Don't Get Charged An Occupancy Tax For A Hotel Room You Never Occupied

Michael canceled his Hilton Hotel reservation with less than 24 hour notice and got charged the full-room rate of $189. This post is not about that. Michael knows and accepts that this is the policy. Rather, this is about $25. The $25 “occupancy tax” the Hilton tacked on. Michael wasn’t about to be charged an occupancy tax for a room he never occupied. After talking to three different people for two days, he finally got Hilton refund the charge. “I thought other readers may like to know about this story and to be on the look out for stupid taxes that aren’t valid when you cancel a hotel room,” Michael writes.

(Photo: Ben Popken)

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  1. HeartBurnKid says:

    I used to work the phones for a hotel chain, and while “resort fees” and the like weren’t charged on cancellations, such things as occupancy taxes, sales tax, etc. were still charged. The reason? Uncle Sam still charges the hotel, and so the hotel still charges the consumer.

    Nice of Hilton to eat the cost for Michael, but it’s not that the tax isn’t valid; far from it.

  2. KlausKinsky says:

    Sales tax is one thing… but occupancy tax suggests that the room was occupied. Might be worth a look at the tax law.

  3. dragonfire81 says:

    @KlausKinsky: I would assume the tax is charged based on the cost of the room. In this case, since this gentleman canceled in such short notice, he was still charged the full cost of the room, therefore since the room was charged, the taxes should apply as well.

  4. Bladefist says:

    @dragonfire81: Right. Minus the fact this is the most worthless tax in the world.

  5. bobpence says:

    @HeartBurnKid: Uncle Sam doesn’t charge any of the taxes, it is the state or municipality. Maybe Hilton “ate” the cost, but its applicability probably varies from place to place.

  6. HeartBurnKid says:

    @bobpence: Well, yeah, I know it isn’t the fed; poor choice of words there.

  7. tempest667 says:

    I found two different versions of the tax from two seperate states. I didn’t look too long.

    Texas
    A tax is imposed on a person who pays for a room or space in a hotel costing $15 or more each day. Local hotel taxes apply to sleeping rooms costing $2 or more each day.

    NYC
    Hotel Room Occupancy Tax (HROT) applies to the occupancy of any room in a hotel in the City.

    Looks like it may depend on where you stay and how its written.

  8. cef21 says:

    Here’s a trick: If you cancel and they try to charge you, call on the day of the reservation and ask if they have any rooms for that night. If not, then they can’t legally charge you for the room — it becomes an illegal penalty charge. Under contract law, they’re only allowed to charge you for the profit that they lost when you cancelled. If somebody else is in that room, they haven’t lost any profit. (Good luck trying to get this through the thick skull of your credit card company, though…..)

  9. jaubele1 says:

    Typically occupancy taxes are established, and assessed, by local government — i.e. state/federal tax laws are not always an overriding factor.

    And the likelihood that, during these tough economic times, any local government is going to revisit a lucrative tax that is levied on many folks who are not their constituents seems slim.

  10. Bladefist says:

    Regardless of hotel policy, and I know the OP accepts their policy, I would wait until I got the charge, and dispute it with my credit card company. May fail, but doesn’t hurt to try.

  11. KlausKinsky says:

    @dragonfire81: agree that sales tax would apply there, but not necessarily an occupancy tax if that tax requires or assumes that the charge is related to someone actually occupying the room.

  12. RckPngn says:

    @cef21: @cef21: @cef21:

    That isn’t true. If they tell you over the phone you have till (cancel policy) to cancel and you break it you can legally be charged.

  13. @Bladefist: Dispute it on what grounds? You have to have made a good-faith effort to resolve it with the merchant first. If it’s written on (e-)paper that you agreed to, then “I didn’t like the terms of the agreement after the fact” isn’t going to cut it. It’s a legitimate charge at that point.

    (Note: It’s not clear which charge you’re referring to. I assumed you’re talking about being charged for the room when you cancel, not the associated tax.)

  14. Bladefist says:

    @Michael Belisle: Either / Or. Like I said, it may not work. But I’d try anyway. If they tell you no, then no. What harm was done?

  15. mythago says:

    @cef21, I would not assume that “contract law” automatically frees you from the tax. For example, if you agreed to some 2-point-type Terms and Conditions when you reserved the room, it may now be part of the contract that you agreed to. And there may be other laws permitting the hotel room to charge the tax on any reservation.

    Don’t take it too literally and assume that it means you must occupy the room – as tempest667 pointed out already. If you want to go to the trouble of checking out the laws in question, go for it; maybe you can get a refund. Here I suspect the customer got the “just make him go away” version.

  16. Eoghann says:

    If Hilton is collecting money for your stay, the gummint doesn’t care whether you actually occupied the room or not. They get their tax.

  17. u1itn0w2day says:

    I don’t know why they just don’t build these fees and taxes into the price.If they want to itemize fine.But just build it into the price.Makes things alot easier.The tax is still basically between the hotel and government.If you rented 10 rooms you should be turning in 10 occupancy fees or 10 rooms worth of taxes.

  18. cef21 says:

    mythago –

    I was referring to the whole amount, not just the tax. It doesn’t matter what the contract says — penalty clauses in contracts are generally unenforceable. The only difference between this case and their saying “If you cancel, you have to pay us $50,000″ is that you’re much more likely to just pay the $189 than the $50,000. The hotels are counting on you not fighting it.

  19. @Bladefist: Personally, I don’t argue things I know I don’t deserve. The frivolous chargeback wastes everyone’s time and money.

    But that’s just me. I always think of the children.

  20. kityglitr says:

    Here’s the deal, and you’re not gonna like it. Depending on what state he’s in, the hotel has room charges plus tax. Because tax for staying in a hotel is different than sales tax (in California, sales tax is about 7% and hotel tax is about 10%). Legally, they cannot call this sales tax, but rather, bed tax or occupancy tax. Essentially its just tax on the total amount of your stay. If he canceled with a less than 24 hour notice, and he understands the policy, he is responsible for the full amount of his stay PLUS TAX. End of story. They aren’t tacking on some random tax for the fun of sticking it to him, they are simply following their stated policy.

  21. SkokieGuy says:

    Well what if the OP DID keep his reservation, but the first night, checked in at 8pm, went to a function and didn’t ‘occupy’ the room till after midnight. Fat chance the occupancy fee is waived because the room wasn’t occupied.

    If the hotel gets revenue, the municipality gets revenue, regardless of if the room was actualy inhabited.

  22. @Michael Belisle: When I say “argue” please read “escalate”. I’ll make a Tier 1 attempt to get something waived even if I knew about it in advance.

  23. SkokieGuy says:

    It is also my understanding that Paris Hilton levies an occupancy tax.

    According to those in the know, a reservation is not required.

  24. Bladefist says:

    @Michael Belisle: Well I say screw the children :) No, I just get sick of these places making tons of policies like they are king shit. I mean how many nice hotels are there? And you know, if they are constantly full, and you cancel, then ya, they have an opportunity cost, and then you are in the wrong. But if the are 99% vacant, and you cancel, its like wtf, you didn’t lose anything. So go after your money back. It’s not frivolous. And I’m not saying sue them. Just ask the hotel nice. They’ll say no. Submit to your CC. And if they say no, move on with your life. If you know they were booked, and you screw’d them, do nothing. I dunno. Just me. If you give me tools to give my money back, I will use them.

  25. HeartBurnKid says:

    @Bladefist: Usually, if they’re not full anyway, and you ask nicely, they’ll waive the fee. I know, I’ve asked nicely on behalf of a whole lot of people (including myself, on one occasion). Just give them a call, ask for the manager on duty, and explain nicely why you’re not going to be able to make it, and could they please waive the cancellation fee? As long as it’s not one of those lovely prepaid, nonrefundable rates you see on the Internet, it’s a relatively quick and painless process.

  26. @Bladefist: I see your point, and I’d ask the hotel too. As for the chargeback, “with great power comes great responsibility.”

    It’s like the airlines in a way. Their policies are crap, and I’d like to see them change. But the chargeback is not the appropriate venue to affect a change of heart.

    It’s amazing that the chargeback exists in the first place. It’s a great consumer tool. I’d hate to see it change because people abuse it.

  27. Angryrider says:

    For awhile I thought hotels were going to charge their guests more money for being in someone else’s room. Say you go to a friend’s room for a chat, bam!, an “occupancy charge.” Although that might just happen considering the state of the economy.

  28. irfan says:

    @Bladefist: your logic seems backwards. if they are constantly full and you cancel… then they have a decent chance of rebooking so they are LESS likely to lose money. fight to get your money back if they are booked solid your night.

    if they are 99% vacant then they have a slim chance of getting that money back, so of course they would want to keep your money. you are at fault in either case for cancelling, but the vacant hotel is almost guaranteed to lose money on you screwing up, if they refund.

  29. KlausKinsky says:

    If you pay for a room, you should be subject to the occupancy tax since it is assumed you will use it– use it to sleep in, or use it to say you have it and don’t sleep there.

    But if you are only paying a penalty for a late cancellation– which coincidently is equal to a night’s stay– you should not be subject to an occupancy tax.

  30. evslin says:

    @irfan: Depends on how you look at it. If you book a room, that room goes off the market (so to speak) and can’t be booked to somebody else. That’s a lost sale to the hotel if you book the room, cancel your reservation the day of, and the hotel isn’t lucky enough to have somebody walk in asking for a room without a reservation. Hence, the 24 hour notice – the hotel has a day to regain the sale by making your canceled reservation available to somebody else.

    A vacant hotel isn’t going to miss the sale either way.

  31. kenblakely says:

    Success huh? Doesn’t sound like much of a success to me. Visa’s contract with hotels specifies that if the reservation is made less than 72 hours to occupancy, it can be canceled without penalty up to 6PM the day of arrival. “Success” would be disputing the charge with the credit card and prevailing.

  32. That-Dude says:

    @cef21: are you a 1L, because I think you need to turn the page in your Chirlstein.

  33. That-Dude says:

    @cef21: seriously dude, take contracts 2.

  34. kityglitr says:

    Yeah, honestly… I’m the manager at a very small hotel, and I’m not sure about the larger ones, but if someone wants to cancel on the same day, I waive the fee.

  35. irfan says:

    @evslin:

    im saying the busy hotel has a way higher chance of refilling that room even on a short, less than 24hour notice. the empty hotel has way less chance of filling that room. they need any guaranteed money they can get. sure they might not have filled it anyways, but they got a sale and they need to hold on to it more than a busy hotel NEEDS to hold on to a sale. the fact that it would likely go empty is exactly why the less busy hotel has more at stake.

  36. littlemsemperor says:

    @irfan:
    When I worked in sales at a similar type of hotel, we were required to leave a certain number of rooms open for walk-in reservations, which is constantly recalculated, so the likelihood that this extra room would be filled is very low.
    There are still costs for the building, rent [not all hotels own the building they’re in], etc whether or not the room is occupied, and regardless of if it’s a “busy” hotel or not.

  37. Every hotel I have worked at has had a state tax, and a local tax. The local taxes are called either ‘Bed Tax,’ or ‘Occupancy Tax.’ The local taxes usually go to the CVB’s to make those nifty brochures about the town, and to employ people at the CVB’s whose job it is to attract tourists from out of town. The local people don’t want to pay for this so they tax hotel rooms and car rentals, etc.

    The consumerist in question was pretty smart to take ‘Occupancy Tax’ literally and catch Hilton out. Hotels will be in contact with who ever changes the names of taxes, and all the ‘Occupancy Tax’ will be changed to ‘Bed Tax’ eventually.

    On late cancellations, I tell the person if I can sell it I wont charge them.

  38. FLConsumer says:

    @tempest667: So if that particular tax only applies to hotels that bill BY DAY, does that mean the little motels that rent by the hour are exempt?

  39. ironchef says:

    call it a 9/11 fee like the airports do and nobody will complain.

  40. ironchef says:

    I was being sarcastic, btw.

  41. JerseyJarhead says:

    Well, SOMEONE has to pay so that the talentless cunt Paris Hilton can skank her panti-less, smegma-encrusted pussy around Hollywood!

  42. rynnassif says:

    I work at a Hilton hotel (I’m actually reading the Consumerist from the front desk) and I think everyone is getting kind of confused about the concept of “occupancy tax.” As some have already pointed out, “occupancy tax” doesn’t actually mean that you occupied the room. It’s what we’ve termed the taxes that are charged to us by the local and state governments.

    As to the suggestion that hotels should just build the taxes into their rates… I mean, don’t you think that’s a little ridiculous? When I buy a $0.99 item at a fast food place, I don’t expect to get a penny back from my dollar bill, you know? Everything’s taxed.

  43. Corbin123 says:

    @That-Dude: What about contracts 2? It is a generally recognized principle of contract law in most (if not all) jurisdictions that the hotel will have a duty to mitigate damages if you breach your end of the contract. If they actually take you to court and you can prove that they got another person to stay in your room the night you canceled (hence calling to see if there is no vacancy) then they aren’t entitled to any damages, notwithstanding anything in your contract to the contrary. This is especially so when the hotel is the superior power in the contract and drafted the terms. He is also right about how many jurisdictions will void any penalty clauses by law.

  44. UraniaCorvus says:

    hate to say it, but in this state, a reserved room is considered income,
    and all hotel/motel/special taxes apply, even if cancelled and refunded.
    No provision is in my state’s laws for expenses off of income.

    Bastards are worst than most big companies.

  45. SubhujaPittheus says:

    If you read the e-mail confirmation that it sent by any of the Hilton Family
    of Hotels or the Terms & Conditions on any of their websites they state that
    the late cancellation penalty is one night’s room rate plus any applicable
    taxes and the occupancy tax is part of those taxes.

    I am not trying to be a know it all but I work for the company so I
    experience things like this everyday.