Staff Report
PREPARED BY: ARN ANDREWS,
Assistant Town Manager
Reviewed by: Town Manager, Finance Director, and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 4/02/19
ITEM NO: 3
DATE: MARCH 25, 2019
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: AUTHORIZE THE TOWN MANAGER TO ENTER INTO A VOLUNTARY
COLLECTION AGREEMENT WITH AIRBNB TO COLLECT TRANSIENT
OCCUPANCY TAXES OWED TO THE TOWN FROM SHORT-TERM RENTAL
OPERATORS IN LOS GATOS USING THE AIRBNB PLATFORM
RECOMMENDATION:
Authorize the Town Manager to enter into a Voluntary Collection Agreement (“VCA”) with
Airbnb to collect transient occupancy taxes (“TOT”) owed to Town from short-term rental
operators in Los Gatos using the Airbnb platform.
BACKGROUND:
On February 5, 2019, the Town Council voted to proceed with the introduction and first reading
of an Ordinance, by title only, adding Article XIV to Chapter 14 of the Town of Los Gatos Town
Code related to short-term rental (STR) of residential property. On February 19, 2019, the
Town Council adopted this Ordinance, adding Article XIV to Chapter 14 of the Los Gatos Town
Code entitled Short-Term Rentals.
As reported to Council in February, Airbnb shows that there are currently 180 active Airbnb STR
hosts within the jurisdiction of the Town of Los Gatos. The average length of stay for guests of
Airbnb STRs in Los Gatos is four days. Based on the data received from Airbnb, the new
regulatory environment would potentially yield annual TOT revenue of $226,800 from the
existing Airbnb hosts. Given that the Town does not currently have the data or resources
required to proactively enforce and collect the TOT ordinance requirements, staff recommends
entering into a voluntary collection agreement with Airbnb (Attachment 1).
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SUBJECT: Authorize the Town Manager to enter into a Voluntary Collection Agreement
with Airbnb
March 25, 2019
S:\COUNCIL REPORTS\2019\04-02-19\Collection Agreement Short Term Rentals\Staff Report Airbnb FINAL.docx
DISCUSSION:
Airbnb has recently started entering into tax collection agreements with municipalities to
collect and remit TOT on behalf of hosts/property owners. These agreements allow
municipalities to interact with one organization, rather than collecting funds from hundreds of
individual property owners. San Jose, Santa Clara, Palo Alto, San Francisco, Cupertino, and
others have established these agreements with Airbnb. The tables below provide a
comprehensive listing of California entities that have entered into VCAs with Airbnb to date.
California Cities with VCAs with Airbnb
Berkeley Carlsbad Coachella Corona
Cupertino Davis Desert Hot Springs Dunsmuir
Indio Long Beach Los Angeles Malibu
Morgan Hill Oakland Orinda Pacific Grove
Pacifica Palm Desert Palo Alto Pasadena
Pinole Pittsburg Rancho Cucamonga Rancho Mirage
Redwood City Richmond Riverside Sacramento
San Diego San Francisco San Jose San Luis Obispo
Santa Clara Santa Monica Sebastopol Sunnyvale
Twentynine Palms Union City Winters Yucca Valley
*Bay Area communities highlighted in gray
California Counties with VCAs with Airbnb
Amador Butte Calaveras Culver
El Dorado Humboldt Madera Marin
Nevada Plumas San Bernadino San Joaquin
San Luis Obispo Santa Cruz Siskiyou Sonoma
Trinity Tuolumne
While Airbnb is not an STR operator and is therefore not responsible for the collection of TOT, it
has agreed to voluntarily collect TOT on behalf of its users and remit the revenue to
cities/towns that sign a voluntary collection agreement. Under the terms of the VCA, Airbnb
agrees to assume the duties to collect the TOT completed on its hosting platform and remit it to
the Town on a monthly basis pursuant to the TOT requirements in the Town Code. Airbnb
represents that that the procedures utilized to bill guests for local TOT achieves 100%
compliance of TOT remittance on their platform. It achieves this compliance by programming
its hosting platform to automatically collect the TOT from transients who rent short-term rental
units from Airbnb hosts. Once collected, Airbnb remits the TOT directly to the Town as
required by the Town’s Code. While the hosts are responsible for remitting the tax, Airbnb
voluntarily collects and remits the tax on the hosts’ behalf.
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SUBJECT: Authorize the Town Manager to enter into a Voluntary Collection Agreement
with Airbnb
March 25, 2019
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DISCUSSION (continued):
Key provisions of the proposed agreement are summarized below:
• Airbnb agrees to notify guests and hosts of the TOT to be collected.
• Airbnb agrees contractually to assume the duties of a TOT collector as described in the
Town Code solely for the collection and remittance of TOT.
• Airbnb agrees to report aggregate information on the tax return form prescribed by
the Town.
• Airbnb agrees contractually to assume liability for any failure to report, collect and/or
remit the correct amount of TOT.
• The Town agrees to audit Airbnb on an anonymized transaction basis for Taxable
Booking Transactions.
• The Town reserves the right to audit any individual Airbnb host for activity that has
been brought to the attention of the Taxing Jurisdiction (i.e., the Town) in the form of
a complaint or other means independent of the agreement or independent of data or
information provided pursuant to the agreement
• The Town agrees to waive the right to collect TOT payments owed by hosts for Airbnb
bookings made prior to the effective date of the agreement.
• The agreement does not relieve short-term rental hosts from remitting TOT for
bookings on other platforms, or registration requirements under the Short-Term
Rental ordinance.
As previously noted, the agreement does not require Airbnb to provide the Town with
individual information regarding its hosts or guests. However, as part of Airbnb’s onboarding
process, they do inform platform hosts that the TOT collection is associated with the Town’s
adoption of a new regulatory environment for STRs. Staff believes that the benefits associated
with the efficient and immediate collection of TOT from all hosts on the largest rental platform,
and the subsequent recognition of the newly adopted regulatory environment , outweigh the
current contractual construct of only receiving aggregate data on TOT collections.
CONCLUSION:
Staff recommends that the Town enter into the VCA with Airbnb and begin the collection of
TOT revenues. The VCA will significantly simplify the remittance process for STR operators
using the Airbnb platform and enable the Town to immediately receive 100% of the TOT
associated with taxable rental bookings completed on Airbnb.
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SUBJECT: Authorize the Town Manager to enter into a Voluntary Collection Agreement
with Airbnb
March 25, 2019
S:\COUNCIL REPORTS\2019\04-02-19\Collection Agreement Short Term Rentals\Staff Report Airbnb FINAL.docx
COORDINATION:
This report was coordinated with the Town Manager, Town Attorney, and Director of Finance.
FISCAL IMPACT:
It is estimated that current booking volumes on Airbnb could yield an additional $200,000 in
annual TOT collections. Actual receipts will be dependent on actual guest nights booked
annually through the Airbnb platform.
Attachment:
1. Draft Airbnb Voluntary Collection Agreement