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Websites offering up private accommodations like Airbnb and vacation rental by owner vrbo, they've brought in hundreds of millions of dollars by taking existing housing stock and marketing it to tourists. The companies do not charge hotel taxes much to the chagrin of cities who say they've been deprived of millions of dollars in tax revenue.
Now, Airbnb has announced it will work with some cities around the country to collect the taxes. From member station KALW in San Francisco, Ben Trefny reports.
BEN TREFNY, BYLINE: Tourists lined up to ride cable cars through Union Square have plenty of choices when it comes to lodging.
REGITZE VISBY: Well, we just Googled a bed and breakfast in San Francisco and then we came to Airbnb and we saw the pictures of the house and the room and we thought that looked very nice.
TREFNY: Regitze Visby is from Denmark and when she saw that she could stay at one of the famed painted ladies on Alamo Square, ones shown on the TV show "Full House," one listed on Airbnb for $135 a night, well, she took it.
VISBY: Yeah, it was a good deal. I haven't been here before so I don't know what a good deal is, but as far as I've heard, it's a good deal.
TREFNY: Do you know if you're paying a transient occupancy tax there, like a hotel tax?
VISBY: I have no idea.
TREFNY: She'd know if she were staying in a hotel. It's 14 percent per room. Places that are like hotels, like Airbnbs, they usually don't bother with it, even though they should.
EMILY BENKERT: Here we go into the apartment.
TREFNY: Property manager Emily Benkert is showing me around a two-bedroom apartment available for rent on Airbnb. It's high on a hill overlooking downtown San Francisco.
BENKERT: And this place is all about the view. The view.
TREFNY: Benkert started her business, Guesthop, in October with five listings. Now, she says, she's up to 50. And while she is aware of the hotel room tax, she's not planning on paying it until she has to.
BENKERT: I personally have decided to wait until the city was actually enforcing it, and Airbnb was collecting it.
DAVID HANTMAN: When we talked to the city and state, it's clear that a lot of the money goes uncollected and that they have not tried to collect it.
TREFNY: David Hantman is the head of Global Public Policy for Airbnb. He says that tax problem is about to change.
HANTMAN: So in Portland and San Francisco and New York, we're looking at pilot projects to help collect and remit these taxes from guests, without the hosts having to worry about all the details.
TREFNY: The self-tax collection is set to start in June and it could be worth a lot of money. Hantman says in New York alone...
HANTMAN: It looks like we'd be collecting at least $20 million a year from our guests and providing it directly to the city and state.
TREFNY: New York is Airbnb's biggest market. It's also one of its most challenging. The city does not currently allow brokers like Airbnb to collect taxes. It's been cracking down on rentals of less than 30 days, which are largely illegal under city code. They're actually illegal in many of the 35,000 cities in which Airbnb operates, including San Francisco.
DAVID CHIU: Under current law in San Francisco, law forbids renting residential apartments for less than 30 days to ensure that our housing wouldn't be used as de facto hotels.
TREFNY: David Chiu is president of the San Francisco Board of Supervisors.
CHIU: But we know that the current reality is that these laws are broken every day. The estimates are, in San Francisco, over the past year, we've seen over 100,000 incidents.
TREFNY: Chiu has proposed legislation that would legalize short-term rentals for permanent San Francisco residents. And it would require...
CHIU: Every hosting platform, not just Airbnb, collect and remit all required taxes as well.
TREFNY: That could get complicated. VRBO, for example, says it can't collect taxes and has no plans to. While it all gets sorted out, the companies continue to make fortunes in the tourist trade. Airbnb was recently valued at $10 billion. The cities where they make their money are struggling to figure out how to cash in as well. For NPR News, I'm Ben Trefny in San Francisco.