As technology progresses and businesses innovate, current laws sometimes struggle to match the technology and innovation. It is not always a bad indication that there is a void in the law, but it does open up to some novel issues and unanswered questions. Because our legal system is a system of common law, the courts can rule on these issues as they our brought before the courts. Based on their rulings, the courts will guide the direction of the law until Congress decides otherwise and decides to enact in legislation.
AirBnB, founded in 2008, is currently worth over 25 billion dollars. There are a number of unanswered questions regarding business regulation that AirBnB’s business model raises raises. The single most important question that the law grapples with in regards to AirBnB is whether AirBnB is a hotel, rental company or other business. Once that question is answered, a number of business regulation issues will be answered and AirBnB or AirBnB’s hosts (those who rent out their home to guests through AirBnB) could have an increase in liabilities.
For instance, if AirBnB is a rental company, will AirBnB be subject to the Fair Housing Act? This classification would hinge on the definition of “to rent” in the Fair Housing Act. If AirBnB is classified as a hotel, then hosts would be subject to the cities local hotel taxes. To date, there has not been any major litigation regarding taxation laws for AirBnB, but it is eminent in the near future. If AirBnB is classified as a hotel, AirBnB currently has about 2 million possibly unpaid taxes to the City of San Francisco.
If you are a small business, and want to avoid litigation, one can always err on the safe side of the law. AirBnB is engaging in risky business by not paying possible taxes. It becomes a personal business decision whether to scathe the outskirts of the law for higher profits in exchange for emanate litigation.