Judge: CoxHealth must pay city hotel tax

In April 2007, CoxHealth received a letter from the Missouri Department of Revenue stating that overnight stays in the on-premises lodging facility were not subject to state sales tax. Consequently, the not-for-profit hospital challenged the city’s assertion that Cox Plaza must pay a 5 percent gross receipts tax levied on Springfield’s hotels and motels licensed to do business in the city.

Built in 1991, Cox Plaza consists of 30 rooms housed on the second floor of the hospital’s Wheeler Heart Vascular Center on South National Avenue. The hospital charges guests, which include patients’ friends and family members as well as job candidates, up to $48 a night.

At an administrative hearing before Municipal Judge Todd Thornhill in December, Assistant City Attorney Jan Millington argued that Cox Plaza operates as a hotel and should be subject to the tax. In an order issued July 1, Thornhill sided with the city.

Millington drew a distinction between Cox Plaza and a lodging facility at St. John’s Hospital that provides standard patient rooms for family members of patients. Conversely, rooms at Cox Plaza have special linens, full bathrooms and are cleaned by a dedicated housekeeping staff, she said.

The city also presented evidence that CoxHealth had Cox Plaza as a hotel on its business license applications and marketed itself as such in brochures available at the Springfield-Branson National Airport and in Springfield Convention & Visitor Bureau offices as recently as late last year.

“They are definitely a hotel,” Millington said. “They are slide-key rooms for privacy. They have maid service each day. They have coffee pots in their rooms.”

Springfield attorney Bryan Wade, who represented CoxHealth in the administrative law hearing last year, questioned the city’s taxation practices.

“The tourism tax – in our opinion – is like a sales tax,” said Wade, with Husch Blackwell Sanders LLP. “The Missouri Department of Revenue exempts Cox from those transactions. … The argument the city raised was the rooms at Cox are a lot nicer.”

Wade also noted that Cox Plaza is different from other hotels and motels in that it’s not open to the public, although Thornhill questioned in his ruling whether CoxHealth had prohibited people with no connection to the hospital from renting rooms there.

CoxHealth begrudgingly paid the gross receipts tax 1991–mid-2007, generating some $270,500 in revenue for the city. Since November, the hospital has paid the tax “under protest,” allowing disputed dollars to be paid into an escrow account. On average, the hospital pays $15,900 annually to the city under the tax. In 2006, the tax payment was about $19,000, Millington said.

Wade said CoxHealth’s position hasn’t changed: The hospital still believes the city is applying the tax in a discriminatory fashion and wants its back taxes refunded. To that end, Wade has appealed Thornhill’s decision to the Greene County Circuit Court, and he’s looking forward to arguing the case before Judge Dan Conklin.

“It’s going to be about the applicability of the tourism tax to these room night stays and whether it’s fair for the city of Springfield to tax a not-for-profit organization that is not taxed by the state or federal government and is treated differently from the other hospital down the road,” he said.

The city, however, has a new bit of ammunition in the form of Thornhill’s decision. Millington maintained that the hospital’s arguments just don’t hold up, especially the one equating a state sales tax exemption to the city’s gross receipts tax.

Millington’s boss, City Attorney Dan Wichmer, dismissed the notion that the city had singled out CoxHealth in a quest for more revenue during an ongoing budget crunch. He said the hospital stirred the pot by formally challenging the tax.

“They came to us and protested,” Wichmer said. [[In-content Ad]]