Sullivan to require proof from hotel guests

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From the Times Herald-Record

Tax-exempt might still owe tax

Sullivan to require proof from hotel guests By Adam Bosch

Times Herald-Record

July 28, 2007

Monticello — Tax-exempt groups visited Sullivan County's hotels, lodges and other tourist houses for years without anyone asking this question: Were they actually staying for a tax-exempt reason?

Some fire department and police organizations weren't coming here for training — they were coming to play golf. Some rabbis and reverends weren't coming for religious retreats — they were coming to visit their kids at summer camp. Some nonprofit groups weren't coming for meetings — they were coming to meet Monticello's racino.

And none of them were paying hotel room taxes, causing Sullivan County to lose untold revenues.

County Treasurer Ira Cohen is putting a stop to unwarranted hotel tax exemptions by stringently enforcing a 1990 local law that requires hotel visitors to prove they're staying for an exempt purpose and that a tax-exempt organization is paying the bill.

Some hotels were enforcing the law already and some guests were genuinely tax exempt, but many were not. Cohen said hotels were accepting exemption certificates as proof without verifying the purpose of their guests' stay.

"It's morally and legally improper," Cohen said.

When Sullivan's hotel tax was increased from 2 percent to 5 percent, Cohen wrote hoteliers in May warning that the law would be enforced.

Cohen won't know how much money the county has lost until an auditor randomly checks the books of a few hotels at the end of this year.

Hotels will be required to pay any taxes that auditors find should have been collected but were not.

"We think it's enough of a problem to take the position that we're going to enforce the law," Cohen said.

County officials have fielded complaints from some hotel owners who believe more stringent enforcement will drive visitors away.

"If Sullivan County makes it much more difficult for these groups, they'll find other places to go," said Mark Kutsher, general manager of Kutshers County Club.

Some hoteliers claim they'll lose business to places like the Nevele Grande Resort & Country Club in Ellenville. Ulster County's law for hotel exemptions is less strict, requiring only state and federal exemption certificates, not proof of an exempt purpose.

Sullivan County was sued in 1991 by hotel owners who believed it was illegal to force visitors to prove they were staying for a tax-exempt reason. The county won the court battle but never enforced the law.

Many believe that county officials looked the other way because hotels were still influential in the early '90s. A new, rigid law that might force them to lose customers would have been politically unpopular.

"The Board of Supervisors were mostly connected to the hotels," said current-day Legislator Leni Binder, who was not a member of that era's board. "But the hotel people sold (the hotels) and left us hanging anyway."

The letter of the law

Section 182-25 of Sullivan County law says the occupant of a hotel room can only be exempt from the applicable taxes if the occupant shows that the visit will be "paid by the exempt corporation or association" and that the purpose of the visit is "necessary or required in the course of or in connection with the occupant's duties as an agent, representative or employee of such exempt corporation or association."