Hotel Occupancy Taxes in NYC

If you operate a hotel, motel, or short-term rental in New York City, the tax stack on each room night is staggering. Here’s what your guests are actually paying on top of the room rate:

• New York State sales tax — 4%
• NYC sales tax — 4.5%
• MCTD surcharge — 0.375%
• NYC hotel room occupancy tax — 5.875%
• NYC $1.50 per unit per day fee — flat fee regardless of room rate

Add it up and you’re looking at roughly 14.75% plus $1.50 per night. On a $300 room, that’s about $46 in taxes. Every single night. You’re responsible for collecting all of it, reporting it on the correct forms, and remitting it on schedule. The city occupancy tax is filed on Form NYC-HTAX quarterly. Miss a filing and the penalties start at 5% per month.

Restaurant and Bar Tax Obligations

Prepared food in New York is subject to sales tax at 8.875% in the city. That applies to everything you serve — dine-in, takeout, delivery, catering. There’s no exemption for food sold at a restaurant, unlike grocery items which are tax-free.

The trickier issue is tip reporting. The IRS requires that tips totaling 8% or more of gross receipts be allocated among tipped employees. If your staff’s reported tips fall below that threshold, you’re required to allocate the difference using Form 8027. Failure to file means penalties, and it also draws attention to your payroll records.

Cash-heavy businesses get extra scrutiny. If your credit card tip percentage is 20% but your cash tip reporting is 8%, the IRS will notice that gap. We help you set up reporting systems that are accurate and defensible, so your staff reports correctly and you aren’t left holding the bag.

Payroll for Staff-Heavy Operations

A 50-room hotel might have 30 to 60 employees across housekeeping, front desk, maintenance, and management. A restaurant with two seatings a night could have 25 to 40 people on the payroll. That’s a lot of W-2s, a lot of withholding calculations, and a lot of room for error.

New York requires employers to provide paid family leave, disability insurance, and workers’ compensation coverage. The state’s wage theft prevention laws require annual written notices to each employee confirming their rate of pay, overtime rate, and pay frequency. Hospitality businesses are frequent targets for Department of Labor audits, especially around overtime calculations for tipped employees.

We handle payroll tax filings, tip credit calculations (the federal tip credit lets you pay tipped employees a lower cash wage, currently $2.13/hour federally, but New York’s tipped minimum is higher), and make sure your overtime is calculated correctly under both federal and state rules. New York doesn’t allow a tip credit against overtime — overtime must be paid at 1.5x the full minimum wage, not the tipped rate.

Depreciation and Capital Improvements

Hotel renovations and restaurant buildouts are expensive. A full hotel room refresh runs $15,000 to $40,000 per room. A restaurant buildout in Manhattan can hit $300 to $500 per square foot. The good news: most of these costs are depreciable, and many qualify for accelerated treatment.

Qualified improvement property (QIP) — improvements to the interior of a nonresidential building — qualifies for bonus depreciation. That means a $2 million lobby renovation can be deducted in the year it’s completed rather than spread over 15 years. Section 179 also applies to furniture, fixtures, and equipment (FF&E) like beds, tables, kitchen equipment, and POS systems.