The United States city of Philadelphia, Pennsylvania, has legalised and plans to tax Airbnb and other short-term rentals.
The move comes ahead of the 2016 Democratic National Convention to be held in the city later this month, as well as the visit of Pope Francis in September.
The online accommodations facilitator said Philadelphia became the largest city in the United States to legalise rentals through online marketplaces, joining San Francisco, California, and Portland, Oregon, in authorising the company's services.
Previously, the rentals had been operating tax free, but Philadelphia has recently changed zoning rules to allow such rentals in residential areas, subjecting them instead to an 8.5 percent hotel tax. A permit is also now required for rentals lasting more than 30 days, with homes not allowed to be rented out for more than 180 days per year.
Philadelphia City Councillor William Greenlee said Airbnb-type rentals are essentially short-term hotels, and should be made to follow the same rules.
Airbnb does not own a single hotel, hostel, or even a bed; rather, it makes its money by taking 3 percent of the transaction from the property owner, and 6 to 12 percent of the transaction from the traveller upon the two parties exchanging their services.
Recently, Airbnb raised $1.5 billion in its latest funding venture, giving the accommodation startup an expected valuation of $25.5 billion.
At $25.5 billion, Airbnb would be worth more than hotel giants Marriott ($20.90 billion), Starwood ($14 billion), and Wyndham ($10.01 billion), placing just behind Hilton Worldwide, valued at $27.7 billion.
Sharing economy services like Airbnb have also been included in Australian Taxation Office (ATO) warnings to businesses. The ATO said Airbnb users must declare income from renting properties, and that it may be subject to some capital gains tax. But the earnings will be classified as residential rents, which are exempt from GST.
Earlier this year, the ATO classified Uber as "taxi travel", and declared that its drivers must have an Australian Business Number and start paying tax by August 1, 2015.
"The existing tax law applies equally, whether a buyer and seller come together at a bricks-and-mortar business or via a mobile phone app or website," ATO deputy commissioner James O'Halloran said.
"Affected drivers must register for GST, charge GST on the full fare, lodge business activity statements, and report the income in their tax returns.
"We understand that people often don't consider the tax consequences of new and emerging business models. Our first step is to assist taxpayers involved in the sharing economy to meet their tax obligations."