Los Angeles laws require hosts of short-term rentals (for 30-90 days) to pay the same lodging tax as hotels. However, the city has had a hard time hunting down hosts flaunting the rules via online rental services.
Effective August, hosts will be taxed 14% through Airbnb. The company will collect taxes from hosts and pay a lump sum to the city.
The city budget is already counting on collecting $5 million annually from the Airbnb deal, according to the Los Angeles Times. Also, as part of the deal, city officials will be able to audit tax payments and fine Airbnb for advertising rentals that are not registered with the city.
Los Angeles is the second largest American market for Airbnb, after New York. However, short-term rentals of less than 30 days are not legal in the city. The tax agreement is part of Airbnb’s technique to work towards complete legalization.
“These agreements allow cities to rightfully benefit in the economic impact of home sharing while also making it easier for Airbnb hosts, the vast majority of whom are middle class people sharing their own home, to comply with local tax laws,” John Choi, Airbnb’s Los Angeles public policy manager, said in a statement. “We are pleased that this process is moving forward and will benefit Angelenos.”
Rentals on Airbnb are currently taxed in over 190 cities around the world, and the company says it has paid out $85 million in tax revenue.