Cash-strapped New Orleans city government is losing revenue each year from hotels that either do not pay sales taxes or under-report their revenue, according to an analysis released Monday by the city's inspector general. The review, which does not identify the businesses, randomly sampled 24 of the 277 hotels cataloged by the city's Bureau of Revenue. It covered the period...
Cash-strapped New Orleans city government is losing revenue each year from hotels that either do not pay sales taxes or under-report their revenue, according to an analysis released Monday by the city's inspector general.
View full sizeNew Orleans Inspector General Ed QuatrevauxThe review, which does not identify the businesses, randomly sampled 24 of the 277 hotels cataloged by the city's Bureau of Revenue. It covered the period between January and March of this year.
Based on the sample results alone, Inspector General Ed Quatrevaux estimated a total tax liability of about $145,000, including interest and penalties, was due from delinquent hotels during the three-month period.
Extrapolating its findings from the sample, Quatrevaux's office said the study suggests that the unpaid taxes are substantially higher based on an estimate, and that the actual number of hotels not filing or under-reporting sales revenue likely is between 102 and 130.
The city collects a hotel-motel sales tax of 4 percent on gross rentals after allowable deductions are taken into account. The city receives 1.5 percent of the sales tax revenue, with 1.5 percent allocated to the Orleans Parish School Board and 1 percent to the Regional Transit Authority.
City Hall also collects a hotel occupancy privilege tax - a $1-, $2-, or $3-per-room, per-night charge depending on the size of the hotel - which is used to pay the New Orleans Tourism Marketing Corp. for services outlined in a contract with the city.
The inspector general's review found that 15 of the 24 hotels sampled, or 62%, had at least one inaccuracy in its tax filings with the city.
Mayor Mitch Landrieu's administration has included additional funding in the city's 2011 operating budget to hire tax auditors to ensure that hotels and other businesses are paying the appropriate amount of taxes.
In his review, Quatrevaux said Chief Administrative Officer Andy Kopplin waived comment on the report.
The study revealed:
- Three hotels, or 13% of the sample, collected hotel taxes and did not remit the taxes to the city. Under state law, it is a crime to knowingly collect and not remit taxes under a local ordinance.
- Five hotels, or did not file the occupancy section of the city's form accurately.
- Six hotels, or 25%, failed to file the occupancy form 8010 on time.
- Seven hotels, or 29%, under-reported gross rentals and/or occupancy.
- Nine hotels, or 37%, did not have an accurate mayoralty permit or occupational license for 2010. Four of the nine hotels were operating without a current mayoralty permit or occupational license for a portion of 2010.
The results revealed that 10 hotels were under-reporting gross rentals and/or occupancy.
It also revealed that 15 hotels were not compliant with the city code, erroneously reporting room rental revenue and occupancy or under-reporting the number of rooms on its permit or license for the first quarter of 2010.
Hotels with six or more rooms are required to pay an annual occupational license tax of $2 per room. Hotels with five or fewer rooms are required to obtain an annual mayoralty permit, which carries a flat fee based on the size of the hotel.
Representatives of the inspector general conducted site visits to review hotel records. Hotels selected for the review were notified prior to the date of the site visit and were told what information to provide.