Appeal from the Order of the Board of Finance and Revenue, in the case of In Re: George F. Egner and North Hotel Realty Co., d/b/a Sheraton Inn Northeast, Docket No. RST-10,732, 610487 SUT, dated August 26, 1987.
Jerrilyn G. Marston, with her, Jeffrey A. Less, Bazelon & Less, for petitioner.
Bryan E. Barbin, Deputy Attorney General, with him, Ernest D. Preate, Jr., Attorney General, for respondent.
Judges Craig, Barry and Palladino, sitting as a panel of three. Opinion by Judge Craig.
[ 125 Pa. Commw. Page 435]
The sole issue in this case, one of first impression, is whether the exemption provisions of the Pennsylvania Hotel Occupancy Tax require direct billing to the United States Government in order for the federal exemption to apply.
George F. Egner and North Hotel Realty Co., t/a Sheraton Inn Northeast (Sheraton), appeal an order of the Pennsylvania Board of Finance and Revenue (board) refusing Sheraton's petition for review of action taken by the Department of Revenue for reassessment of sales tax. The board held Sheraton "liable for the hotel occupancy tax at issue inasmuch as it did not establish that the federal government directly paid this tax as required by 61 Pa. Code § 38.2."
Sheraton is engaged in the business of renting rooms to the transient public, including employees of the federal government. This action arises from an audit of Sheraton's business, conducted by the Bureau of Audits of the Pennsylvania Department of Revenue, for the time period January 1, 1982 through December 31, 1985. The bureau initially assessed a tax deficiency of $64,456.54, plus interest and penalties.
Sheraton maintains that federal employees are exempt from state taxation when occupying a room while on official government business, and that it obtained adequate proof that the individuals staying at the hotel were federal government employees on official business. The bureau contends that federal employees are not exempt from hotel occupancy tax if they initially pay for the rooms themselves, even if they are to be reimbursed by the federal government; the exemption applies only if the bill
[ 125 Pa. Commw. Page 436]
is sent directly to, and paid directly by, the federal government. Therefore, the bureau assessed Sheraton for hotel occupancy taxes that had not been collected from federal employees who, although occupying rooms while on official business, had personally paid the bill.
On August 22, 1986, Sheraton filed a petition for reassessment with the Department of Revenue's Board of Appeals to contest the assessment. The Board of Appeals upheld the bureau's position in its entirety, but abated the penalties against Sheraton because it found that Sheraton's position was based upon a reasonable interpretation of the regulations and that Sheraton had acted in good faith.
On April 20, 1987, Sheraton filed a petition for review with the Board of Finance and Revenue. On August 26, 1987, the board refused the petition because Sheraton did not establish that the federal government directly paid the tax.
Sheraton now appeals to this court contesting the result reached by the Board of Finance and Revenue on the basis of a reading of a direct billing requirement into the regulation which provides for exemptions from the hotel occupancy tax. Sheraton seeks to have the assessed deficiency reduced by $44,435.96. The parties have stipulated that this total is comprised of $23,039.62 assessed on transactions where the hotel did not charge the 6% hotel occupancy tax to federal government employees presenting exemption certificates, and $21,396.34 assessed on transactions where the employees had stated that they were on ...