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IN 2007, A HOTEL ROOM SHORTAGE IN SAN FRANCISCO prompted two roommates to create a website to rent out air mattresses in their apartment. Less than eight years later, the company they founded, Airbnb, has been valued at more than $25 billion. 1 The success of Airbnb is mirrored in other “peer-to-peer” startups, such as Uber, Lyft, and HomeAway, which are capitalizing on technological advances that have allowed the creation of platforms to directly connect buyers and sellers.
The sharing economy has led to a host of tax headaches for taxpayers and tax authorities, in large part because of the new business models enabled by new technology that have not been contemplated by existing tax laws. Although this problem is not unique...