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Home My WebLink About0224.091~ .... ~ w April 11, 1991 TIlE HONORABLE CITY COUNCIL Palo Alto, california TlWl'S lift O9C1JII»rc;Y 0.1 Members of the Council: leport fO Irl.f 8 This report recommends that council approve a reVl.Sl.on to the. definition Cot -rent-under the transient occupancy tax ordinance to include unrefunded advance reservations deposits (-no show-) revenue4 -No show-revenue is realized when a hotel reservation customer forteits an edvance deposit upon dishonoring an advance botel reservation. The City Attorne.y's Office has revised the transient occupancy tax ordinance to clarify these amounts are ineludible in rent tor transient occupancy tax purposes. This _edification dee3 not constitute a chanqe In, but 1s declaratory of, existing law. I.e'qrpup4 A -transient-is any person who occupies a room or is entitled to occupancy by reason of concession .. permit, riqbt of access, license or other aqreement for a period ot thirty consecutive days or less~ The tax is levied on the privilege of occupying a rOOll, and consti tutes a debt owed by the tranIJient to the City. This debt is extinguishable only by payment ot the tax to the hotel operator or by the transient reDitting payment airectly to the city. Chapter ~.3J ot the City of Palo Alto Municipal Code requires that a botel operating within the City of Palo Alto charqe and collect fro. each transient a tax in the amount of 10 percent of the rent a!R:224: 91 , • "' " -_ 1 " ............. -'---....-..:...--,_."-"-----'--'-" --- charged by that botel operator. All transients ~ust pay the tax, unless they are exempt under Section 2.3)~030. Hotels operatinq in Palo Alto are required to remit monthly payments, calculated against gross revenue, to the city Finance Department. CUrrently, there are 28 hotels operating 1n Palo Alto. Pi.gus.ioll Hotels are periodically audited by City staff for compliance with the ordinance. A recent audit of a hotel by the City Auditor's Office revealed that -n? show· revenue as. reported on its tax return was erroneously exoluded from gross revenue. As.!li result of the audit, 6 deficiency va. determined to exist and Finance statf billed the hotel for the unpaid tax and related 1nterest charges as _clUed bY Palo Alto MU11icipal Code. The hotel appealec:l tile cbarqe, and the Director of Finance, on advice of the City Attorney's Office, ruled that the assessment was valid. The tax is levied on the pr1vileqe or right to occupy a room, not necessarily on the actual occupancy. If the Boney Is forfeited because the hotel operator -held-the roo. for occupancy, a taxable event has occurred~ staff conducted a survey of other Bay Area cities to ascertain whether such -no show· revenue was subject to the transient occupancy tax. Twenty-seven cities were cuntacted, includinq ten cities located within Alameda, San Kat8o, Santa Clara and San Francisco Counties. Of the cities contacted, 21 cities (or 78 percent) tax -no show· revenue if the guest forfeits quaranteed reservation charqea to the hotel. btu. ht.:lPD The City's Ordinance requires payment ot tax tor any and all kinds of rent received by hotels, including -no show· revenue. Finance staff believes an express clarification of this ordinance, which is declaratory of exlstinq law, is appropriate at this time. This change simply clarifies existing law and it should have no impact on hotel operations. '.M".pgl1:10p statf reCOJDller..ds that council approve the attached revision to ordinance 3704, Chapter 2.33, which declares that ·rent-for transient occupancy tax purposes, includes -no show· revenue or unretunded advance rental deposits. CMR:224:U 2 • R.Bpeetf~lly .~itted. ~I'~ SUpervisor, Revenue Collections CIIIt:224: n 3 ORDINANCE NO. ORDINANCE OF THE COUNCiL OF THE CITY OF PALO ALTO AMENDING SECTION 2.33.010 OF THE PALO }!.LTO MUNICI PAL CODE TO DEFINE: "RENT" '1'0 INCWDE ANY UliREFl1N- OED ADVANCE: RESERVATION REh"TAL DEPOSITS The Council of the. City of Palo Alto does ORDAIN as f011ov&: ~ECTION 1. Section 2.33.010 of Chapter 33 of Title 2 of the Palo Alto Municipal Code is hereby amended to read as tollows: 2.'3.010 Definition.. Except where the context otherwise requ1res~ the definitions given in this section qovern the construction of this chapter: (a) PERSON. -Person" means any individual, firm, partnership, joint venture, aSSOCiation, social club, fraternal organization, jOint stock company, corporation, estate, trust, business trust, receiver, tr~stee, syndi cate, or any other qroup or combination actinq as a unit. (b) HOTEL. -Hotel· means any structure, or any portion of any structure~ which is occupied or intended or desiqned for ~-upancy by transients for dyellinq, lodqinq or sleeping purposes, and includes any botel .. inn .. tourist ho.e or house r lIotel, stuclio hotel, bachelo~ hotel, lodqinqhouse, roominqhouse, apartment house. cionDitory, pub~lc or private club, mObilehome or house trailer at a fixed location.. or ot"_":.er similar str1.!ctur-e or portion thereof .. (e) occtJPANCY.. "Occupancy· means the use or posses sion r or the right to the use or possession, of any room or rOOBS or portio-n thereof in any hotel for dwelling, lodqing or sleeping purposes. (d) TRANSIENT.. "Transient-means any person ..-ho e:ltercises occupancy or is entitled to occupancy by reason of concession, permit, right of access, license or other aq-ceement for a period of thirty consecutive days or less, countinq portions of calendar days as full days.. Any such person so occupying space in a hotel s.1tall be deemed to be a transient until the period of thirty days bas expired unless there is an agreement in writing between the operator and the occupant providing for a longer period of occupancy. ~~u~:~r~~:G:~~~~~r~':·:a hotel valued in 1 money, goods, labor or all receipts, cash, credits and 1 property and services of any kind or nature, withou~ any deduction therefrom whatsoever. (f) OPERATOR. -Operator" means the. person who is proprietor of the hotel, whether in t..h"! ~.apa~ity cf cwner, lessee, sublessee, mOltgaqee in possession, li~ensee, or any other capacIty. Where the operator performs his or her functions tbrouqh a manaqinq agent of any type or character other than an employee, the manaqinq agent ahall also be deemed: an cperator for the purposes ot this chapter and shall have the same duties and liabilities as his or her principal. Compliance with the provisions of this chapter by either the principal or the managing aqent shall, however, be considared to be compliance by both. SEC1'ION 2. Palo Alto Kunicipal const~tute a change The amendment madf'. to secticn 2.33.010 of Code by section 1 of this ordinance does in, but is declaratory of, existing law. the not SECTION l. The council finds that none of the provisions of this ('rdinance constitutes a project for the purposes of the California Environmental QualIty Act. SECTION f. This ordinance shall ~eoome effective on the thirty-first day after the day of its passaqe. IN','ROOOCED: PASSED' AYES: NOES: ABS'rENTIONS: ABSENT: ATTEST: APPROVED: City Clerk Mayor APPROVED AS TO FORM: city Manager Assistant City Attorney Director of Finance z 'UUll jim 0070IXJ' •