October 6, 2020
Re: Ruling Request: Retail Sales and Use Tax
This will respond to your letter in which you request a ruling on behalf of ***** (the “Taxpayer”) concerning the retail sales and use tax exemption for hotel rooms occupied for 90 continuous days or more. I apologize for the delay in responding to your request.
The Taxpayer requests a ruling explaining the proper calculation of the retail sales and use tax exemption for hotel rooms that are occupied for 90 continuous days. The Taxpayer also asks whether the exemption is valid when the stay is part of a package that includes the sale of a meal.
Virginia Code § 58.1-609.5 8 provides an exemption from the retail sales and use tax for:
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 of the Virginia Administrative Code (VAC) 10-210-730 interprets this statute. Subsection B of the regulation addresses the 90-day rule for the exemption and states:
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.
Public Document (P.D.) 10-251 (11/10/2010) addresses the proper calculation of the number of room rentals that qualify for the exemption in Virginia Code § 58.1-609.5 8. Each day is the start of a new 90-day period for purposes of calculating the least number of rooms rented during the period. P.D. 14-9 (1/27/2014) addresses the Department’s policy with respect to block rentals of hotel rooms on a continuous basis to businesses such as airlines. When a block of rooms is rented under rental contracts, the exemption applies to the least number of rooms rented on a given day during a continuous 90-day period.
The Taxpayer provides an example, listing dates from January 8, 2018 through May 31, 2018, along with a number of rooms rented, and asks the Department to explain the exemption calculation. In the Taxpayer’s example, the least number of rooms rented on any day is 5 rooms on February 3, 2018. Therefore, the guest in the example would be entitled to the exemption for 5 rooms for the 116 day period, from January 8, 2018 through May 3, 2018, or 580 room rentals. The next fewest number of rooms rented is 6 rooms on March 21, 2018. The guest would be entitled to the exemption for 6 rooms for the remaining 28 day period, from May 4, 2018 through May 31, 2018, or 168 room rentals. In total, the guest in the Taxpayer’s example is entitled to the exemption for 748 room rentals.
Accommodations and Meals Packages
Virginia Code § 58.1-602 includes in the definition of retail sale “… any room or rooms, lodgings, or accommodations furnished to transients for less than 90 continuous days by any hotel, motel, inn, camp, tourist cabin, camping grounds, club, or any other place in which rooms, lodging, space, or accommodations are regularly furnished to transients for consideration.” Similarly, as already discussed above, Virginia Code § 58.1-609.5 8 provides an exemption from the retail sales and use tax for accommodations supplied for a period of 90 continuous days or more. Therefore, once a room sale meets the 90-day threshold, it no longer falls under the definition of a retail sale and is not subject to the tax imposed by Virginia Code § 58.1-603 4. However, there is no such exemption or exception for the sale of meals.
Title 23 VAC 10-210-930 provides that “retail sales of meals by restaurants, hotels, motels, clubs, caterers, cafes and others are taxable.” Virginia Code § 58.1-602 defines “sales price” to mean the “total amount for which tangible personal property or services are sold…” The Department has previously ruled that packages offered by hotels, motels, inns, etc. that include a single charge for accommodations and other services or tangible personal property are subject to the tax on the total charge for the package. See P.D. 95-17 (2/2/1995), P.D. 02-77 (5/2/2002), P.D. 12-67 (5/2/2012), and P.D. 13-205 (11/7/2013). This is also similar to the tax treatment of packages offered in other industries where only part of a transaction is taxable. See P.D. 08-76 (6/6/2008), P.D. 08-90 (6/18/2008), P.D. 14-1 (1/3/2014), P.D. 14-41 (3/20/2014), and P.D. 19-41 (4/25/2019). As such, a tax exempt sale of rooms, lodgings, or accommodations that is “packaged” or lumped into a single charge with the taxable sale of meals is subject to tax on the total charge of the package. However, if the charges are separately stated, any charge for rooms, lodgings, or accommodations that meets or exceeds the 90-day threshold is not taxable.
I hope the above information responds to your inquiry. This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.
The Code of Virginia sections, regulations and public documents cited are available online at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's website. If you have any questions about this ruling, please contact ***** in the Department’s Office of Tax Policy, Appeals and Rulings Division, at *****.
Craig M. Burns