Tax Type
Retail Sales and Use Tax
Description
Hotels point redemption program is analogous to a retailer's coupon
Topic
Collection of Tax
Computation of Tax
Property Subject to Tax
Date Issued
08-24-2004
August 24, 2004
Re: Request for Ruling: Retail Sales and Use Tax
Dear ********:
This is in response to your letter submitted on behalf of your client (the "Taxpayer") concerning the applicability of the retail sales and use tax to specific transactions. I apologize for the delay in this response.
FACTS
The Taxpayer owns and operates hotels nationwide, with a number of hotels located in Virginia. The Taxpayer has a point redemption program designed to reward clients who frequently stay at its hotels. The points can be redeemed for complimentary accommodations, a discounted room, or a free room upgrade. You state that the points have no dollar value, and the recipient cannot resell the points on the open market. The points cannot be exchanged at one of the Taxpayer's hotels for money.
RULING
Virginia Code § 58.1-602 provides that the terms "retail sale" and "sale at retail" shall specifically include "the sale or charges for any room or rooms, lodgings, or accommodations furnished to transients for less than ninety continuous days by any hotel, motel, inn, tourist camp, tourist cabin, camping grounds, club, or any other place in which rooms, lodging, space, or accommodations are regularly furnished to transients for a consideration . . . ."
Virginia Code § 58.1-602 defines "sales price" as the total amount for which tangible personal property or services are sold, including any amount for which credit is given to the consumer by the dealer, without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever.
In this instance, the Taxpayer's point redemption program is analogous to a retailer's coupon as addressed in Title 23 of the Virginia Administrative Code (VAC) 10-210-430. As with a retailer's coupon, the value of the reward points are not included in the sales price of the Taxpayer's accommodations.
Complimentary Accommodations: In this transaction, the reward point participant redeems reward points for a complimentary room at the Taxpayer's hotel. Because there is no charge for the room, the Taxpayer is not required to charge or collect any sales tax on this "complimentary room" transaction.
Discounted Room: In this instance, the reward point participant redeems reward points for a 50% reduction in the charge for the room. Accordingly, the Taxpayer would charge and collect sales tax only on the portion of the room charge that was not subject to the 50% discount.
Free Room Upgrade: In this instance, the reward point participant redeems reward points for a free room upgrade. The Taxpayer would charge and collect sales tax only on the actual amount charged to the reward point participant for the room.
Further, for each of the three reward point transactions, the Taxpayer is required to charge and collect the tax on any charges made in connection with the accommodations. See 23 VAC 10-210-730(C).
The Code of Virginia sections and regulations cited, along with other reference documents, are available on-line in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us. If you have any questions about this ruling, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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Tax Commissioner
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AR/45864P
Rulings of the Tax Commissioner