What is the Digital Media Fee?
The Digital Media Fee is a charge of 10 percent imposed on the cost of the in-room rental or purchase of digital media services. The fee is imposed in addition to all other taxes and fees that may be imposed on charges for temporary lodging, including the Retail Sales and Use Tax.
Who is required to impose and collect the fee?
The fee must be imposed and collected by any business that provides lodging facilities and offers digital media to its guests for in-room rental or sale. Lodging facilities include hotels, motels, bed and breakfast establishments, inns, tourist camps, tourist cabins, clubs, townhouses, condominiums, apartments and similar businesses offering guest rooms for continuous occupancy for periods of fewer than 90 days.
My business doesn't offer in-room media services for a separate charge. Do I need to register?
No. If you are not liable to collect the Digital Media Fee, you do not need to register for a Digital Media Fee account.
How do I register for a Digital Media Fee account?
You may register online, or submit a completed Virginia Digital Media Fee Registration Form.
How often do I need to file Digital Media Fee returns and payments?
The returns and payments must be filed on a monthly basis. The return and payment for each month are due on or before the 20th day of the following month. The return and payment must be filed using Form DM-1, and cannot be combined with your Retail Sales and Use Tax filing.
What services are subject to the Digital Media Fee?
Services subject to the fee include any audio-visual work provided through the in-room television for a separate charge, such as motion pictures, television or audio programming, and games, regardless of whether the service is delivered via digital or analog format. Internet access, telephone service, and television programming provided for no extra charge, such as basic cable or premium channels, are NOT subject to the fee.
Are any of my guests exempt from paying the Digital Media Fee?
If a guest provides a properly executed exemption certificate that would exempt the guest from the Retail Sales and Use Tax on charges for temporary lodging, the exemption will also apply to the Digital Media Fee. The Retail Sales and Use Tax exemption provisions for federal government agencies with respect to charges for temporary lodging will apply to the Digital Media fee. The exemption does not apply to purchases or rentals made by state or local government agencies. In addition, because the Digital Media Fee is imposed on charges for services, exemptions extended for the purchase of tangible personal property do not apply to the digital media fee. Nonprofit organizations do not qualify for the exemption unless the organization holds a valid exemption certificate that specifies that it enjoys an exemption on taxable services.
Where can I get more information about the Digital Media Fee?
I have several sales and use tax accounts under the same Federal Employer Identification Number (FEIN), but I am not a consolidated filer. Will I have to file a separate Digital Media Fee return for each of these accounts?
No. You may register for a single Digital Media Fee under your FEIN, and report the taxes for all locations under that account. If you prefer to maintain separate accounts for each location, complete the Multiple Location Schedule in Section 2 on your registration form.
If I stay in a hotel for longer than 90 days, will I get a refund for the amount of Digital Media Fee that I may have to pay during the first 90 days?
Yes. Generally, the hotel will provide a credit on your final bill. Otherwise, you may request a refund from the hotel.
If a guest stays in our hotel longer than 90 days and we apply a credit to his bill for the Digital Media Fee paid during the first 90 days, how can we recover those funds from Virginia Tax?
For funds already collected and remitted, you may claim a credit by adjusting Line 2 of your return (Form DM-1) for the current month, or you may write to Virginia tax at P.O. Box 1115, Richmond, VA 23218-1115 to request a refund. If the fee has not yet been remitted to Virginia Tax, you may adjust your liability on for current month on Line 2 of Form DM-1.
In completing the Form DM-1, should the gross taxable sales reported on Line 1 include the Digital Media Fee collected?
No. The gross taxable sales amount is the cost price charged for the taxable digital media services provided to customers during the calendar month being reported on the return. The fee is accounted for later on the return.
Isn't the pay-per-view option offered at my hotel a service? How can a tax be imposed on a service?
Although many services are exempt from the Retail Sales Tax and similar fees, lodging services and associated charges are subject to a number of taxes and fees, including the Retail Sales Tax. The Digital Media Fee is imposed in addition to those charges effective July 1, 2009, because the law now defines the provision of digital media services for in-room sale or rental as a taxable service.
Why do the dealer's discount factors on Form DM-1 seem so high in comparison with the factors on the Retail Sales and Use Tax return (Form ST-9)?
The discount is actually higher on the Form ST-9 because the state Retail Sales and Use Tax dealer discount is on the first three percent of the four percent tax, or 75%, whereas the Digital Media Fee dealer discount is on the first three percent of a ten percent fee, or 30%. Therefore, the dealer's discount on the Retail Sales and Use Tax is taken on a bigger percentage of the tax.
The more technical answer on how the discount rates are calculated is that because the dealer's discount is only on the first three percent, the Taxpayer would take the total Digital Media Fee due and multiply by 30 percent (.30), because the discount is on the first three percent of the ten percent Fee, and then multiply by either a 4% (.04), 3% (.03), or 2% (.02) to get the amount of the discount. So the Taxpayer can calculate the dealer's discount in one step, the discount rates are used. The discount rates are just the thirty percent (.30) multiplied by 4% (.012), 3% (.009), and 2% (.006). The discount rates for the Retail Sales and Use Tax are calculated the same way, but using seventy-five percent (.75) is used instead of thirty percent, because the state Retail Sales and Use Tax is only four percent.
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