SAN FRANCISCO — San Francisco-area residents who have rented out rooms in their homes through an app in the past six years but haven't told the local tax collector may soon find themselves in trouble.
Short-term rental app HomeAway will have to provide the city and county of San Francisco information about its local vacation rentals dating back more than six years, an appeals court ruled this month.
California's 1st District Court of Appeal, 4th Division, affirmed an earlier court order requiring HomeAway comply with a 2016 subpoena for the data, according to the appeals court's ruling issued March 15. HomeAway argued it has every due process right to challenge the city's transient occupancy tax, but the appeals court disagreed, saying the tax isn't assessed against HomeAway and that the city's and county's subpoena "is reasonably relevant" to an ongoing tax collection investigation, the ruling said.
HomeAway's argument, "unsupported by authority, only highlights the fact that the issues HomeAway attempts to litigate here are not ripe for judicial review," the 20-page ruling said. "Indeed, the general rule is that a tax may be challenged only after it has been paid."
California First District Court of Appeal Justice Ignazio J. Ruvolo
Justice Ignazio J. Ruvolo wrote the appeals court's ruling in which Justice Jon B. Streeter and Justice Timothy A. Reardon concurred.
HomeAway is not the only short-term vacation rental app that San Francisco has gone after. In 2014, the city began requiring residents who provide short-term rentals through apps like HomeAway, Airbnb and VRBO to register with the city. The city's and county's recent case against HomeAway is an effort to enforce that requirement, which many area residents reportedly have ignored.
San Francisco's tax collector is seeking HomeAway records for accommodation bookings dating back to Jan. 1, 2012, according to the ruling. HomeAway is a Texas-based company owned by the travel website Expedia.
The appeals court considered de novo, from the beginning, whether a subpoena approved by a lower court is considered enforcement, which HomeAway maintains it isn't, according to the appeals court's ruling. HomeAway claimed the subpoena violates the federal Stored Communications Act, which regulates when disclosure of cloud-stored data can be compelled, according to the ruling.
HomeAway also argued that enforcing the subpoena would violate the constitutional rights of its customers and that it also violates state and local law, according to the ruling.
San Francisco County Superior Court earlier issued an order granting a petition by the city and county of San Francisco, including the city's tax collector and treasurer, to enforce an administrative subpoena for HomeAway to disclose rental transactions in San Francisco arranged through its website, according to the appeals court's ruling.
The appeals court stayed enforcement of the subpoena during the appeal but rejected HomeAway's that the subpoena violated its customer's constitutional rights and agreed with the lower court's finding of "insufficient evidence to show that the subpoena was burdensome or overbroad." The appeals court also rejected HomeAway's claim that the subpoena covers customer emails, saying "the record does not support this argument."
"At oral argument before this court, counsel for the City reiterated that the 2016 subpoena does not compel disclosure of electronic communications, and HomeAway's appellate counsel accepted this representation, which she characterized as a concession," the appeals court ruling said. "Accordingly, we now confirm and adopt the parties' stipulation that the 2016 subpoena does not compel the disclosure of any electronic communication generated by a customer or subscriber of a HomeAway service."