Airbnb filed a lawsuit against the City of Boulder last August. (Courtesy Airbnb)
Airbnb must pay city taxes on the service fees that it collects in Boulder, a judge there ruled Wednesday, rejecting the company’s arguments that it is tax-exempt.
“Airbnb’s guest fee is a part of the price paid for the leasing or rental of any dwelling unit,” District Judge Keith Collins decided. “(It) is accordingly subject to the tax.”
Airbnb rental costs are itemized. There are charges set by hosts, such as the nightly rate and cleaning fees, and the charge set by Airbnb, which is called a guest or service fee.
Airbnb and the City of Boulder reached an agreement in 2016 that required the company to pay a short-term rental tax. But an audit later found that between 2017 and 2019, Airbnb paid taxes only on the charges paid to hosts, not on its service fees. A court determined that the company owed $263,000 in back taxes, plus $152,000 in interest and penalties.
Airbnb responded by suing the city last August and asking Collins to settle the dispute.
“The guest fee is not part of the price paid for the leasing or rental of any dwelling unit, but rather is paid for an array of Airbnb services such as advertising, secure payment processing, customer support (and) problem resolution,” its attorneys wrote in a December brief. “Thus, under the plain language of the statute, the guest fee is not taxable.”
But the City of Boulder argued — and Collins concluded this week — that Airbnb was making a distinction without a difference. It is Airbnb that advertises the properties, collects payments for their rental, provides customer service and pays taxes on the rentals.
“The service fee would not exist,” the judge decided Wednesday, “but for the short-term rental of the property, and it is therefore necessarily a part of the transaction.”
Collins also rejected Airbnb’s arguments that it should not be hit with interest and penalties because it wasn’t trying to dodge taxes – it just didn’t know it had to pay them.
“Good faith arguments are not sufficient evidence proving Airbnb had good cause to not pay the tax, as Airbnb could have paid the tax under protest,” he ruled. “Nor is there any evidence in the record that Airbnb was misinformed about the meaning or application of the tax.”
Boulder was represented by the lawyers Teresa Taylor Tate, Luis Toro and Veronique Van Gheem from its City Attorney’s Office.
“The City of Boulder is pleased with the district court ruling,” it said in a statement, “which affirms a previous finding by a hearing officer that Boulder has the authority to tax the full amount paid by Airbnb customers.”
Airbnb was represented by Neil Pomerantz with Silverstein & Pomerantz in Denver, along with Gregory Roberts at the Roberts Law Group in White Plains, N.Y. They and spokespeople for Airbnb did not answer requests for comment on the ruling Thursday.
