Deposits and Taxes (again)

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YellowSocks's picture
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Well, the guest that I got from the B&B north of me called and cancelled morning of arrival.  Knew my policies and knew she wasn't getting her money back unless we rebooked (we didn't) and cancelled anyway.

I take a one night deposit at booking.  Since it was only a one night stay, I took the entire amount, plus taxes.

She didn't stay here or eat here... so no bed or food taxes?  Entire amount becomes "cancellation charge?"  Or pay the tax and count it as lodging revenue?

What should I do?  (Please don't tell me to ask my accountant... that would be me.)

Dh says to call the tax people and ask them.

=)
Kk.

gillumhouse's picture
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I have had no-shows and I run the room & tax and just enter it as revenue. I do not have an extra "food" tax but I do have a business &occupation tax to my City of 50 cents per $100 GROSS revenue.

It is so much easier on me to just pay the damned tax as if the person was there - I charged him for the room same as I would have otherwise - than to try to rack my brain for a lousy $6.00 (IF I had the bed tax it would be a max of $12 on a $100 room) of how to account for it. I do show on my ledger that it was a no-show charge.

JunieBJones (JBJ)'s picture
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And if you are an inn who runs the one night stay as a deposit for the stay, then do you run it as the room rate only?  I don't, I run the night AS IT IS ADVERTISED and THEY AGREED TO.  Therefore with taxes.  Otherwise I would have to rebate teh taxes, nawwww. Or not run the taxes and run JUST the taxes when they check in, and pay for entering amts TWICE, nawww.

Pls let us know the accurate info.  Seems a STATE ASSOC should have the answers to this to help their people in that assoc. The legalities. Right?

__________________

"What the country needs is dirtier fingernails and cleaner minds." Will Rogers

 

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Not really. Unless a state assoc. has an accountant...their answers would be as varied as ours. I think the bottom line is...ask your accountant.

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I am just going to throw this out for your thinking - Example:

ABC B&B's policy is to take a deposit equal to one night's stay plus taxes of 11% (which include all taxes required).  So Jane S. makes a reservation for a $100 room for 1 night, so Jane knows she will have a charge of $111.   She cancels at the last minute and ABC can not resell the room.  Now let's say that this was to be a business trip that was cancelled.  Jane will need a detailed receipt (describing all charges) to submit for reimbersment.

So, if you are collecting the tax as part of the deposit, you are making it known to the guest that taxes are being collected on that amount and thus should be dispersed to the tax office.  If you would like to avoid haveing to do this in the future, you need to change your deposit policy to only take the room charge as the deposit, and collect applicable taxes on arrival along with any other nightly charges.

seashanty's picture
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hmmm  ... on an accountant's advice

i post noshows as other income, not sales and not lodging

i don't collect tax on it and i don't pay tax on it ... but i declare it as income.

i wonder if it varies by state or if it's the same everywhere.  i do wonder if the accountant just gave what he thought the answer ought to be. he does the books for two inns near here.

 since you collected the tax, pay the tax.  but it would be great to have a definite answer.  p.s. i used to work for the irs and if you asked ten of us the answer to a specific question, you'd get ten different answers.  no joke!  we had manuals 6 inches thick!

YellowSocks's picture
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seashanty wrote:
 since you collected the tax, pay the tax.  but it would be great to have a definite answer.  p.s. i used to work for the irs and if you asked ten of us the answer to a specific question, you'd get ten different answers.  no joke!  we had manuals 6 inches thick!

I believe it!!!

Are you feeling any better today?  I'm still dragging...

=)
Kk.

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don't you pay tax on income????

seashanty's picture
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yes, income tax on all income.  that is different.  i thought she was talking about sales and use tax or lodging tax.   on 'other income' i don't pay the lodging and meals tax unless it if for lodging and meals.  we have other sales here, sales on paintings, and that has yet another sales tax. 

Morticia's picture
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YS- Given the disagreement here, you should call your tax officials or look it up online. Another point comes to mind...to avoid this in the future, don't collect the lodging & meals tax with the deposit. Unless you find out from the tax folks that they will be expecting those monies whether the guest stayed or not.

__________________

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My deposit was alway just the room amount. Not the taxes.

JunieBJones (JBJ)'s picture
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Bree wrote:

YS- Given the disagreement here, you should call your tax officials or look it up online. Another point comes to mind...to avoid this in the future, don't collect the lodging & meals tax with the deposit. Unless you find out from the tax folks that they will be expecting those monies whether the guest stayed or not.

It is the same as a no show according the to MAN. Like a hotel, you pay the tax.  They bought the room for the night, whether they slept in the bed or not, they bought it, tax accrued-tax paid.

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Treat it like you would if they HAD stayed there. You got their money..so you pay the sales taxes on it as well.

If you pay lodging and meal tax...that would  not apply because they didn't actually stay or eat so I would not pay that.

JunieBJones (JBJ)'s picture
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Uh its revenue. If you collected the TAX you PAY THE TAX. 

It is not iffy, very clear.  You took it you pay it to who it goes to.   Lodging and sales tax included.  Whether they physically messed up your bed or not, they have paid for the room AND NOT SHOWN accordingly.  Meals tax, same same.

 

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Well, it is MHO that since you charged the card for the entire amount including tax, that the tax should be reported as such.  If for any reason you are audited by the tax assessor, it would be in your favor to have reported all moneys that can be tracked as income. 

When you take money as a deposit it should be placed it in a seperate account and then transfer that money to your regular account (income) when the room is on their clock - whether it is used or not! 

Swirt, I do not see how that service fee idea would fly as no service was done, it was not (I presume) listed in the reservation confirmation that there was a deposit and service fee charge.  

Just my 2 cents... 

gillumhouse's picture
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I agree with Bree.

swirt's picture
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I dunno, that's an iffy one.  You have to, of course, count the deposit as income (which will be income taxed), but since you collected the taxes in the name of sales and lodging, I think technically you could get into trouble for collecting taxes and then not paying what you collected.  The likelyhood of it ever being questioned is pretty slim.  Either they have to go back to the payee or you have to send the taxes in, would be my conservative interpretation.  I suppose you could weigh it as the 11% taxes (or whatever the % is) get wiped out and then become an 11% service charge....which of course you would also have to declare as income.  Plus if you charge a service charge, that means you performed a service, in which case the service charge is subject to sales tax because you exchanged a goods or service.

It's a mess.  Sorry...I know that was of no help  Eye-wink

YellowSocks's picture
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swirt wrote:
I dunno, that's an iffy one.  You have to, of course, count the deposit as income (which will be income taxed), but since you collected the taxes in the name of sales and lodging, I think technically you could get into trouble for collecting taxes and then not paying what you collected.  The likelyhood of it ever being questioned is pretty slim.  Either they have to go back to the payee or you have to send the taxes in, would be my conservative interpretation.  I suppose you could weigh it as the 11% taxes (or whatever the % is) get wiped out and then become an 11% service charge....which of course you would also have to declare as income.  Plus if you charge a service charge, that means you performed a service, in which case the service charge is subject to sales tax because you exchanged a goods or service.

It's a mess.  Sorry...I know that was of no help  Eye-wink

Actually, it's a help to know it's not just me, and that you see it like me.

And a help to see everyone else's response too.... it really is a tough call after all.

I collect 3% in bed tax (for the CVB).

I collect $0.37 per person per night for "food tax" which is more properly called "Use and Sales Tax."  Even though my food is complimentary, if they eat food on my premises I have to charge tax, but only on the actual cost of the food, not the [nonexistent] mark up.  So we (somewhat arbitrarily) chose $0.37 to charge (6.75% of $5.50).

And, naturally, the monies get paid to two different taxing entities.

To my way of thinking, they didn't stay here so there is no lodging that occurred (no 3%) and they certainly didn't eat here so there was no food to tax ($0.37 x 3 persons).  So to me it's a cancellation fee that I would claim on my income tax but which would not be subject to either bed or food tax.

OTOH, the guy who showed up with another person at breakast this morning didn't pay the extra $0.37, which I guess will come out of my pocket....

I guess I'll call the county and ask them about the bed tax.  I think the state will be OK with me on this one.

Thanks to all for your input!

=)
Kk.

Morticia's picture
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That's what I was thinking originally...she collected the tax, she has to pay it. I asked hubs and he said no. He's the acct, so I put what he said. Of course it's always best to check with the local tax authorities who will say to send the tax portion in.

JunieBJones (JBJ)'s picture
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Bree wrote:

That's what I was thinking originally...she collected the tax, she has to pay it. I asked hubs and he said no. He's the acct, so I put what he said. Of course it's always best to check with the local tax authorities who will say to send the tax portion in.

Totally disagree.  If you collect tax you are doing so on behalf of the tax man.  That is THEIR MONEY, not yours.  You could be in deep doo doo if you don't pass it over.  If no tax was collected, there might still be something there in the fine print that you have to.

Morticia's picture
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Count it as revenue toward your income taxes, don't send lodging & meals tax in as no lodging or meals took place. My guess.

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