PALO ALTO (KCBS) — Concerned about losing out on local hotel taxes, city leaders in Palo Alto have asked San Francisco’s Airbnb to notify members of the vacation rental service to read the fine print.

Airbnb, which has been growing in popularity, markets itself as an inexpensive alternative to hotels. But landlords who offer lodging through the service may still be subject to local hotel taxes. For example, Palo Alto charges a 12 percent room charge for any rentals less than 30 days.

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Chief Financial Officer Lalo Perez said not many people are paying that tax. “So far we have two people that have signed up and transmitted money to the city of Palo Alto,” he said.

The city has drafted a letter to Airbnb asking it to help make users more aware of local taxes. Airbnb issued a statement Monday afternoon saying that it has listings in 34,000 different cities and the laws vary extensively. The company said it asks hosts to make sure that they follow local laws.

Palo Alto Economic Development Manager Thomas Fehrenbach said if more people use Airbnb instead of local hotels they could be losing out on the tax, known as a “transient occupancy tax”

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“It could be a potential drain,” he said.

The tax makes up about seven percent of the city’s budget. City officials said the penalty for not paying the tax is 10 percent, an amount which carries over month-to-month.

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