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Taxes and the sharing economy: issues in play as legislative session ends

| Jul 31, 2016 | Tax Controversies

One of the threads we’ve been following in this blog is the impact of the ever-increasing sharing economy on taxes.

Services such as Uber and Lyft for ride-hailing and Airbnb for short-term housing rentals have become remarkably popular in a very short time. But they have also created new types of tax compliance issues for people who provide such services.

In this post, we will update you on some developments in Massachusetts concerning the regulation of sharing services.

In a post last year, we wrote about the use of 1099s for service-providers in the sharing economy. We noted that sharing companies differ quite a bit on whether they send out 1099s and, if so, what type.

Ride sharing

This weekend, as the Massachusetts Legislature tries to wrap up its session, the bills to be considered included two on sharing companies.

On ride-sharing services, the proposed regulations are not directly tax-related. They concern background checks on drivers and whether there should be a moratorium on pickups in certain areas.

At present, there is a ban on pickups by Lyft and Uber at Logan Airport. The Legislature is considering extending that ban, as well as imposing a similar ban at Boston Convention and Exhibition Center.

Short-term rentals

Regulation of short-term housing rentals, especially through Airbnb, has become a highly controversial issue across the country. In Los Angeles, for example, the city recently reached an agreement by which Airbnb will collect lodging taxes for hosts, starting later this year.

This has put Los Angeles in an awkward position because many of the short-term rentals there are illegal under the city’s current ordinance. LA is considering changing its rules to allow rentals of up to 180 days.

Here in Massachusetts, traditional hotels and motels are lobbying for the taxation of short-term housing rentals through Airbnb and other sharing sites. Earlier this month, a proposal in the Massachusetts Senate called for requiring sharing sites to collect lodging taxes (both state and local) on housing rentals of 31 days or less.

It is uncertain whether this proposal will go anywhere, however, because Governor Charlie Baker has indicated he may not support it.

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