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Audit of Hotel Occupancy Tax Completed

Audit found one establishment overcharging guests the incorrect amount of tax; Comptroller’s Office identified internal deficiencies and implemented reforms to streamline processes

(Buffalo) – The Office of Erie County Comptroller completed an audit of the Hotel Room Occupancy Tax and found one hotel overcharging guests the amount of tax that was supposed to be collected by law.  Auditors completed field audits of twelve establishments ranging in size from large hotels to small hotels and Bed and Breakfast inns.

Establishments with more than 30 rooms are subject to charge a 5% rate for the Hotel Occupancy Room Tax, while smaller establishments charge a 3% rate.

When auditors visited one establishment to conduct fieldwork they found this business converted some rooms and suites into residential living spaces and had been allowed by law to lower its Hotel Room Occupancy Tax rate in 2009 from 5% to 3%.

Auditors determined that the establishment in question never updated its software and continued to charge guests the incorrect and higher tax rate of 5%, but was only remitting the proper 3% to the county to honor its obligation under the Hotel Room Occupancy Tax.

Auditors concluded the extra 2% retained by the establishment for a period of four years and three months, in which guests were overbilled and incorrectly charged, totaled $13,358.  Auditors found the other eleven of 12 hotels charged guests the correct amount of Hotel Room Occupancy Tax.

“It is my job to protect taxpayers.  I take that responsibility seriously.  Businesses know we are going to make sure customers are protected and not overcharged.  I am proud of our auditors for identifying this problem and making sure it was fixed.  This audit is a strong example of the Comptroller’s Office living up to its responsibility to protect the interests of taxpayers,” said Erie County Comptroller Stefan I. Mychajliw.

Pursuant to Erie County Local law No. 12-1974, confidentiality of hotels’ financial information prevents the Office of Erie County Comptroller from publicly naming hotels/businesses in the audit.

Overall the amount of Hotel Occupancy Room Tax collected by Erie County increased by 3.56% from 2011 to 2012, from $8,556,982 to $8,861,557.  The amount of Hotel Occupancy Room Tax collected has increased every year since 2009.  Currently there are 136 active establishments in the county’s Hotel Occupancy Room Tax county database.

The Office of Erie County Comptroller is responsible for the entire process as it pertains to registration, certification, and collection of this revenue from hotels in Erie County.

Auditors also identified ways in which the Office of Comptroller could improve the Hotel Occupancy Room Tax process to make it easier for businesses to remain in compliance.  They include: 

  • Provide businesses the ability to find policies, procedures, and forms on the Comptroller’s Office website
  • An overview of the Hotel Occupancy Room Tax is on-line, along with instructions on how to complete the Certificate of Registration form and tax return forms
  • Update the registration form to include how many rooms in the establishment, provide separate lines to differentiate between the establishment’s legal name and its “Doing Business As” name, and require the person completing the certificate to sign the document
  • Creation of a procedural checklist for staff to record and maintain in order to track of new registrants

“One of our first comprehensive reviews was to reform up my own office.  I wanted to lead by example and set the bar high.  I am going to continue holding departments across Erie County accountable, including my own.  We inherited policies and procedures that needed to be reformed and that’s exactly what we did,” added Comptroller Mychajliw.

Click here to view the Audit Report