reprinted from:
 

Auditor tells hotels to pay bed tax;
$1.8 million is found to be due

By Rich Exner, Plain Dealer Reporter
Copyright 2001 Plain Dealer Publishing Co.
Article date: July 31, 2001
 

Some hotels and motels in Cuyahoga County have been pocketing bed taxes they collect from guests. Others haven't bothered to charge guests the tax at all. And some often paid late.

But they've been caught and are being told to pay - to the tune of $1.8 million in back taxes, interest and penalties, the result of hotel-by-hotel investigations over the last three years, the county auditor's office reports.

"Taxes aren't voluntary," auditor Frank Russo said.

"Every homeowner in this county gets a tax bill, but the hotels were on the honor system."

The county has already collected some $900,000 from the establishments.

Another $900,000 is on the way, through payment schedules set with hotels or through negotiations nearing conclusions, said Judy Caputo, head of the auditor's Bed Tax Department.

The countywide bed tax of 4.5 percent is charged on top of the regular sales tax and brought in $11.9 million last year before the audits brought in the extra money.

It funds operation of the Convention and Visitors Bureau of Greater Cleveland and helps pay the construction debt on the Rock and Roll Hall of Fame and Museum.

"It's great we can have increased revenue," visitors bureau President Dave Nolan said.

"But at the same time, it does come out of the coffers of the hotels.

"We don't necessarily take glee in policing and making sure collections take place, but it has to be done. It's the right system to have in place."

About 65 of the county's 132 hotels are members of the visitors bureau. All, however, are obliged to collect the tax and send it to the county. The county is barred by Ohio law from discussing individual audits because they involve proprietary business information, Assistant County Prosecutor Gregory Rowinski said.

Yet all but a couple of the 92 hotels audited so far owed at least some money, Caputo said. In the worst cases, she said, hotels and motels were keeping more than half the bed tax money they raked in. Others were paying but doing so late.

The names of some establishments that balked at paying are available through court records because the county auditor took them to court.

To date, county prosecutors have filed liens in Common Pleas Court totaling $323,344, mostly against smaller hotels and motels. Among them: the Knights Inn and Manor Motel in Fairview Park; Days Inn-Lakewood; the Econo Lodge and Days Inn-Cleveland Airport West in North Olmsted; the Parma Hotel; and the Riviera Motel and Kings Inn in Strongsville.

Hotel officials either declined to comment or did not return telephone messages. Four of the hotels are now making back payments under agreements with the auditor's office, Caputo said, though she declined to say which ones.

Complaints of underpayment are not new for the 31-year-old bed tax. In 1987, the county sued nine hotels and named others publicly, including the well-known downtown hotels Bond Court and Hollenden House, as being behind in payments.

County Commissioner Tim McCormack, who was the auditor in 1987, complained at the time that "there is no penalty, no mechanism in the law where we can make it painful for them for not paying instead of taking them to court."

The law changed in 1989 to allow the auditor's office to assess penalties. The county didn't begin to fully use those enforcement procedures until after the hotel-by-hotel audits began in 1998, Caputo said. Now, six people work in the department.

Caputo said she had assessed $214,955 in penalties and interest for late payments. But, perhaps more important, she hopes the threat of penalties and continuing audits will bring hotels into better voluntary compliance.

The auditor's office can go back four years in seeking underpayments, so she wants to audit every hotel at least every four years.

"The audits will never go away," Russo said.
 

In the News