Home Sharers Democratic Club Meets with The SF Treasurer & Tax Collector’s Office
By Keith Freedman, Co-Chair HSDC Policy committee
Several HSDC board members met with a representative of San Francisco’s Treasure and Tax Collectors office last Wednesday. Kevin Guy from the Office of Short Term Rental (OSTR) was in attendance as well.
We discussed several HSDC ideas and got feedback on the Treasurer’s position on some of these things.
1. Tax Amnesty: Our proposal was to offer a tax amnesty to any hosts that come forward and register prior to a specific date.
There are several issues the treasurer has with this proposal. First, They would object to offering an amnesty for the ToT tax itself, but there is precedent for offering amnesty on fees and penalties (which in many cases, far exceed the tax itself). This is normal for all sorts of taxes at the local, state and federal level. She also said that when people come forward the Treasurer’s office is always more willing to offer fee waivers than if they have to track you down and find you. Our advice to anyone who has rented space in SF on a short term basis since the Treasurer determined STR’s are responsible for ToT should make an appointment with the Treasurers office to discuss their situation and work out a plan to pay the back ToT. Going forward everyone should be collecting this from their guests and remitting it. Anyone not currently on their radar would be better off hurrying up and registering and paying the back 14% than hiding and getting caught.
Any Qualified Website Company (currently AirBnB is the only one) is required to disclose certain information which makes it easier for the tax collector to know who’s hosting.
If you have a business license and indicated you are ONLY using a QWC then they know that the ToT is being collected and remitted on your behalf. If you haven’t indicated that you’re exclusively using a QWC then they expect to see some amount of revenue/taxes reported from non QWC sources.
Similarly, if you do NOT have a business license, but your name comes through from a report from a QWC then you’re now on their radar and they will assume you have income from other non QWC sources and will expect an explanation. If this is the case, it is highly recommended you make an appointment with the Treasurer and work out a plan to pay the ToT and ask for amnesty on any penalties and fees.
When anyone gets a business license (even a legal hotel) which indicates they might be generating ToT (even if they use a QWC) their name is passed on to the office of short term rental which likely triggers some enforcement activity.
If someone does not have a business license and does NOT use a QWC, the Treasurer has active subpoenas issued to certain companies (the Treasurer couldn’t disclose details as the specifics are not for public disclosure) seeking information about individuals who are generating taxable activity in the city.
It’s very likely that soon those subpoenas will bear fruit and anyone who has not come forward will get an unpleasant tax bill along with penalties and fees — in these cases, the likelihood of penalty forgiveness will be slim. Again, if you’ve not obtained a business license for your STR activity and may owe back taxes, we strongly suggest you make good with the treasurer as soon as possible.
2. 14 day limited use permit with no business license required
It is currently city law that if you do business in SF for more than 7 days a year, you’re running a business and need a business license. This is true for Uber/Lyft drivers as well as STR hosts, home yoga studios, massage therapists, and the list goes on.The Treasurer’s representative indicated that He would have no objection to this being raised to 14 days. This was voted on in 2011, I think, but the supervisors could increase it to 14 days since that technically reduces a tax liability. To increase tax liability requires another ballot vote. Such a change would affect uber/lyft drivers and any other similar “sharing economy” people who have a large percent of ‘casual’ workers.
We estimate that 30% of STR hosts in SF are hosting for 14 or fewer days. I suspect that some of the other businesses which use casual contract labor may have similar numbers.
Such a change from 7 to 14 days would help seasonal contract workers or any person who owns their own business or operates in the “sharing economy” but only has activity in SF for 14 or fewer days a year.
This is also in line with Federal IRS guidelines wherein STR income generated in your primary residence for 14 or fewer days a year does not need to be reported on your income tax. Just as the IRS doesn’t find this to be sufficient business activity, neither should the City or the State.
3. We propose not requiring a business license at all.
The treasure can collect the tax even if we don’t have business licenses. This was added by the original Chiu ordinance because there was a tax liability that isn’t true of the landlord renting out full time units in a building with 3 or fewer units. However, in hindsight, it doesn’t really bring much value and the Treasurer’s representative indicated the Treasurer wouldn’t object to eliminating this requirement.
4. Simplified one-stop application on-line form
While the business license requirement still exists, the Treasurer’s representative likes the idea of a simplified form (We passed along our form improvement suggestions). The Treasurer’s representative had no real objection other than to say that they can’t really have special forms for every type of business and they try to have as few forms as possible that encompass as many different types of businesses as possible.
They are currently working on improving the Treasurer’s website and online forms and so this was timely and will be reviewed and passed on to the team currently working on improvements.
The Treasurer currently collects around $20 Million in ToT from STR’s. Roughly 30–40% of that is generated from people NOT using a QWC (i.e. not airbnb). This means that people not using AirBnB are actively collecting and remitting tax just like they’re supposed to.
However, we do suspect that many of the unregistered hosts are using non-QWC platforms and so the likely back tax bill could be quite high. Again, if you’re not licensed and paying ToT for your STR activity I urge you to start doing so right away, come forward with the Treasurer and work out a plan for any back taxes that may be owed.
For more information on SF’s ordinance regarding the ToT and how it’s allocated to city services, you can read it here