CIB wants to up scrutiny on taxes paid by hotels and restaurants

Taxes paid by local hotels and restaurants are getting closer scrutiny from the city’s Capital Improvement Board.

CIB members initiated an effort Friday at their monthly meeting to partner with the Indiana Department of Revenue to make sure area hotels and restaurants are paying the taxes they should be.

The move comes in the wake of news on Thursday that two central Indiana restaurant owners have been charged with theft for allegedly failing to collect taxes by underreporting a total of $1.8 million in sales at six locations. 

In those cases, the two restaurant owners agreed to pay nearly $143,000 in restitution to the Indiana Department of Revenue. 

“We’re talking about what could be substantial amounts of money,” said CIB member and Hamilton County Tourism CEO Brenda Myers, who initiated the discussion about an audit. “I want to be vigilant about this.”

The issue is important to the CIB because the quasi-governmental agency is largely funded by a stew of taxes that flow from hotels, restaurants and other companies such as car rental agencies that are frequented by visitors. That money is designed to fuel infrastructure and services that draw more visitors and bolster the entire local tourism-related sector.

While Myers said she believes the majority of hotels are in compliance, she said that there could be “a couple of brands” that are less apt to be compliant. She told IBJ after the meeting that some hoteliers might use tax money to temporarily shore up cash flow issues, which could in some cases delay them in paying their taxes. “It’s a matter of perspective,” she said.

“I’m not accusing any particular chain,” Myers said, but added that during past assessments, “a couple names surfaced.”

She declined to say which names or brands surfaced.

Myers said while audits can be “uncomfortable” for the business being audited, they can serve as “a nudge” to get companies to pay taxes owed more promptly.

In most cases, a hotel is required to remit taxes (food and beverage, sales, county innkeeper’s tax, income withholding, etc.) to the state on a monthly basis, said a spokeswoman with the Indiana Department of Revenue.

“The request today is to have the CIB partner with the state to make sure taxes are being remitted as they’re supposed to be,” CIB President Melina Kennedy said.

Kennedy asked CIB Secretary Douglas R. Brown, an attorney with Bose McKinney & Evans, to look into a partnership with the state. 

Kennedy said “it’s a fairness issue.”

Jim Dora Jr., a local hotel operator and CIB member, agreed.

“In my opinion, it’s only fair the city and state should be monitoring this and make sure that the taxes that are supposed to be paid are being paid,” said Dora, CEO of General Hotels Corp., which operates multiple hotels in Indiana including the Crowne Plaza downtown and at the airport. “I’m all about following the law.”

Dora pointed out that the taxes flowing to the CIB from hotels and restaurants help support the Indiana Convention Center and Visit Indy, the city’s tourism sales and marketing arm, which help bolster business for all area hotels and restaurants.

Dora is confident the vast majority of city hoteliers would welcome the scrutiny on the industry.

“I think it’s something we should definitely take a look at,” Dora said. “Since we as an industry are held to a certain standard, we should make sure people are remitting the taxes they should.”

Indianapolis wouldn’t be the first Indiana city to take a hard look at the taxes local hotels pay.

The Allen County auditor and Visit Fort Wayne sought closer scrutiny of tax money coming in from hotels in late 2014. The Fort Wayne audit, city officials there said, will get underway this year.