Berkeley could generate $800K in tax revenue with new Airbnb agreement

Cherry Wu/Staff

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After years of negotiations, Berkeley finalized details for a tax collection agreement with Airbnb on Oct. 27, which could create about $800,000 to $1 million annually for the city.

Per the agreement, Airbnb will collect a 12 percent transient occupancy tax, or “hotel tax,” from hosts and deliver it to the city. The transient occupancy tax has already been applied to hotels and mobile homes in Berkeley, but short-term rentals, such as Airbnb and “Vacation Rental By Owner,” or VRBO rentals, have only been paying the tax since September.

“We originally said the hosts themselves, the homeowners, would collect the tax and send it themselves,” City Councilmember Kate Harrison said.

Some of the hosts, Harrison said, had approached her to say that they felt the tax was unfair because they were losing guests to the cheaper prices in other locations. Harrison added that it was “difficult” for hosts because it was unclear how they should send taxes to the city.

Marcy McGaugh, an Airbnb host who worked with city council members on the agreement, said Berkeley hosts had received a letter from the city telling them to prepare to start collecting the new tax.

McGaugh went to the website cited in the letter to explain the tax collection process, but she found the website was not up yet. She said the letter told hosts to get zoning certificates, but after going through a lengthy process and paying $225 for the certificate, she was told only one other Airbnb host in the area had actually gotten the certificate.

“It was crazy,” McGaugh said. “But now the city and Airbnb have come to an agreement. I knew that this would happen because I’ve been pressuring city councilmen for a month and a half, and (Wednesday) an email went out to all the hosts saying exactly that.”

Although Airbnb has agreed to collect the tax from its hosts, the city has not made a similar agreement with other rental platforms, such as VRBO or Craigslist, whose hosts will have to file the tax themselves rather than through their rental companies.

“Our goal is to get agreements with all the companies,” said Councilmember Kriss Worthington, who proposed taxing short-term rentals three years ago. “It should really be the responsibility of the company, rather than make each individual homeowner file the paperwork.”

The agreement concluded negotiations that had started in 2014, after San Francisco imposed a similar tax. San Francisco is among the first cities where Airbnb agreed to collect the tax on behalf of the hosts. Since then, the company has collected taxes for more than 300 jurisdictions “all over the world,” according to Airbnb spokeswoman Jasmine Mora.

Worthington said the original contract Airbnb offered was “woefully insufficient.”

“Basically, it said, ‘We’ll send you a check, and you just trust us that we’re sending (you) the right amount,’ ” Worthington said. “If they only send you one-third of the money, or one half of the money, how are you going to know?”

According to Worthington, the city insisted on auditing Airbnb for compliance, so it can verify that the revenue received by the company is the correct amount.

The revenue will go into a general fund and has no specific, designated use yet. Both Harrison and Worthington, however, alluded to using the funds for affordable housing projects.

“This is long overdue, to get this tax in place,” Worthington said. “And now that we are getting the tax in place, we also need to do the enforcement.”

Contact Anjali Shrivastava at [email protected] and follow her on Twitter at @anjalii_shrivas.