemstheagreementsclaimtosolve.Thus,theirratingsrangefrom
unacceptabletoterrible.
Table5summarizestheratingofAirbnbagreements.Thetableshouldnotbeinterpretedas
implyingthatAirbnbagreements,bythemselves,areadequatemeasuresforachievingequitable
andeffectivetaxandregulatorycompliance.Ataminimum,theyrequirethesupplemental
measuresreferencedinandlistedbelowTable5.
49
Table5.RatingsofAirbnbAgreementsCombinedwithSupplementalMeasures
Rating
Jurisdictions
Characteristics
Excellent
None
Atraditionalvoluntarydisclosureagreement
agreedtobyAirbnbcombinedwithsteps1
through3below.
Good
None
Atraditionalvoluntarydisclosureagreement
agreedtobyAirbnbforfuturetaxes,combined
withsteps1through4below,whichinclude
disclosureagreementswithoperators(step4).
Conditionally
Hillsborough,Polk,SanJose, “Level1”Airbnbagreements.Addallsteps1
Acceptable
andPalmDesert
through5belowtomovefromconditionally
acceptabletogood.
Unacceptable
Humboldt,Florida,Taos,
“Level2”Airbnbagreements.
Multnomah,andWashington
Terrible
Pinellas,Montgomery,and
“Level3”Airbnbagreements.
SantaFe
Thefouragreementsratedas“conditionallyacceptable”canmovetoaratingof“good”by
addingtoandmodifyingtheexistingagreementswiththesefivesteps:
1. Ifnotaccomplishedalready,jurisdictionsshouldsubmit,asmodifiedandsupplementedby
themeasureshere,thepoliciesintheagreementstopublicscrutinyandparticipationby
proposingthosepoliciesasrulesorordinancesasappropriate.
2. Jurisdictionsshouldestablish,forallrentalplatforms(notsimplyAirbnb),alodging
operatorregistrationsystembackedupbyalodgingoperatoridentificationprocessto
securecompliancebythosewhodonotregistervoluntarily.Thebasicregistration
informationaboutthelodgingfacilities,ownershipandlocationshouldbepublicly
available.Theregistrationandidentificationprocesseswillsupporttaxcollectionandlocal
regulatoryactivitiesandinformthepublicinaffectedneighborhoodsoflodgingactivitiesin
theirareas.Theidentificationprocesscoulduseacommerciallyavailableservicetoidentify
operatorsusingonlineservices,anditscostscanbesharedbytaxandregulatoryagencies.27
3. Jurisdictionsshouldestablishanoperatortaxreportingsystemrequiringreturnsoflodging
rentalrevenuesfromallsources,paymentoftaxesonthoserevenues,withacreditfortaxes
collectedandpaidbyonlinebookingplatformssuchasAirbnb.Evenifalltaxesarepaidby
Airbnbforagivenfacility,therevenueprovidesacross-checkonAirbnb’staxreporting.
Thetaxreturninformationwouldbeconfidentialandprotectedfrompublicdisclosure,but
availableforofficialpurposestootherpublicagencieseligibletoreceiveitbylaw.
4. Taxagenciesshouldundertakeback-taxcollectioneffortsbyofferingvoluntarydisclosure
agreementstooperatorsrequiringthreeyearsofbacktaxeswithinterest(orlessifthe
facilityhasoperatedforlesstime)butnopenalties.Ifoperatorsfailtoregistervoluntarily
beforebeingcontactedbythetaxagency,theywouldnotqualifyforpenaltyrelief.
5. AgenciesshouldrenegotiatetheAirbnbagreementstogainaccesstoAirbnb’sbooksand
recordsintheauditprocess,eliminatingtheartificialrestrictionsonauditingincurrent
27Seefootnote25.
50
agreements.ThisisnecessarytoensureAirbnb’saccountabilityfortaxescollectedandpaid,
includingcross-checkingAirbnb’sreturnswithlodgingoperatorreturns.
ThesemeasuresassumethefourjurisdictionscontinuetheirAirbnbagreements,with
modifications.IfAirbnbdoesnotmodifytheagreementstomakethemacceptable,thejurisdictions
canterminatetheagreementsandimplementthemeasuresrecommendedinSectionE,whichare
preferabletorelyingonAirbnbagreementsinanyform.
51