Ontario has launched a pilot project with Airbnb that will see the home-sharing service tell its 11,000 hosts in the province to pay their taxes.
Airbnb has agreed to email people who list their homes or other spaces for rent on its site, telling them to report the income and to educate them about consumer protection rights such as cancellations and refunds.
Finance Minister Charles Sousa says the "voluntary" goal is to get Airbnb to be in compliance with Ontario's laws and regulations.
Sousa says Ontario wants to embrace the sharing economy, but he admits the changes enabled by technology are disrupting existing business models, such as traditional hotels who say they're losing money to Airbnb.
However, he couldn't say when the government would introduce regulations to cover new services such as Uber, which has led to protests by taxi drivers across Canada.
Sousa says the Liberal government believes the sharing economy has "significant potential to create jobs and drive growth, productivity and innovation."
Airbnb was founded in 2008 by three friends with air mattresses for rent, and now lists two million properties for rent in 191 countries.