103 Waverly Place in Manhattan. Image credit: CityLaw.

Hotel claimed tax credit for purchases of continental breakfasts provided to guests. The Washington Square Hotel LLC, located at 103 Waverly Place, Manhattan, purchased continental breakfasts from Café C–III, a vendor located on the hotel’s premises, and provided the continental breakfasts to guests. The hotel did not charge their guests separately for breakfasts, nor did the hotel give guests an option to decline breakfasts in return for a lower rate for a hotel room.

The hotel applied to the Department of Finance for a $20,000 sales tax credit, claiming that the continental breakfasts were not subject to the sales tax because the hotel purchased the continental breakfasts for resale. Finance denied the hotel’s request. Following a hearing, an administrative law judge ruled against the hotel and found the tax assessment to be proper. The Tax Appeals Tribunal affirmed.

The hotel filed an Article 78 proceeding. The Appellate Division, Third Department, upheld the tax and affirmed the tax appeals tribunal.  The Appellate Division ruled that the hotel provided continental breakfasts for guests as part of the hotel rental rate and did not separately resell them. The court also rejected the hotel’s additional argument that the City had previously granted the resale tax exemption in past audits. Each audit stands on its own and the earlier audit did not bind a future audit.

Washington Square Hotel LLC v. Tax Appeals Tribunal, 155 A.D.3d 1477 (Dep’t 3rd Dept. 2017).

By: Malik Callender (Malik is a New York Law School Graduate, Class of 2018.)