HomeMy WebLinkAboutIR 9851 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9851
To the Mayor and Members of the City Council February 16, 2016
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*a SUBJECT: PENALTIES RELATED TO HOTEL OCCUPANCY TAX REPORTING
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Rental of hotel/motel rooms in the City of Fort Worth is subject to hotel occupancy tax at both the
state and city level. This report provides an overview of the laws that impose hotel occupancy
taxes, the City's process for accepting reports and remitted taxes, and our process for ensuring
compliance with the laws.
Laws Imposing Hotel Occupancy Tax
State hotel occupancy tax is imposed and regulated by Chapter 156 of the Texas Tax Code.
Hotel/motel operators are required to collect the tax on the state's behalf; to maintain information
regarding the imposition of the tax; and to submit reports and remit collected taxes to the Texas
Comptroller of Public Accounts. Hotel/motel operators who do not comply with all state law
requirements are subject to the possibility of both criminal and civil penalties.
Chapter 351 of the Texas Tax Code authorizes cities to impose a municipal hotel occupancy tax.
Each city that wishes to impose the tax adopts its own local ordinance. The Fort Worth ordinance
is found in Chapter 32, Article II of the City Code and was most recently revised in November of
2012. Consistent with the state tax, hotel/motel operators are required to collect the tax on the
City's behalf; to maintain information regarding the imposition of the tax; and to submit reports
and remit collected taxes to the City. Those operators are similarly subject to criminal and civil
penalties for failure to comply with all applicable requirements.
Violations and Penalties
The following chart compares the approach to enforcement under each set of applicable laws.
State Hotel Occupancy Tax (Ch 156 TX. Tax Code) Local Ordinance (Ch 32, Art. II)
TAX RATE—6% TAX RATE—9% (All revenue from rate greater than 7% is
dedicated to (i) expansion of existing convention center
facility or(ii) "qualified project" such as Multipurpose
Arena)
CIVIL PENALTY CIVIL PENALTY
Failure to pay when clue— (i) 5%of tax due (min. $1); Failure to timely remit or report—(i) 15%of total tax
plus (ii) if not paid within 30 days, add'I 5%of tax due owed
(min. $1)
Failure to remit or report—If balance is more than 90
Failure to report—(i) 5%of tax due (min. $1) plus days past due, City can bring suit to enjoin hotel
(ii) $50 operations until tax is remitted or report is filed.
City can recover:
Failing to pay or report when due as a result of fraud - Attorney's fees
or intent to evade—Add'I penalty of 50%of tax due - Costs of audit IF certain conditions met
- 15%of tax owed IF at least one quarter late
- Interest
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9851
To the Mayor and Members of the City Council February 16, 2016
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*a SUBJECT: PENALTIES RELATED TO HOTEL OCCUPANCY TAX REPORTING
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CRIMINAL PENALTY CRIMINAL PENALTY
Failure to Collect Fail to Collect
Failure to Pay to Comptroller Fail to Remit taxes to City when due
Failure to Report Fail to Report when due
File False Report
Each offense is a misdemeanor, fine of$100-$1,000
Each offense is a misdemeanor, fine of up to $500; each
Tampering with Governmental Record (Penal Code day a violation continues is considered a separate
37.10), offense
Ranges from Class C misdemeanor to 2d Degree
Felony
The City's ordinance incorporates enforcement mechanisms that generally mirror those found in
state law. In addition, staff reviewed the hotel occupancy tax ordinances of the following Texas
cities: Arlington, Austin, Dallas, EI Paso, Houston, Irving, San Antonio, and Waco, and
determined that the enforcement mechanisms found in the City Code are comparable to those of
the listed cities.
The state laws governing hotel occupancy tax do not contain a specific provision on the topic of
falsifying or concealing required tax records. However, if that type of activity were suspected, the
case would be submitted to the appropriate district attorney's office for criminal prosecution under
applicable Penal Code provisions, including, but not limited to, Section 37.10.
Collection of Hotel Occupancy Taxes
The Financial Management Services Department is responsible for the collection of the City's
hotel occupancy taxes. Hotel/motel remittances are due on or before the 25th of each month.
Payments received on this day cover the prior calendar month's activity, e.g., December
collections are paid to the City on or before January 25th. Payments for hotel/motel taxes can be
remitted to the City in one of three ways: (i) via electronic funds transfer made using the online
hotel occupancy tax remittance site; (ii) by mail if paying by check (postmarked on or before the
25th to avoid penalties); or (iii) by in-person payment made in cash or by check. Because
merchant processing fees reduce the amount of tax received by the City, credit and debit cards
are not accepted.
Beginning on the 26th day of the month, an aging report is run to identify any delinquent hotels
that have not timely remitted the tax due or filed the applicable report. These hotels are sent a
manual delinquency notice in addition to the auto generated notice from the system. The aging
report lists delinquencies in 30, 60, and 90 day windows.
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9851
To the Mayor and Members of the City Council February 16, 2016
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*a SUBJECT: PENALTIES RELATED TO HOTEL OCCUPANCY TAX REPORTING
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Written notices are also sent at 30 and 60 days. If there is no response to either of the written
notices the hotels are then contacted by phone and or email. If (i) there has not been any
communication through either of these efforts and (ii) the delinquency has reached the 90 day
window, the hotel is then referred to the City's collection attorneys (Lineberger, Goggan Blair &
Sampson, LLP) for contact and collection.
Internal Audit
The Internal Audit Department has employed various strategies to verify the accuracy of the
information reported to the City by hotel/motel operators.
Through an electronic database, the Internal Audit staff assigns unique identifiers to each hotel
listed on the State's website, and data related to each hotel on the State's website is then
compared to hotel occupancy tax data on the City's mainframe on a quarterly basis.
This comparison helps to identify:
• Hotels listed on the State's website, but not within the City's mainframe, and vice versa;
• Hotels that have reported to the State but not to the City, and vice versa;
• Inaccurate calculations of hotel occupancy tax due, based on taxable hotel receipts
captured within the City's mainframe;
• Patterns in variances between taxable revenue reported to the City and State. (NOTE:
Since taxable revenue per State and City vary due to eligible exemptions, the program
graphs the history of hotel occupancy revenue recorded by the City and State); and,
• Hotels that have missed one or more monthly payments to the City
The Internal Audit Department has a five-year audit plan during which five-to-six hotels/motels will
be audited each year. Fiscal Year 2016 is the second year of the plan.
David Cooke
City Manager
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS