How did this hotel end up owing the City of Fairfield $686,542? If you bought a business and the previous owner owed enormous taxes, should you be responsible? These are questions the Fairfield City Council tried to answer at last night’s council meeting.
The Fairfield City Council held a hearing at last night’s city council meeting to decide if it would waive payment of $686,542 in Transit Occupancy Tax (TOT) from owners of the Quality Inn (formerly the Super 8 Motel) located at 2170 N. Texas Street.
The amount due includes $173,544 in interest and penalties.
A Little Background…
In January of 2023, the City of Fairfield notified owners of the Super 8 Motel they had not received TOT payments since 2018. In March, a new operator purchased the hotel through a foreclosure sale and rebranded the motel as a Quality Inn.
The current operator, Shri Guri Hari, LLC, claimed no knowledge of the back-taxes owed by the former owners and filed an appeal to the city. The city claimed there was communication with the buyers about the existence of the back taxes. In March of this year, the operator was granted a hearing with the city’s tax administrator.
The assessment of the unpaid taxes was upheld and the next step was a direct appeal to the city council. And that’s what took place last night.
According to a municipal code, the purchaser of a hotel is responsible for all unpaid TOT of the previous owner.
What the Hotel Says…
Frank Weiser, a Los Angeles attorney representing the hotel operator, argued this case was unique in that the hotel sale was not a voluntary sale but a foreclosure. The city estimated the TOT and therefore Weiser’s clients didn’t have access to records of how the tax was accrued.
“These are earnest tax payers and I think you will find they are going to be an asset in the city, but to put a burden of $600,000, or anywhere near that is a pretty high amount, and especially with the lag in time and everything… I did try to negotiate and maybe there will be some ability to still do that, but I would ask the council to consider the economic burden on my clients also.”Frank Weiser
The hotel operator spoke at the hearing and explained his history in the City of Fairfield. He is also the operator of the Comfort Inn of Cordelia.
“The Transit Occupancy Department and finance department had failed to collect for five years. What happened here? If that department did not collect for five years, somebody dropped the ball… there’s something, a missing piece.”Quality Inn Hotel Operator
He continued, “Our position here is it’s going to devastate us. We’re starting from scratch. The economy is not as strong as it used to be.”
The city acknowledged the new operators have collected and paid all TOT taxes due since they took ownership of the business.
What the City of Fairfield Says…
Attorney Christopher Dykzeul of Richards Watson Gershon (contracted law firm) represented the City of Fairfield and provided the city’s stance which included:
“Chapter 18 of the city’s municipal code requires purchasers of the hotel to withhold and remit to the city any outstanding tax liabilities attached to that hotel. So if a prior operator is selling a hotel and that hotel has delinquent TOT taxes, the purchaser must withhold from the purchase price, sufficient amount of money to cover that deficiency and remit it to the city.”Christopher Dykzeul
In speaking to Mr. Weiser’s technical arguments regarding ambiguity of the code, Dykzeul added, “There’s nothing ambiguous about our code. This was a sale. It was a purchase and the amount of the tax should have been withheld and remitted to the city and it wasn’t.
After several questions, the council unanimously voted to sustain the decision by the Tax Administrator and require the hotel to pay the back taxes. A subsequent discussion on allowing for negotiation of reduced fees occurred.
What Do You Think?
If you watched the council meeting, you couldn’t help but wain from supporting one side to the other. On one hand, the city made a straight-forward argument that the rules are clear and the hotel operator knew exactly what was owed when he made the purchase.
On the other hand, the hotel operator presented an eloquent appeal that he is a local businessman trying to improve the quality of hotels in Fairfield.