Airbnb and New York battle over advertising restrictions
- Sales Tax News
- Nov 3, 2016 | Gail Cole
It’s against the law to rent out a whole apartment in New York City for fewer than 30 days. It’s also against the law to jaywalk, but that doesn’t prevent New Yorkers from crossing when and where they please. The jaywalking law is rarely enforced, but there’s now new motivation for authorities to crack down on illegal short-term rentals.
Newly enacted House Bill 8704 makes it “unlawful to advertise for the use or occupancy of dwelling units in class A multiple dwellings for purposes other than permanent residence.” (Renting out part of a dwelling is permitted, provided the owner/tenant is present.) In addition, the measure establishes civil penalties for violations: $1,000 for the first, $5,000 for the second, and $7,500 for the third. The policy is to be enforced by the mayor’s office of special enforcement in cities with a population of one million or more. A joint enforcement initiative is also forming between the attorney general’s office and the City of New York.
Within hours of Governor Andrew Cuomo’s signing of the bill, Airbnb filed suit (Airbnb Inc. v. Schneiderman, 16-cv-08239, U.S. District Court, Southern District of New York) against New York City Mayor Bill de Blasio, the City of New York, and New York Attorney General Eric Schneiderman, who on October 16 released a report “documenting widespread illegality across Airbnb’s NYC listings.” The complaint claims the policy “would impose significant immediate burdens and irreparable harm on Airbnb” because it “would be required to screen and review every listing a host seeks to publish.” Airbnb is also concerned that it could be held liable for noncompliant hosts.
It has cause for concern. Mr. Schneiderman, whose report found Airbnb to be “dominated by commercial users,” released this statement on October 21: “Airbnb can’t have it both ways: it must either police illegal activity on its own site — or government will act to protect New Yorkers, as the State just did.” And Senator Liz Krueger, bill sponsor and longtime opponent of Airbnb, has accused the company of “encourag[ing] illegal activity that takes housing off the market and makes our affordability crisis worse.” It should be noted that the home share giant includes information about New York's multiple dwelling law on its website.
The language of the measure itself is vague: “Any person found to have violated [this policy] shall be liable for a civil penalty.” It doesn’t specify who would be held liable — the platform (Airbnb) or the host —in the event of unlawful advertising.
The new policy was to take effect immediately upon being signed into law on October 21. However, city and state officials have said it will not be enforced until the lawsuit is resolved. That is, they won’t prosecute Airbnb. New York officials and Airbnb are currently in talks to resolve the suit, and a status update is expected soon.
In the meantime, hosts “who flout the restrictions in advertising prohibited units” online, via Airbnb or any other means, could be prosecuted. And if the law is upheld, New York City will “take any procedural and administrative steps necessary” to enforce it.
Platforms such as Airbnb and VRBO have come under attack over tax revenue. Short-term rentals are subject to lodging and/or sales tax in most parts of the country, but while the platforms facilitated rentals from their outset, they initially did little to help hosts comply with tax obligations or local ordinances. That's changing.
In response to HB 8704, for example, Airbnb has proposed a solution that would promote responsible home sharing; it includes simple, mandatory registration and authorizing online platforms "to collect and remit taxes from guests on [hosts'] behalf."
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