Airbnb’s web site for rooms to rent in New York City. ()
ALBANY – New York state’s attorney general has made an “overbroad” demand for information about Airbnb’s clients and their customers, a lawyer for the online lodging service told an Albany Supreme Court judge Tuesday.
Roberta Kaplan, a partner with Paul, Weiss, Rifkind, Wharton & Garrison, argued that Attorney General Eric Schneiderman has insufficient evidence to force Airbnb, which pairs travelers with private apartments for short-term stays, to turn over information about nearly 16,000 apartment owners who rented out units in New York through Airbnb’s web platform since 2010.
Kaplan told Acting Supreme Court Justice Gerald Connolly (See Profile) that Airbnb has sought clarification for years on how state and New York City laws apply to the rentals Airbnb has catalogued since 2008 on behalf of “hosts,” people offering their units for short-term occupancy.
But Kaplan contended that the attorney general’s office has refused to provide interpretations of the tax and the state Multiple Dwelling Law. That failure, she said, makes the information sought through subpoenas a “fishing expedition” to allow the government to interpret the laws depending on the data produced.
“I’m not asking for a white paper,” Kaplan said. “I’m not asking for a brief. But, at a minimum, how they interpret the law.”
She added, “The burden is not on Airbnb to show that we’re innocent. The burden is on the regulator to show that prior to the issuance of the subpoenas,” the attorney general had sufficient evidence of wrongdoing to justify such a broad request for data.
The attorney general is seeking the names of the hosts renting their dwellings through Airbnb, the location of the units, rental rates, lengths of stay and the manner in which the renters paid.
Executive Deputy Attorney General Karla Sanchez argued that her office was not interested in the names of the renters, but Kaplan said that information could be gleaned through their credit card numbers, bank account numbers or the other means of payment.
At issue in the nearly 90-minute arguments were Schneiderman’s October 2013 subpoenas for the records of Airbnb hosts as part of an investigation into possible non-payment of New York City hotel occupancy taxes and of state and New York City sales taxes. The office said it was also concerned about violations of the Multiple Dwelling Law that prohibits residents of most apartment buildings in New York City from renting out their units for less than 30 days unless they are present in the dwellings at the same time.
Sanchez told Connolly that the attorney general does not have to disclose how it will interpret the laws to which the parties are subject to comply with the subpoenas.
“It’s not our duty to put open letters out there about how we are going to interpret the law,” she said. “It doesn’t work that way.”
Sanchez said the subpoenas complied with Court of Appeals’ precedents requiring that the attorney general’s office make a “bare” showing that information it seeks is “relevant” and “related” to the investigation at hand.
She cited an analysis of data from the company’s web site, Airbnb.com, on Jan. 31, 2014, provided by Schneiderman’s Investor Protection Bureau, which indicated that of the 19,522 listings for New York City properties that day, nearly two-thirds were for the “entire apartment,” according to Airbnb.
Sanchez said that category meant that the apartment’s owner was most likely not present, which in turn suggested that the rental arrangements were breaking the law. “That, to me, is sufficient evidence to demonstrate there is illegality,” she said, and meets the Court of Appeals’ “bare showing” standard to enforce the subpoenas.
Connolly concluded the hearing without ruling on the motion to quash. But he did say he worried that the subpoenas would generate information that went beyond any use in determining potential violations of state or city law.
“That concerns me,” he said.
Airbnb is a private San Francisco-based business that allows consumers to find dwellings other than traditional hotels or bed-and-breakfasts. In addition to apartments for short-term rent, it advertises more exotic dwellings such as villas or castles in upscale travel destinations.
The company argues that unlike hotels or bed-and-breakfasts, it does not own or control the dwellings and does not set the prices for the units. The owners and renters agree on those prices.
As such, Airbnb argues that it is not subject to New York City’s hotel room occupancy tax nor city or New York state sales taxes that are imposed under the New York City Administrative Code §11-2501.12 or the state Tax Law §1101(c)(8).
Amendments to the tax statutes approved in 2010 were intended to clarify that the state and local taxes do apply to the short-term renting of private housing units, said a sponsor of the legislation, Sen. Liz Krueger, D-Manhattan.
Schneiderman’s office contends that it suspects Airbnb hosts are violating the 30-day city statute, designed to prohibit over-crowded hostel-type rentals in units not designed for multiple living arrangements.
The attorney general said a preliminary investigation indicated that only an “extremely small percentage” of Airbnb hosts are collecting the taxes that should apply to the rental arrangements.
Kindlon Shanks & Associates in Albany are assisting the Paul Weiss lawyers in representing Airbnb.