Hotel Tax Loophole

A tip of the hat to the tax lawyers for American Airlines, William Ault and Jay Rosen of Deloitte Tax LLP. As our Adam Rowe reports at page one today, they are on the verge of having litigated their way out of more than $200,000 in New York City hotel taxes on the basis of a provision that says that if you live at a hotel for at least 180 days out of the year, you don't have to pay the hotel tax. So a provision intended to apply to poor residents of welfare hotels or single room occupancy rooming houses, or to clarify that the hotel tax does not apply to residents of places such as the Chelsea Hotel or the Pierre, ends up benefiting a big corporation that rents rooms for thousands of different flight attendants and pilots.

RELATED: City Could Lose a Big Chunk of Hotel Tax.

The outcome seems unfair — why should the parents of Columbia students in town for their children's graduation, or the relatives of cancer patients being treated at Memorial Sloan-Kettering, or parents visiting from out of town, have to pay the hotel tax, while big companies like American can be exempt from all their hotel taxes merely by booking one room for 180 nights a year? The instinct of lawmakers, Mr. Rowe reports, is to change the law so that the companies would have to keep paying the tax. Here is a better idea: why not get rid of the bed tax of $2 plus 5% altogether, for tourists, relatives of New Yorkers, and American Airlines pilots alike?

A $200 a night hotel room in the city is already subject to an 8.375% city and state sales and use tax — $16.75. There's a $1.50 a room tax on top of that to pay for the "Javits Center Expansion," which has not happened and doesn't have much prospect of happening. Add in the current 5% tax and the $2 flat fee and it brings the total current tax on a $200-a-night Manhattan hotel room to $30.25. Let the corporate tax lawyers' win be a victory for everyone checking in for a night in New York.