A landmark New York hotel was undergoing a three-year sales and use tax examination, focusing primarily on certain exempt hotel stays by foreign dignitaries and diplomates. The client, facing a $450,000 tax assessment and additional fees in interest and penalties, reached out to Friedman’s State and Local Tax (SALT) Group for support.
With extensive expertise in sales and use tax, the Group utilized their knowledge of exemption cards issued by the United States Department of State for foreign diplomatic missions and/or their personnel to make official mission, and sometimes personal, purchases free of state and local sales tax. In New York, a vendor is required to receive a completed Form DTF-950, Certificate of Sales Tax Exemption for Diplomatic Missions and Personnel, and a copy of the individual's tax exemption card. Despite difficulties—a new management team was in place that was not on board during the audit period so they were not aware of what occurred previously, further, the requisite documentation was stored offsite and was completely unorganized—the SALT group rolled up their sleeves to resolve the issue at hand. Pulling boxes from storage, our professionals combed through numerous records to identify and match exemption certificates to the sales registers.
With the assistance of the SALT group, the hotel was able to identify more than $5,000,000 in receipts from diplomatic missions during the tax period under audit – ultimately providing sufficient exemption certificates to satisfy the auditor's inquiry and saving the client from a $450,000 tax assessment before interest and penalties.