Rules For The ‘Sharing Economy’

The Press Democrat, Santa Rosa, Calif.

For a decade or more, Amazon and eBay and other Internet retailers argued vehemently that they, unlike their brick-and-mortar competitors, should be exempt from collecting sales taxes.

Was there something inherently different about a Joe Montana jersey or a John Grisham novel purchased online?

Of course not. There were, however, business advantages for big e-tailers if they avoided legal requirements to collect sales taxes, beginning with a price advantage that didn’t come off their bottom line. They also avoided the accounting costs associated with collecting and remitting those taxes, which their competitors could not.

But other justifications were offered as the sales tax vs. tax-free sales battle played out in Sacramento and other state capitals. Online commerce was new, it was innovative, and it shouldn’t be pigeonholed with traditional retail businesses.

Turn the clock ahead about five years, and we’re hearing variations on those arguments from a new generation of Internet entrepreneurs.

This is the “sharing economy,” we’re told. It’s new, it’s innovative, and it shouldn’t be pigeon-holed with taxi and limousine services or with hotels that provide the same services in the, um, whatever buggy-whip economy came before.

For car services such as Uber and Lyft, the disputes tend to involve insurance requirements and driver background checks that are required for taxi services. Airbnb and others that rent short-term lodging contest bed tax collections and zoning codes that restrict commercial activities in residential areas.

Airbnb prevailed in San Francisco this month when voters soundly defeated Proposition F, a sweeping — probably too sweeping — regulatory scheme for vacation rentals.

That could have made it considerably more difficult for other communities to address concerns about the impact of short-term rentals on residential neighborhoods and the availability of traditional rental housing. But after spending millions to defeat Proposition F, Airbnb is pledging to work with communities, including sharing some of its internal data with local government agencies, and promising to pay its fair share of taxes.

“We are 100 percent committed to being constructive partners with regulatory agencies and policymakers,” Airbnb said in a document called “The Airbnb Community Compact.”

Good for them. It’s a responsible approach and tacitly acknowledges that a company with a market valuation of .
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5 billion — more than some of the nation’s best-known hotel chains — doesn’t need special treatment to compete, just as the online retailers didn’t collapse when they started collecting sales taxes.

The timing may be serendipitous for Sonoma County, which has issued more than 900 permits for vacation rentals in unincorporated areas and estimates that they generate about 40 percent of the county’s bed tax revenue. County planners have been studying the issue for the past year, with public meetings drawing large audiences. A Planning Commission hearing on proposed revisions to the county’s ordinance is set for 5:30 p.m. Thursday.

In addition to zoning and fee changes, recommendations include stepped-up enforcement and earmarking some bed tax revenue for affordable housing because a growing number of short-term rentals could cut into the county’s permanent housing stock.

These are modest regulations, especially compared to San Francisco’s failed proposal, but they could ease tensions between owners of vacation rentals and their neighbors if they’re given a chance to work.

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