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Most pay taxes, but some hotels still delinquent, audit shows

Tuesday, May 13, 2008 by Mark Richardson

A recent audit of 11 Austin hotels has found that the inns owed the city more than $250,000 in taxes from the city’s Hotel Occupancy Tax, according to a report by the City Auditor’s Office. That audit was a follow-up to a broader examination in late 2007 of 75 of the city’s hotels and motels that showed that the city was owed more than $875,000 in delinquent hotel occupancy taxes. Most of those taxes have now been collected.


Austin’s Hotel Occupancy Tax, a 9 percent levy on the bills of those who stay at the city’s hotels and motels, brought more than $40 million in revenue in 2007. The city collects the occupancy tax on hotels, motels, tourist homes, tourist courts, lodging houses, inns, rooming houses and bed and breakfasts. It is used to fund the Convention and Tourism Bureau, among other city programs.  As of Fiscal Year 2007, there were 175 establishments that were required to collect the tax within the city limits.


City auditors examined 75 hotels between FY 2005 and 2007 in three phases. Issues uncovered during the examinations included misapplication of 30-day exclusions, misapplications of exemptions, reporting issues, registration control weaknesses, and calculation mistakes. Because of that audit, according to the City Auditor’s Office, the city has collected 91 percent of the deficient amount, or just under $800,000.


The City Auditor performed a similar follow-up audit in March 2006, and uncovered 13 properties owing the city more than $500,000 in Hotel Occupancy Tax. At that audit, officials reported collecting about $350,000 of the taxes in the month after the audit. (See In Fact Daily, March 6, 2008)


Two of the properties in the 2006 audit that owed the city the most back taxes – Holiday Inn Town Lake and Candlewood Suites – were also first and third on the current list of hotels owing delinquent taxes. 


In the most recent audit, of the 75 original hotels, auditors performed follow-up examinations of 11 hotels and found subsequent deficiencies ranging from 3 percent to 60 percent of the taxes owed.


Auditors said that two hotels reviewed in follow-up were in full compliance with hotel tax requirements, but another nine had recurring compliance issues resulting in at least $253,000 due the city, including penalties and interest.


The 11 hotels in the follow-up and the amount they owe include:


  • Holiday Inn Town Lake, $126,385;
  • Austin Suites, $90,520;
  • Candlewood South, $10,792;
  • Budget Inn, $10,171;
  • Residence Inn, $6,181;
  • Northcross Suites, $5,252;
  • Hawthorne Suites; $2,700;
  • Renaissance Hotel, $820;
  • Wyndham Garden, $596;
  • Radisson Hotel, in compliance; and
  • Crowne Plaza, in compliance.


There is a process in place for the hotels to appeal the results of the city’s audit.  The auditors reported that most of the hotels involved in the follow-up audits had improved their systems for supporting the hotel tax exemptions.

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