A New Tax on the Sharing Economy

Young woman using credit card and tablet for reserving plane ticket online

(Image credit: Iakov Filimonov)

published 3 October 2014

Kathleen O’Malley first used Airbnb in the summer of 2013, when she traveled through Washington State and British Columbia with her fiancé. After that, “we were hooked,” says O’Malley of Portland, Ore. The couple used Airbnb to book a cottage in Sonoma for their honeymoon in September.

Cash In on the Sharing Economy

Airbnb connects budget-minded travelers with homeowners who have a room, apartment or house to rent. Soon, guests could pay more to sleep on someone’s fold-out couch. In July, Airbnb began collecting 11.5% in city and county lodging taxes for bookings in Portland. Airbnb plans to expand the program to San Francisco, which charges a 14% hotel tax. From there, “we’ll take the lessons we’ve learned and move forward,” says Airbnb spokesman Nick Papas.

The move is an attempt to forestall regulation that threatens to slow the company’s growth. Other enterprises in the “sharing economy” are similarly pursuing agreements with state and local governments amid concerns about unfair advantages over more-traditional businesses. For instance, Colorado recently enacted legislation that authorizes ride-sharing services, such as Lyft and Uber, to operate in the state, provided drivers undergo background checks and obtain insurance.

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Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.