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Private and often untaxed home rentals under fire

It's a crazy day. I'm trying to get a lot of stuff done before I head off to New Orleans tomorrow for FinCon14, the annual conference for personal finance bloggers.

By this time tomorrow, I'll be at the hotel that's hosting the get-together. It's handy to stay on premises. Plus I like room service and a chance to sample premium television channels we don't get at home.

Short term for rent signA lot of folks, however, whether they travel for business or pleasure (or a combination!), prefer smaller, independent accommodations.

Many also look for a homier experience and stay in personal residences that are leased through such companies as Airbnb and HomeAway.

Tax free and taxes uncollected: The owners who put their homes or apartments on the market for visitors love this option.

If you don't mind strangers have the run of your place, it's an easy way to make extra money. Even better, if the rental days for the year total 14 days or less, they don't owe any income tax on the money.

These landlords, however, likely owe local lodging taxes.

In many cases, short-term renters short their city and county coffers, either unknowingly or intentionally failing to pay the local tax bills.

That's prompted some cities to take action.

Cities, residents looking for tax money: Tax Analysts reports that Steamboat Springs, Colorado, and Los Angeles are the latest cities to warn residents that if they rent out an apartment or home on websites such as Airbnb, they need to collect and pay the same kinds of taxes as hotels.

Short-term rental in the Colorado resort town is taxed at a rate between 9.65 percent and 11.65 percent, according to the tax publication. Those rates help the city bring in $320,208 in July, a 28.4 percent increase from the same time in 2013, according to a Colorado Springs revenue report.

City officials can't say how many residents failed to remit the appropriate lodging taxes, but they are concerned enough to prompt the city council to approve earlier this month a resolution designed to clarify taxable charges and fees for room and accommodation services.

Los Angeles lawmakers also took similar action this month.

The City of Angels imposes a 12 percent transient occupancy tax. To ensure that private landlords know of the tax, L.A. officials have started sending warnings to people renting out rooms.

New York rental tax woes: Lost local lodging revenues, which some estimate could be millions a year in larger locales, is not limited to the west.

In New York City, the Share Better Coalition, a group of more than 100 housing advocates, community groups, and elected officials, rallied at city hall to complain about how the growing home-sharing industry cuts into tax revenue.

Democratic N.Y. State Assemblyman Richard Gottfried wants stronger laws against transient rentals, as well as more enforcement of current rules on home rentals of 30 days or less. Gottfried says such rentals essentially are illegal hotels in violation of the 2010 Multiple Dwelling law.

The private rentals "make life a nightmare and deprive the city of affordable housing," says Gottfried.

Plus, there's the tax issue.

To be fair, the companies that coordinate the rentals do make it clear to folks renting their homes that they might owe local taxes. But, said Gottfried, "there is a lot of illegal hotel activity going on" outside such corporate clearinghouses.

Airbnb coastal reactions: Max Pomeranc, public policy manager at Airbnb, answered the Big Apple anti-rental activists in a post on the company's blog.

Pomeranc said 62 percent of New York's Airbnb hosts say the rental income has helped them stay in their homes. Plus, wrote Pomeranc, the Airbnb rentals will generate an estimated $768 million in economic activity in New York in 2014 and support 6,600 jobs.

And while Pomeranc didn't address the lodging taxes, he pointed out that visitors who stay at Airbnb residences will "visit small businesses in all five boroughs, and the Airbnb community will pay more than $36 million in sales taxes."

On the Left Coast, however, the company is more tax accommodating. In a couple of weeks, Airbnb will begin collecting occupancy taxes on behalf of its San Francisco hosts.

Guests who book San Francisco residences at the Airbnb website on or after Oct. 1 will see a line item on their bill for the city's 14% percent transient occupancy tax on bookings of fewer than 30 days.

The company has been collecting hotel taxes on listings in its hometown of Portland since July.

David Owen, Airbnb's regional head of public policy, said in a blog this week that automating the collection of taxes in the Bay Area was something Airbnb's community had sought:

"Our community members in San Francisco have told us they want to pay their fair share and the overwhelming majority have asked us to help. In the past, it's been difficult for individual hosts to pay taxes that were designed for traditional hotels that operate year round. This has been a complicated issue and we're happy to be taking action to help simplify the collection process for hosts, guests and for the city."

Will the Airbnb's West Coast tax collection trend move eastward? I suspect so, eventually.

I also suspect that Airbnb's hope that other home sharing companies will implement similar tax collection programs also will happen, either voluntarily or via legislation.

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