Tax Type
Retail Sales and Use Tax
Description
Exemption for room rentals of more than ninety continuous days
Topic
Exemptions
Returns and Payments
Statute of Limitations
Taxable Transactions
Date Issued
01-27-2014
January 27, 2014
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This will reply to your letter in which you seek the correction of an assessment issued to ***** (the "Taxpayer") for the period August 2009 through January 2013. I apologize for the delay in this response.
FACTS
The Taxpayer operates a hotel that was audited by the Department. An assessment was made for sales tax on untaxed room charges. The Taxpayer did not file sales tax returns for part of the audit period, and sales tax that was collected but not remitted to the Department was assessed. The Taxpayer also claimed exempt sales on its sales tax returns for room charges billed under a continuous stay contract with a railroad. The Taxpayer maintains that the exempt sales were improperly disallowed in the audit. The Taxpayer agrees with the audit assessment made for the period August 2009 through July 2010.
DETERMINATION
Complete Appeal
Virginia Code § 58.1-1821 states, "Any person assessed with any tax administered by the Department of Taxation may, within ninety days from the date of the assessment, apply for relief to the Tax Commissioner." Title 23 of the Virginia Administrative Code (VAC) 10-20-165 interprets Va. Code § 58.1-1821 and sets out guidelines for the filing of administrative appeals. Subsection D 4 of this regulation states "An incomplete appeal or notice of intent to appeal does not satisfy or extend the 90-day limitation period."
Title 23 VAC 10-20-165 A defines a "complete appeal" as "an administrative appeal containing sufficient information, as prescribed in subsection D of this section, so that the grounds upon which the taxpayer relies in contesting an assessment are fully set forth to allow the Tax Commissioner to make an informed final determination." Subsection D provides a list of the information required for a complete appeal. The information needed includes alleged errors in the assessment, the grounds upon which the taxpayer relies and all facts relevant to the taxpayer's contention. In addition, taxpayers must provide the legal authority (statutes, regulations, rulings of the Tax Commissioner, court decisions, etc.) which is the basis for the taxpayer's position in the appeal.
Pursuant to Va. Code § 58.1-1821 and Title 23 VAC 10-20-165, the Taxpayer was required to file a complete administrative appeal no later than June 12, 2013. The Taxpayer's appeal letter was received June 11, 2013, which is within the required 90-day filing period. However, the appeal letter does not satisfy the requirement that a complete administrative appeal be filed with the Department within the 90-day period. The Taxpayer's appeal letter does not provide any documentation or authorities to support the grounds for protesting the assessment. Therefore, the Taxpayer's application for correction is barred by the statute of limitations.
Exempt Sales to Railroad
While the Taxpayer's appeal was not filed timely, I will address the issue of the exempt room charges that were billed to the railroad but disallowed in the audit. The Taxpayer claimed excessive exempt sales on its returns based on the erroneous application of the exemption for room rentals of more than ninety continuous days. Virginia Code § 58.1-609.5 8 provides an exemption from the retail sales and use tax for:
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- The sale or charges for any room or rooms, lodgings, or accommodations furnished to transients for more than 90 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.
Title 23 VAC 10-210-730 interprets this statute. Section B of the regulation addresses the ninety day rule for the exemption and states:
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- The tax does not apply, however, to rooms, lodgings or accommodations supplied to a guest for a period of 90 continuous days or more. After a transient has occupied a room or received other accommodations for 90 continuous days or more, the dealer furnishing the room or other accommodations may refund any sales tax actually collected from the person. In filing a subsequent return with the Department of Taxation, the dealer may deduct from gross sales in the place provided the amount of the charges for which the tax was refunded.
The Department's policy is longstanding with respect to contracts for block rentals of hotel and motel rooms on a continuous basis to businesses such as railroads and airlines. Public Document 10-251 (11/10/10) addresses the proper calculation of the number of room rentals that qualify for the exemption in Va. Code § 58.1-609.5 8. When a block of rooms are rented under such rental contracts, the exemption applies to the least number of rooms rented on a given day during a continuous ninety day period. Each day is the start of a new ninety continuous day period for purposes of calculating the least number of rooms rented during the period.
The auditor prepared a spreadsheet to calculate the number of exempt room rentals during the audit period. The room rental information used in the spreadsheet was provided by the Taxpayer. A review of the audit methodology to calculate the exempt room charges billed to the railroad appears to be sound and the assessment correct with respect to this issue.
Virginia Code § 58.1-205 1 further supports the Department's position and states that an assessment of tax by the Department is deemed prima facie correct. This means that the burden of proof is upon the Taxpayer to establish that the assessment is incorrect. As previously stated above, the Taxpayer has not presented documentation or a legal basis with its appeal letter to challenge any part of the audit assessment.
CONCLUSION
The audit assessment is now due and payable. The Taxpayer will be issued an updated bill with interest accrued to date. The bill should be paid within 30 days to avoid the accrual of additional interest.
The Code of Virginia sections, regulations and public document cited, along with other reference documents, are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's web site. If you have any questions concerning this response, please contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
Tax Commissioner
AR/1-5430973120.S
Rulings of the Tax Commissioner