Short-term rental company Airbnb has agreed to collect and pay hotel taxes on behalf of its Los Angeles hosts under a three-year agreement announced by city officials Monday.
Starting Aug. 1, Airbnb will be responsible for paying the hotel taxes -- also known as "transient occupancy taxes" -- that are owed by hosts who rent out rooms and properties through the company's website and smartphone applications.
City finance officials estimate the taxes could bring in at least $5.8 million in annual revenue.
Just as with hotels and motels, short-term rental hosts are legally required to pay taxes to the city for renting out their properties, but city officials needed an effective way to ensure they are actually receiving the revenue.
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City Administrative Officer Miguel Santana said during budget hearings in April that some "honest" hosts have taken it upon themselves to pay taxes, which at the time amounted to about $1.5 million in revenue for that fiscal year.
The city is working to reach similar agreements with other companies that provide short-term rental and home-sharing listing and booking services.
Airbnb Southern California public policy manager John Choi said the "agreements allow cities to rightfully benefit in the economic impact of home- sharing while also making it easier for Airbnb hosts, the vast majority of whom are middle-class people sharing their own home, to comply with local tax laws."
"We are pleased that this process is moving forward and will benefit Angelenos," Choi said.
Airbnb officials noted that had the city entered an agreement before 2015, the city might have received as much as $23 million in hotel tax revenue. Company officials said they first began discussing the tax collection agreement with the city more than a year and a half ago.
Cielo Castro, an aide for the city administrative officer, said the city did not have access to Airbnb's internal records when they came up with the $5.8 million estimate for the upcoming year. If the city does receive revenue closer to what Airbnb reports was generated last year, the city will make mid- year financial adjustments to account for it, Castro said.
The amount of tax revenue could be affected by regulations still being debated by City Council members for Airbnb and other online home-sharing services like HomeAway. Proposed regulations being considered include limitations on the number of days properties can be rented out, and requirements that the hosts register with the city for enforcement purposes.
Councilman Mike Bonin called for regulating short-term rentals last year, saying too many property owners were not merely sharing their homes, but evicting tenants and turning their properties into purely commercial hotel and motel businesses.
Of the tax collection agreement announced today, Bonin said he is "glad to see that Airbnb has agreed to do its part in helping the city collect the transit occupancy tax that it is owed."
"This funding is a vital part of the city's comprehensive efforts to address homelessness," he said. "But it remains urgent for the city to approve reasonable regulations governing the short-term rental industry."
Bonin added that the regulation should not be influenced by how much tax revenue the city could be getting.
"We need to let our regulations dictate how much revenue we receive, and not let potential revenue dictate what sort of regulations we craft," he said.
For the upcoming fiscal year, city officials have budgeted the same amount expected to be collected from Airbnb -- about $5.8 million -- mostly toward "rapid re-housing" vouchers to assist homeless people with their housing costs.
The tax collection agreement could be terminated at any time during the next three years to better adhere to any short-term rental regulations that are adopted by the city.