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13250-13256 Ordinance Enactment Considerations: Reporting and Remittance

13250. GENERAL RECOMMENDATIONS
The ordinance should require reporting of the tax and remittance at set intervals. The intervals could be monthly, quarterly, or as otherwise defined by the board. (It may be advisable to have the board allow for accelerated collection periods shorter than the normal reporting periods, at the discretion of the tax collector, in situations where the tax may be in jeopardy.)  The report should be on a form provided or designed by the tax collector.

The report should contain, at a minimum, the following information:

1) Operator name and address;

2) Total rents charged that are subject to TOT;

3) Total amount of TOT being remitted;

4) Reporting period; 

5) Exemptions granted;

6) Certificate number and/or federal identification number;

7) TOT tax rate;

8) Hotel name and location; and,

9) Due and delinquent dates.

CONFIDENTIAL REPORTING 
The ordinance can be written to make reports and remittances confidential, other than those to government agencies for official use only. The tax collector should avoid providing operator TOT information that may give a competitor or potential competitor an unfair advantage.

13251. DUE DATE
The completed TOT report and remittance should be postmarked on or before the last day of the reporting interval defined by the ordinance. If the last day to pay is on a holiday or weekend, a postmark on the first business day following the holiday or weekend should be timely.

13252. DELINQUENCY
Once an operator has become delinquent, penalties and interest may be assessed. Ordinances may be written to state that the penalties and interest become a part of the tax to be paid. 

It may be advantageous to define and charge only interest (excluding the word penalty from the ordinance), due to the better treatment of interest over penalties in a bankruptcy.

PENALTIES AND INTEREST
The ordinance should define the amount of penalties and/or interest and when they are to be assessed. A reasonable approach would be one similar to other delinquent taxes: a 10% penalty upon delinquency and a 1.5% interest fee per month thereafter. However, other amounts and frequencies may be charged; for example: a 5% penalty upon delinquency, an additional 5% if the amount is still unpaid the following month, and additional interest at some point after that. 

FRAUD
An ordinance may allow for an additional penalty if it can be determined that nonpayment of any tax owing is due to fraud. This would normally be determined when an audit of the operator’s books clearly indicates rents intentionally underreported. A reasonable penalty would be 25%.

13253. REFUNDS

REFUNDS TO TRANSIENTS
Refunds for overpayment of erroneously or illegally collected TOT should be refunded directly to the transient that paid but was not subject to the tax, or who paid the tax twice. The only exception would be an operator who can prove that he/she has paid or credited the transient for the erroneous or illegal tax collected, in which case the refund should be issued to the operator. In either situation, the refund should be made only upon verification of a written claim.

REFUNDS TO OPERATORS
An operator should receive a direct refund if a mathematical error was made in calculating the tax reported.

13254. AUDITS

PURPOSE AND PERFORMANCE OF THE AUDIT
Audits are necessary to determine whether operators are correctly reporting TOT. The ordinance should allow for an audit of the operator's books and clearly define which county department will perform the audit. Even though the tax collector usually collects the TOT, it may be advisable to have the county auditor or assessor perform the audit, as these departments employ audit staffs. No matter which department performs the audit, the ordinance should state that audit requests are at the tax collector's discretion.

WHEN TO PERFORM AN AUDIT
Audits may be performed at the following suggested intervals:

1) Any time the tax collector believes an operator is underreporting;

2) When there is a pending change in hotel ownership;

3) Any time the tax collector believes a business may be subject to the tax but has not registered;

4) At regular intervals, with the time between audits dictated by the number of hotels to be audited or staff available to audit.

Operators should be aware that they are subject to audit. This will help promote compliance and correct reporting.

13255. APPEALS
The ordinance should clearly set forth the remedies available to both the operator and the tax collector if an audit determines that an operator has underpaid the TOT. The appeal process should also be available to the operator when an estimation of the tax has occurred.

OPERATOR
Depending on which county department performed the audit, the operator should be allowed an appeal process with either the tax collector or the board or both. The appeal process should not be adversarial but rather an opportunity for the operator to present any documentation that would influence the results of the audit. The ordinance should require the operator to file an appeal within a specific time after the audit.

TAX COLLECTOR
The ordinance should require immediate payment of the deficiency, plus any penalties and/or interest accrued, if the operator does not file an appeal or if an audit is upheld on appeal.

13256. OPERATOR'S FAILURE TO REPORT / MAINTAIN ADEQUATE RECORDS

ESTIMATION OF TAX
The ordinance should allow the tax collector to determine a tax amount by any means available if an operator does not maintain or fails to make available adequate records for audit purposes or fails to report the tax. The tax determined to be due should be subject to change only if the operator provides records that are verifiable as accurate and true.

Following are suggested methods for acquiring information to estimate a tax amount.

1) Call the hotel and ask for a room rate.

2) Call a travel agency for rates for the hotel.

3) Check the newspaper travel section to see if the hotel advertises rates.

4) Have a staff member stop by the hotel to see if it has a published list of rates.

5) If the hotel is a member of Best Western or a similar group of hotels, acquire a catalog. Many times the rates are listed or are available through a toll-free phone number.

6) If the hotel previously paid taxes, check the records for prior occupancy history.

7) If there is no prior occupancy history, check the TOT records for similar hotels in the same area of the county.

METHODS OF ESTIMATION
When estimating the tax, it is suggested that the estimate be more than adequate. Following is an example of how an estimate is calculated.

Units
Usually the number of units can be determined from the records or by a trip to the hotel.

Rates
The rate is usually more difficult to determine, because most hotels have several rates depending on the size and type of room or the number of persons occupying the room. For estimation purposes, it is suggested that the estimate assume that every room in the hotel is the most expensive and all are occupied.

For example, the hotel has the following rates:

Single Room: $45/night single occupancy
Double Room: $65/night single occupancy
Mini-Suite: $95/night single occupancy
Each extra person: $15/night - maximum 4 people/room

The estimate should assume that every room in the hotel is a mini-suite with 4 people occupying the room. Therefore the rate is:

$95 mini-suite single rate + $45 (3 extra people @ $15 each) = a nightly rate of $140.

Occupancy
The calculation below assumes that every room is rented for every night of the reporting period.

Assume the estimate of TOT tax is for a reporting period of three months, April, May and June.

April 30 days of TOT rental possible
May  31 days of TOT rental possible
June 30 days of TOT rental possible
         91 total days of TOT rental possible

Assume there are 252 units in the hotel and that the rate is $140/night for a fully occupied mini-suite– (see Rates, previous page).

Assume the TOT rate is 9% and the penalty/interest rate is 10%.

Calculation:
$140/night x 252 units = $35,280/day gross receipts

91 days of possible reporting x $35,280/day gross receipts =
$3,210,480 total receipts for the 91 days unreported

9% of $3,210,480 total receipts for reporting period =
$288,943.20 estimated TOT tax due

$288,943.20 x 10% penalty/interest rate =
$28,894.32 estimated penalty/interest due

$288,943.20 estimated tax + $28,894.32 penalty =
$317,837.52 total estimated tax and penalty due)