June 24, 2002 –– A lot of the territory's hotels have not been getting it right when they report occupancy and pass along hotel room taxes to the V.I. government, according to an audit by the Virgin Islands Inspector General for the year 2000. Although the audit concluded that many of the mistakes were honest ones, some have been referred to the Internal Revenue Bureau for further auditing.
The hotel room tax, which currently is 8 percent, was established years ago, but little has been done by the government to ensure that all hotels compute it in the same way.
The auditors, who looked at records from 19 hotels, found that 11 of them were under-calculating the taxes owed because they went by 8 percent of the basic room rate. But the law requires the tax to be levied against the "gross room rate or rental," including such add-ons as energy surcharges.
Because of these miscalculations, the government missed out on $241,497 in 2000, the audit report states.
Auditors also found that at least four hotels and three individual vacation homeowners collected occupancy taxes that they did not pass on the government. That resulted in the loss of another $116,667, the report says, for a total underpayment of $358,164.
Beverly Nicholson, executive director of the St. Thomas-St. John Hotel and Tourism Association, said Monday that she was aware the audit had been conducted. But she said she had not seen the Inspector General's report and would not comment until she had done so.
David Yamada, president of the association, did not return a message seeking comment. Officials of the St. Croix Hotel and Tourism Association could not be reached Monday for comment.
Total occupancy tax collections in 2000 came to $11.8 million. Government sources list 119 hotels, inns and accommodations management companies operating in the territory that year with a combined total of 5,658 rooms. The businesses reported occupancy rates for that year at 53 percent on St. Croix, 60 percent on St. Thomas and 73 percent on St. John.
Inspector General Steven Van Beverhoudt recommends that IRB collect from those who failed to turn over taxes they collected from vacationers, and also assess them interest and penalties. However, he recommends against going after hotels for under-assessment of taxes owed.
"Most officials at hotels visited indicated to us that they have never seen the law as it relates to the Hotel Room Tax, and have never received instructions from IRB regarding what constitutes 'gross room revenues,'" Van Beverhoudt said. "IRB officials acknowledged to us that the Hotel Room Tax had been neglected for many years, mainly due to a lack of manpower."
IRB officials said that situation should be corrected by September 2002, when the bureau will complete the reorganization of its operations.
The Inspector General recommends that the bureau also clear up confusion over so-called "no show" revenues — deposits forfeited to a hotel when intended visitors fail to honor a reservation or to cancel it by the deadline required by the hotel.
Van Beverhoudt notes that many jurisdictions tax such no-show revenues. But he also says that V.I. hotels seldom keep such deposits, despite their own policies, because they want to maintain the goodwill of potential guests.

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