Tax on No Shows (hotels)

Factual Questions
1

I was wondering if any tax people can give me some advice. When I worked at the Sheraton back in 1994 we got fined a lot of money because we were charging tax on no show rooms. It was explained to me hotel taxes are an occupancy tax.

To define terms a no show is when a guest reserves a room and fails to show up. The hotel bills them one night. We were billing one night rooms and tax. Now I was told since it was an occupancy tax no tax should be charged.

Years have since past. I currently work at another hotel. We DO charge room and tax. Our controller said I was nuts and of course he’s charging tax. Either way it doesn’t matter to me but I would hate to be fined.

Does anyone know what the exact tax law is. Or where I can find it? I checked the Illinois Statues but can’t find anything specific on it.

By the way this is Illinois. I know it would vary from state to state.

2

The laws do vary from state to state, I work for a hotel group, the company I work for owns hotels across America. We DO charge both occupancy tax and sales tax on no shows. Although technically, the occupancy tax should not be applied, it is generally an easier process to collect it than to subtract it. I wouldn’t worry about being fined, the controller should be aware of the managing company’s policies and procedures, who, in turn, should be aware of the risk of any fines that may be imposed. It’s their call.