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In early December, we described the lawsuit in which HomeAway, Inc. sued the City of San Francisco to have the court strike down an ordinance that it said unlawfully favors its competitors in the short-term rental market. The crux of the complaint was that the ordinance impermissibly discriminates against interstate commerce by:

  1. Allowing only permanent residents of San Francisco to rent out their properties on a short-term basis; and
  2. Requiring the “hosting platform,” defined as the means by which a property owner offers its property, to collect and remit the transit occupancy taxes.

Though HomeAway acts as a hosting platform, it is not a party to any of the rental contracts and does not collect payment or taxes from renters. As a result, it cannot comply with the tax collection requirement. Instead, HomeAway’s revenue comes from those who pay to advertise their properties on its websites.

In its order granting San Francisco’s motion to dismiss, the court rejected HomeAway’s position that the ordinance violates its right to engage in unfettered interstate commerce.

In addition, the court agreed with San Francisco that HomeAway is not an entity that is subject to the collection requirements set forth in the ordinance. HomeAway is merely a listing service that does not own or rent any of the properties at issue and is not a party to the transactions that the ordinance governs, so it lacked the necessary standing to bring the suit in the first place. Nor does HomeAway have a sufficiently close relationship with its property owners/advertisers to impart the necessary standing.

The court gave HomeAway the opportunity to amend its complaint solely with respect to its challenge of the transient occupation tax collection requirement, but “only if HomeAway can allege facts supporting a plausible conclusion that it faces actual or imminent harm.” HomeAway’s deadline is Feb. 26, 2015.

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