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San Jose Legalizes, Taxes Airbnb

  • Dec 12, 2014 | Gail Cole

 Short term housing options in San Jose are expanding.

Sixty miles southeast of San Francisco, the birthplace of Airbnb, short term rentals have been approved by the San Jose City Council. But legitimization comes with a cost. Airbnb vendors will have to collect and remit the city’s 10% transient occupancy tax on their short term rentals.

Councilmember Don Rocha recommended approving the agreement with Airbnb, referencing the “need to preserve affordable housing.” He spoke of a “tenant’s ability to afford their rent by using home sharing as a supplemental income” but also stressed the need to keep apartment complexes “available for longer-term leases” rather than converting them into “make-shift hotels.”

The council has approved the use of the following dwellings for incidental transient occupancy in compliance with Part 2.5 Chapter 20.80: one-family dwelling units, two-family dwelling units, multiple family dwellings, mobile homes, live/work units and secondary dwellings or guest houses. Certain criteria must be met, including but not limited to:

  • Number of occupants with the host present: up to three transient users in a one-family dwelling or mobile home; up to two transient users in each dwelling unit in a two-family or multiple family dwelling.
  • Number of occupants with the host not present: up to two people in a studio unit, three in a one bedroom unit and two people per bedroom for each bedroom in excess of one bedroom, but not to exceed ten persons total.

According to Mercury News, the council agreed to an annual limit on the number of days allowed for incidental transient occupancy: 180 rental nights per calendar year per host, when the host is not present.

Transient occupancy taxes are the responsibility of the host but may be paid by a hosting platform on behalf of the host when the incidental transient occupancy is created through a hosting platform that has an agreement with the City for collection and payment of such taxes. Airbnb has negotiated such an agreement. Tax records must be maintained for a period of three years.

Not surprisingly, the imposition of transient occupancy taxes on short term rentals in San Jose is controversial. Detractors, including some Airbnb hosts, worry that the tax will “drive visitors to stay in other, cheaper cities or use hotels.” Yet Airbnb is embracing them, in San Jose and elsewhere; Airbnb short term rentals are now legal (and taxed) in San Francisco and Portland, Oregon. The company says “it want fair regulations in place.”

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photo credit: //ichael Patric|{ via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.