Meetings & Conventions: Planner's Portfolio July
The Law & the Planner
By Jonathan T. Howe,
ARE ATTRITION FEES TAX-DEDUCTIBLE?
Readers ask about deductions, sales taxes, alcohol liability
and energy surcharges
Q: I just read “Easing the Burden of Taxation”
in the April issue of M&C. I have one question: Are
attrition fees deductible?
Audrey Featherman, CMP
National Industries for the Blind
A: The answer is yes, if the rooms were a
tax-deductible item in the first place. In such a case, attrition
fees are a business expense and not a penalty or a criminal “fine”
(although you might think attrition is both). The burden is to show
that the purpose of the meeting was to foster the “trade or
business” of the organization (the taxpayer claiming the deduction)
that was stuck with the unused rooms, and that the expenses were
ordinary and necessary. Assuming a contractual relationship exists,
attrition fees would be deductible as a business expense under
Section 162 of the Internal Revenue Code.
Q: California hotels now charge us a tax on
banquet room rentals. I’d like to find out if hotels can charge
sales tax on top of the 19 percent gratuities they charge for
F&B served in the banquet room. If F&B were served outside
the banquet room, would I still be charged 19 percent plus sales
Travel & Meeting Services Director
Trade Secrets Financial Network Inc.
A: Each state has its own approach to sales
taxes and how they are applied to room rentals and the like. The
question of gratuity taxation is one that is equally perplexing
throughout the United States. In some states, such as Illinois,
gratuities are taxable only to the extent that they are not
distributed to the servers. So if the gratuity is 19 percent, and
10 percent of it goes to the catering staff, the remaining 9
percent is subject to sales tax.
Because this varies all over the country, ask your F&B
representative to show you how it works in his state; if gratuities
are taxed when the bill comes, find out the reasons for it. If he
claims he doesn’t know, don’t pay it until he finds out. You are
entitled to question whether the charge is legitimate. Moving your
activity outside of the banquet room would not change how the
California taxing authorities would view the situation. If you are
paying rent for the space, and the rent is subject to tax, you will
have to pay the tax.
Q: If I plan a meeting for 250 people and
alcohol is not served but they leave the premises and drink and
drive, am I responsible? Can I be sued?
Noreen E. Hibbits
Manager of Exhibits and Special Events
GAF Materials Corp.
A: If you are not serving alcoholic beverages
at your function, you are safe. There is no way someone can accuse
you or impose liability for what people do away from your activity.
No liquor, no liquor liability. If you do serve liquor, be prepared
to face potential liability.
Q: Do I really have to pay energy surcharges
that are added after our meeting contract is signed?
A: Our office is receiving many calls on how to
handle the energy surcharges being levied by hotels. Such fees,
unless specifically provided for in your contract, can be resisted
and not paid. The imposition of a surcharge is above and beyond the
contract price. When you come to an agreement with the hotel not to
pay the fees, tell your attendees they are not obligated to pay the
charge at checkout.Jonathan T. Howe, Esq.,
is a senior partner in the Chicago and Washington, D.C., law firm
of Howe & Hutton, Ltd., which specializes in meetings, travel
and hospitality law. Legal questions can be e-mailed to him at email@example.com.
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