OCA Audit Reports

Issued: February 2006

SUMMARY

This report presents the results of the Hotel Occupancy Tax Collection and Remittance Audit. This audit examined 28 hotels to determine whether they were properly collecting and remitting City hotel occupancy taxes.

Of the 28 hotels selected, nine demonstrated compliance and were assessed no additional tax liability. Of the remaining 19 hotels, six audits have yet to be completed. The other 13 hotels were found to have compliance issues and/or additional tax liability. Our audits indicated that eleven of these 13 hotels owed additional taxes ranging from around $300 to $298,000. Total deficiencies were approximately $508,000.

The scope of this audit centered on claimed exemptions and exclusions. The understanding and application of rules related to exempt guests varied across hotels. Guests qualifying as permanent residents are entitled to a hotel occupancy tax exclusion. However, some hotels incorrectly apply the exclusions for such guests. Guests who are employees of certain agencies and organizations are also exempt from the tax. We found multiple instances in which hotels were offering exemption for ineligible guests.

In addition to misapplication of exemptions and exclusions, we also encountered several other issues with hotel owners including:

• Lack of reliable documentation for the entire four-year audit scope period;
• Potential fraud in questionable records; and
• Failure to ensure that a prior owner did not owe taxes at the time of purchase.

Austin hotels operate in an environment of lenient enforcement and insufficient communication with regard to the HOT, which may contribute to the level and types of compliance problems identified.

As a result of our work, we made recommendations to strengthen the City legislation guiding the hotel occupancy tax and to enhance monitoring of the tax.

Download the entire text of our Hotel Occupancy Tax: Collection and Remittance Audit (Size: 794 KB) in Adobe Acrobat. You will need Adobe's Acrobat Reader to view these files. Or request a hard copy of this audit report, No. AU05105B, by submitting this audit report request form.

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