A Suite Discovery: Unlocking Hidden Value by Maximizing Tax Recovery

How We Helped a Hospitality Company Obtain a Significant Sales and Use Tax Refund

Client

We were introduced to the client, an owner and operator of a large, luxury hotel group, through an existing relationship with a partner at the firm. They connected with our team because the client wanted clarity about the nuanced sales and use tax laws across states, given their extensive capital improvements.

Challenge

a group of people sitting around a table

Reviewing sales and use tax obligations should be an industry standard for all corporations and should be performed routinely (every 2-3 years), especially hotels, as it provides an opportunity for significant refunds on recently invested capital improvements. Our client needed clarity and professional support to verify the accuracy and compliance of their sales and use tax obligations for their most recent expenditures, renovations, capital investments, and construction projects.

The client was already relying on their management company and in-house accountants to seek guidance on sales and use tax; however, the client wanted to reinforce that support with an in-depth opinion from a firm specializing exclusively in sales and use tax.

With a dedicated team focused solely on sales tax laws in every state, our advisors were prepared to review all purchases made over the prior 3 years and accurately assess their sales and use tax obligations. Based on the variance in state laws and our experience in the hospitality industry, we recognized that hotel renovations often provide various refund opportunities. Common expenditures that could lead to refund opportunities include:

Guest room renovations (e.g., upgrading furniture, fixtures, floors, lighting, etc.)
Technology Updates (e.g., software systems, smart room systems, booking platforms, high-speed internet, etc.)
Safety and compliance upgrades (e.g., fire alarm and sprinkler systems, ADA compliance renovations, security system enhancements, etc.)
Exterior and structural improvements (e.g., landscaping and outdoor lighting, parking lot resurfacing, and roof repairs, etc.)

Approach

Our team performed a thorough evaluation of the hotel’s expenditures related to capital improvements, as well as all additional expenses incurred over the past three years. Our team performed a thorough evaluation of the hotel’s expenditures related to capital improvements, as well as all additional expenses incurred over the past three years. Our review found no instances of unpaid sales tax, but we did identify several cases where sales tax was unnecessarily paid, resulting in a refund for our client.

From there, we documented each transaction in which we believed tax was paid incorrectly and a refund was due to the hotel. After we presented a detailed schedule of all occurrences to the hotel, we received approval from our client to submit a refund claim to the appropriate state taxing authority.

Results

Through our evaluation, we found significant financial gains for our client.
From the sales tax refund, our client obtained over six figures in refunds connected to capital improvements, including:

$40k

In taxes paid on an exempt limousine service

$15k

In taxes paid on pine needles used for landscaping

$15k

In taxes paid on software exempt expenses

$8k

In taxes paid on ingredients purchased to make complimentary baked goods for hotel guests

$75k

In tax paid on capital improvements, environmental services and professional services on renovation projects

Contact Us

Contact our team and uncover potential sales and use tax refund opportunities.