An audit of the Elko, Nev., transient lodging tax licensees indicates the Double Dice RV Park has been taking advantage of the promotional package provision of the ordinance to deduct costs for water, sewer, electric, phone, cable, Internet and breakfast services from taxable room revenue, according to the Elko Daily Free Press.
The audit, prepared by certified public accountants Read & Powell, was presented Sept. 11 during the Elko City Council meeting. Auditors reviewed room tax returns from January 2004-December 2005 for 11 lodging establishments.
According to the audit, the RV park’s interpretation of the ordinance “significantly” reduces taxable room revenue.
The transient lodging tax ordinance requires a 12% tax on the gross income received by lodging establishments for overnight rentals if the length of the stay is less than 28 days. In instances in which establishments offer promotional packages, the tax is applied to the percentage of the room rate of the overall package price or the actual amount charged for transient lodging, whichever is greater.
The ordinance offers the following example: if a package including a $10 food credit, $10 coin credit, $20 cabaret show, $10 drink tokens and $50 room rate with a retail value of $100 is offered for $40, the taxable amount would be $20, since the room accounts for 50% of the actual retail value of the package.
Applying the promotional package provision to deduct the cost of utilities violates the spirit and intent of the law, city attorney Dave Stanton said.
Whether it violates the letter of the ordinance is still to be determined.
Auditors have had a difficult time obtaining records from the business, according to the audit report, so they do not know how the tax is being applied.
Double Dice provided some of the required information, but more specific information is needed, including cash receipts, said Nick Konakis, who helped conduct the audit.
City council members asked the auditors to continue trying to obtain information from the RV park so the audit of the business can be completed.