CHARLESTON, W.Va. —¬†The state Tax Department is awaiting a federal judge’s ruling on whether it may intervene in a court dispute over a Morgantown hotel to collect $675,000 in taxes that were paid by hotel guests but never passed along.

The Tax Department wants to intervene in a running dispute over Morgantown’s Hilton Garden Inn.

MORE: Read the state Tax Department’s motion to intervene.

The department has already intervened a separate but related case involving the Hilton Garden Inn in Clarksburg and the Hampton Inn in Elkins. At issue in that case is $720,000 in unremitted taxes.

Between the two cases, the state says it is owed a total of $1,395,000 in consumer sales taxes that were collected by the hotels that were owned by developer William Abruzzino and other investors.

The lawsuits against the hotel developers were initially filed by lenders from the U.S. National Bank Association who said the investors had defaulted on multi-million dollar loans.

Now the state Tax Department is taking aim at both the hotel developers and the lenders, saying the tax money was improperly commingled and never passed on even though the sales taxes were collected from hotel guests.

Lawyers for the state make the point that the consumer taxes are meant to be passed on and are never considered the property of the collector.

“Since 2015 until the appointment of the receiver, Defendant Mountain Blue Hotel Group LLC collected state consumer sales taxes from its customers but failed to remit them to the State as required by law,” the Tax Department wrote in a March filing by attorney Marc Weintraub.

“These taxes should have been held in trust by the Defendant and then paid to the State, as these funds were never the Defendant’s property to begin with.”

The filing by the state continued, “In this case, the State believes the Defendant converted approximately $675,000 in collected but unremitted trust taxes.

“And the State also has reason to believe the Plaintiff-creditor may have converted or may still be holding some or all of these trust funds either by or through an account or accounts under its exclusive control.”

A proposed complaint that was filed as part of the request to intervene alleges that both Mountain Blue and U.S. Bank unjustly enriched themselves at the expense of West Virginia taxpayers. If the motion to intervene is granted then the complaint would be filed.

Lawyers for U.S. Bank filed their opposition to the state’s motion to intervene.

U.S. Bank says the state’s complaint is unrelated to the lender’s own$15,470,000 breach of contract suit against Mountain Blue. It says it should be dismissed.

“The State should not be entitled to hijack Plaintiff’s breach of contract suit in order to sue the plaintiff,” wrote lawyers for U.S. Bank in a March 21 filing.

The hotel case is currently in the form of a civil suit in U.S. District Court for the Northern District of West Virginia. The Hilton Garden Inn is in receivership as part of those proceedings.

But the case has also bounced in and out of bankruptcy court.

Senator Joe Manchin and longtime aide Larry Puccio were listed as investors in Mountain Blue in the original lawsuit and and in the loan documents from 2013.

But the two were not listed as current investors in a document filed in bankruptcy court in October 2017.

It has never been made clear when Manchin and Puccio got out of the hotel investment.

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