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Square 345 Limited Partnership v. District of Columbia

May 24, 2007

SQUARE 345 LIMITED PARTNERSHIP, APPELLANT,
v.
DISTRICT OF COLUMBIA, APPELLEE.



Appeal from the Superior Court of the District of Columbia Tax Division (TX-7985-01) (Hon. Kaye K. Christian, Trial Judge).

The opinion of the court was delivered by: WASHINGTON,Chief Judge

Argued May 10, 2005

Before WASHINGTON, ChiefJudge,*fn1 RUIZ, Associate Judge and SCHWELB, Senior Judge.*fn2

This appeal is from an order of the Tax Division of the Superior Court granting summary judgment to appellee, the District of Columbia ("the District"), which held appellant Square 345 Limited Partnership's ("Grand Hyatt" or "hotel") attrition fee was subject to sales tax as the retail sale of a hotel room, pursuant to D.C. Code § 47-2002 (2) (2001). We affirm.

I.

The material facts in this case are undisputed. Grand Hyatt operates a hotel at 10th and H Streets, N.W., in the District of Columbia. As part of its services, the hotel contracts with groups that have scheduled events, such as conferences, to stay at the hotel during the events. The contract requires the hotel to set aside a block of rooms ("room block") available at a lower rate for reservation until a certain date for participants of the event. In consideration for the hotel holding a room block, the group's participants have to reserve a minimum number of room nights*fn3 within the contractually-specified time period. If the minimum number of total room nights is not reserved and paid for by the event's participants, the group itself guarantees the difference between the actual room nights used and the minimum number of room nights guaranteed. Grand Hyatt refers to this as an attrition fee.

The District of Columbia's Office of Tax and Revenue ("OTR") tax auditors examined the Grand Hyatt's records for the 1998 and 1999 tax years and proposed tax deficiencies arising from the sales tax on attrition fees. The District assessed a retail sales tax*fn4 on the attrition fees, in the amount of $80,517.28, plus interest and penalties for late payment,*fn5 for a total assessment of $132,986.52.

The Grand Hyatt paid the assessment and timely filed a petition on November 9, 2001, seeking a ruling that the District improperly assessed the retail sales tax on the attrition fee, or, in the alternative, that the District should not have imposed penalties and interest. The parties filed cross-motions for summary judgment. On December 31, 2003, the Superior Court granted the District's Motion for Summary Judgment, finding that OTR properly imposed a tax on the attrition fees. Although the trial court failed to address the issues of penalties and interest specifically, it is clear from its order the court affirmed the total assessment imposed by the District.*fn6

On appeal, Grand Hyatt contends that: 1) the fees charged by the hotel did not constitute a taxable "retail sale" within the meaning of D.C. Code § 47-2002 because it did not "furnish" any rooms to "transients" when the group failed to make the requisite number of reservations; and, in the alternative, 2) asks this court to remand the case to the trial court for further proceedings because of the trial court's failure to address the issues of interest and penalties.

II.

The central issue in this case is whether attrition fees are subject to a hotel sales tax. The hotel sales tax refers to the cumulative 14.5% tax imposed under D.C. Code §§ 47-2002 (2) and -2002.02 (1). D.C. Code § 47-2002 provides, in pertinent part:

A tax is imposed upon all vendors for the privilege of selling at retail certain tangible personal property and for the privilege of selling certain selected services. . . . The rate of tax should be 10.05% of the gross receipts from the sale of or charges for any room or rooms, lodgings, or accommodations furnished to a transient by any hotel.

D.C. Code § 47-2002 (2). "The term 'transient' means any person who occupies or who has the right to occupy any room or rooms, lodgings, or accommodations for a period of 90 days or less during one continuous stay." D.C. Code § 47-2001 (n)(1)(c). Further, the hotel tax includes:

[a] separate tax at the rate of 4.45% of the gross receipts for the sale or charges for any room or rooms, lodgings or accommodations ...


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