Austin and San Francisco Navigate the Sharing Economy

Sunday, May 22, 2016

The “sharing economy” is a business model that allows providers and consumers to share resources and services, from housing to vehicles and more. Well-known examples include Uber and AirBnB. Cities like Austin, Texas, and San Francisco, California, are at the forefront of the challenge that sharing economy business poses to traditional municipal regulation and taxing regimes. At “Local Government Finance and the Sharing Economy,” a Sunday session at GFOA’s annual conference, Greg Canally and David Augustine, from Austin and San Francisco, respectively, shared some of their experiences on coping with this challenge.

For example, both cities are taking steps to collect taxes and ensure compliance with local tax laws. A key has been to make it easy for participants in the sharing economy to pay taxes and to make sure local laws are written in a way that applies to the sharing economy.

Both cities have had important successes in collecting taxes and licensing participants—but they’ve also experienced challenges. For example, it can be difficult to balance the safety concerns of the public and the attendant need for regulation against the public desire for the services that the sharing economy makes available. Also, the sharing economy as upended certain assumptions that Austin had used in its financial forecasting. For example, vehicle rental tax revenue growth formerly parallelled sales tax revenue growth, but ride sharing has introduced a fundamental change into how visitors travel around Austin.