How to handle tax increases?

[muirford]

You are both right - it is dependent on whether you use cash basis accounting or accrual basis accounting: http://www.nolo.com/legal-encyclopedia/cash-vs-accrual-accounting-29513.html
We pay the taxes at the time we take the deposit (to the taxing bodies), but we don't take a full night's deposit. So we would charge the increased tax rate at check-in, but generally there is a much bigger balance than just the change in taxes. For what it's worth, most small businesses use cash basis accounting.
Blessed be

 

[Madeleine]

Around here, if they are paid, it's the date of the payment for the tax. If they are unpaid, the tax levy rate changes because it hasn't been paid.
That said, just to avoid the hassle and arguments, I would agree with R about this and just absorb the $300. It's more of a hassle to collect it and it will create some ill will with people, over small amounts..

Around here, if they are paid, it's the date of the payment for the tax. If they are unpaid, the tax levy rate changes because it hasn't been paid.
That said, just to avoid the hassle and arguments, I would agree with R about this and just absorb the $300. It's more of a hassle to collect it and it will create some ill will with people, over small amounts.

Since I first posted this we've been waiting to find out if there would be an increase and when it would start. A lot more reservations came in the meantime.
I know it's picky but technically I am not allowed to pay the sales tax for the guest. Weird rule but there it is. Sure, no one else knows that. Well, all the emails have been sent and good thing as we've gotten some cancellations from folks who forgot they made these plans back in the winter.
I hope there is no backlash from guests who were not charged the additional tax at all the other places they booked. Most of them are coming from far enough away that this is not their only stop.

 

[Generic]

Around here, if they are paid, it's the date of the payment for the tax. If they are unpaid, the tax levy rate changes because it hasn't been paid.
That said, just to avoid the hassle and arguments, I would agree with R about this and just absorb the $300. It's more of a hassle to collect it and it will create some ill will with people, over small amounts..

Around here, if they are paid, it's the date of the payment for the tax. If they are unpaid, the tax levy rate changes because it hasn't been paid.
That said, just to avoid the hassle and arguments, I would agree with R about this and just absorb the $300. It's more of a hassle to collect it and it will create some ill will with people, over small amounts.

Since I first posted this we've been waiting to find out if there would be an increase and when it would start. A lot more reservations came in the meantime.
I know it's picky but technically I am not allowed to pay the sales tax for the guest. Weird rule but there it is. Sure, no one else knows that. Well, all the emails have been sent and good thing as we've gotten some cancellations from folks who forgot they made these plans back in the winter.
I hope there is no backlash from guests who were not charged the additional tax at all the other places they booked. Most of them are coming from far enough away that this is not their only stop.
.

For future reservations, put the new tax in now. You can always refund it to them in cash when they are there. For those who are coming, I would simply recalculate the price of the stay if the tax passes. In other words if the tax was 5% and is not 6% and the stay was $100 plus tax (ie $105) instead of asking them for the $1 ($106). I would simply change the price of the stay to $99.06. I just wouldn't want to have the argument with them or for them to have the ill will. I would send them a new corrected invoice so that they see that we have "paid" the extra tax for them by discounting the room, which would create positive will for you, instead. Think of it as $300 worth of advertising.

 

[OnTheShore]

We are subject to a tax rate increase coming up soon, too. In our case however, no one who is coming after the rate change takes effect has yet paid in full, so we have simply adjusted their balance due to reflect the new tax rate. I think if I were in Maddie's shoes, with guests who have paid in full in advance, I would do as Sugar Bear suggests, keeping the total paid the same by adjusting the room rate (but only for those who paid in full in advance).

 

[Madeleine]

We are subject to a tax rate increase coming up soon, too. In our case however, no one who is coming after the rate change takes effect has yet paid in full, so we have simply adjusted their balance due to reflect the new tax rate. I think if I were in Maddie's shoes, with guests who have paid in full in advance, I would do as Sugar Bear suggests, keeping the total paid the same by adjusting the room rate (but only for those who paid in full in advance)..

I guess the cheap side of me wouldn't let me do that.
If anyone kicks THEN I'll offer to take it out of my own pocket for them. Nope, that doesn't sound gracious, either does it?

 

[Madeleine]

Around here, if they are paid, it's the date of the payment for the tax. If they are unpaid, the tax levy rate changes because it hasn't been paid.
That said, just to avoid the hassle and arguments, I would agree with R about this and just absorb the $300. It's more of a hassle to collect it and it will create some ill will with people, over small amounts..

Around here, if they are paid, it's the date of the payment for the tax. If they are unpaid, the tax levy rate changes because it hasn't been paid.
That said, just to avoid the hassle and arguments, I would agree with R about this and just absorb the $300. It's more of a hassle to collect it and it will create some ill will with people, over small amounts.

Since I first posted this we've been waiting to find out if there would be an increase and when it would start. A lot more reservations came in the meantime.
I know it's picky but technically I am not allowed to pay the sales tax for the guest. Weird rule but there it is. Sure, no one else knows that. Well, all the emails have been sent and good thing as we've gotten some cancellations from folks who forgot they made these plans back in the winter.
I hope there is no backlash from guests who were not charged the additional tax at all the other places they booked. Most of them are coming from far enough away that this is not their only stop.
.

For future reservations, put the new tax in now. You can always refund it to them in cash when they are there. For those who are coming, I would simply recalculate the price of the stay if the tax passes. In other words if the tax was 5% and is not 6% and the stay was $100 plus tax (ie $105) instead of asking them for the $1 ($106). I would simply change the price of the stay to $99.06. I just wouldn't want to have the argument with them or for them to have the ill will. I would send them a new corrected invoice so that they see that we have "paid" the extra tax for them by discounting the room, which would create positive will for you, instead. Think of it as $300 worth of advertising.
.

OK, I did change the tax rate and hope I don't hear about it from guests who book for next week.

 

[Breakfast Diva]

Our taxes will be going up 9%. There's no way I'm going to absorb that.

 

[Joey Camb]

I still say the tax is assessed at the time the money is collected. If they paid in full in July, they pay the rate in effect in July, even if they arrive in October when the rate has changed.
Now those who reserved earlier, and haven't made final payment yet, but were quoted a total based on the day they reserved, that's a different story. They just have to understand that they pay the rate in place on the day they make the payment, and if the state/county/city changes that, it's beyond your control and you have to charge what the government says you must charge on the day the money is collected.
Amen..

I still say the tax is assessed at the time the money is collected. If they paid in full in July, they pay the rate in effect in July, even if they arrive in October when the rate has changed.
Now those who reserved earlier, and haven't made final payment yet, but were quoted a total based on the day they reserved, that's a different story. They just have to understand that they pay the rate in place on the day they make the payment, and if the state/county/city changes that, it's beyond your control and you have to charge what the government says you must charge on the day the money is collected.
Amen.

I would say that applies to the price of the room. If you had a rate of $100 when you booked in March and I raise the rates to $150 you still get the room at $100. But I have no control over the tax rate. So, you, the guest, do have to cover that as the tax isn't due until after you've stayed. (I have a fair number of guests who got a discounted stay because they booked early before room rates went up.)
Here, if I collect the room + the tax as a deposit and you cancel and forfeit your deposit, I have to give you back the tax portion of that. No tax is collected or remitted for services not used.
.

we have a tax on pretty much everything called VAT they changed it from 17.5% to 20% when I worked in a large hotel and it was all done overnight majour operation - but say guests were staying 4 nights their exact same drinks or room rates were one price one day different the next it was a pain in the bum to say the least when checking all these people out when you had to explain to everyone when they queried that their martini on Monday was $5 and$5.20 on Tuesday!