Sales and Occupancy Tax
I had a conversation with a long-time client recently. They had recently under gone a sales tax audit, during which their department of revenue uncovered the fact that they had failed to collect taxes due on housekeeping, which was configured in the system as a not-taxable guest charge.The state involved is now a number of thousands of dollars richer, while the agency is poorer by the same amount.
With the new year, perhaps it is time for all of us to review our policies regarding the collection of sales and occupancy tax. We need to be sure that we are in compliance and that we don't run into the sights of our friendly tax auditor as our friend did.
This is an area that varies widely by jurisdiction and sometimes by interpretation. In some states, housekeeping and other guest charges are taxable for both sales and occupancy, some for just sales and some not at all. It just tens to vary according to the state and sometimes county in which you do business.
The best advice is to consult with your accountant to get an educated opinion as to what taxes are collectible, and under what circumstances, in your particular location. An alternative is to consult directly with your taxing authorities for a written opinion. Or, if you are uncomfortable calling your taxing authority, call us and we will be happy to make the phone call for you and give you an informal description of what they said (remember, however, that we are not accountants or attorneys).
Thinking about our client above, it's a wise move to be sure that you're handling sales and occupancy taxes correctly for your jurisdiction. The few minutes it takes to be sure can save you a lot of trouble, and a lot of money in in the future.
When all else fails, you cannot go wrong by taxing everything on the reservation. Lots of people do this tactic.