Tax Type
Retail Sales and Use Tax
Description
Hotel rentals by federal employees
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
03-27-1987
March 27, 1987
Re:
Dear
This will refer to the February 11, 1987 letter of *********** a copy of which you provided to me for review. In his letter, ********** discussed the applicability of the sales tax to hotel rooms rented to employees of federal reserve banks.
Pursuant to federal law at 12 U.S.C. § 531, federal reserve banks are exempted from federal, state, and local taxation, except for taxes on real estate. As such, any purchase of tangible personal property or rental of a hotel room that is paid for directly by a federal reserve bank will be exempt from the sales tax. In this instance, however, payment for the rooms is made by employees of the federal reserve banks.
While the department's regulations do not specifically address federal reserve banks, Virginia Regulation 630-10-45 (copy enclosed) describes in detail how the tax applies to rentals of hotel rooms by the federal government and federal employees. This regulation specifically requires that the transaction must be pursuant to an official government purchase order or must be paid for out of public funds in order to be exempt:
-
- if a federal employee is traveling on government business and payment for meals and lodging is made directly by the federal government pursuant to a purchase order (e.g., by direct billing to the government or use of government credit card), no tax will apply. However, if the employee pays for the meals and lodgings with personal funds and will be reimbursed by the government or utilizes a travel advance, no exemption is available even though the employee may be traveling pursuant to official government orders.
- if a federal employee is traveling on government business and payment for meals and lodging is made directly by the federal government pursuant to a purchase order (e.g., by direct billing to the government or use of government credit card), no tax will apply. However, if the employee pays for the meals and lodgings with personal funds and will be reimbursed by the government or utilizes a travel advance, no exemption is available even though the employee may be traveling pursuant to official government orders.
As you will note in the final paragraph of the letter, Commissioner Morrissett advised that "a clear-cut rule that can easily be applied is... No sales tax exemption certificate offered a hotel or motel by an individual who is an employee of government at any level, and who receives accommodations or meals at the hotel or motel, is or has been relevant, valid or acceptable."
Commissioner Morrissett's advice to hotel operators is still valid today and will eliminate the need for hotel operators to verify the exemption certificates provided by guests who are employed by a federal reserve bank or a governmental entity. As for federal reserve banks, they may easily structure the transactions to insure that the tax is not due, by having the hotel bill the bank directly or by providing their employees with a bank credit card or check to make payment to the hotel.
If you have any questions or concerns after reviewing this information, please do not hesitate to contact the department. In addition, if ************** does not concur with the position taken by the department, his client may submit to me an appeal with respect to any tax that may be assessed.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner