Tax Type
Retail Sales and Use Tax
Description
Resales; Provision of services to a hotel
Topic
Taxability of Persons and Transactions
Date Issued
11-08-1995
November 8. 1995
Re: Request for Ruling: Retail Sales and Use Tax
Dear*****************:
This is in response to your letter regarding the application of the tax to audio visual equipment provided to hotels. I understand that you have discussed this issue at some length with my Office of Tax Policy staff.
FACTS
********** (the Taxpayer) provides A/V equipment to hotels and to hotel guests, primarily in connection with meetings and conferences. This activity may be transacted in a number of ways. For example, in some cases the Taxpayer may contract directly with hotel guests to provide A/V equipment and related services (e.g., set-up and operation of the equipment) as needed. In such instances, the Taxpayer issues a bill directly to the guest and collects and remits the tax on the transaction.
Alternatively, the Taxpayer may contract with the hotel for A/V equipment which the guest has requested. In these instances the Taxpayer bills the hotel for providing the A/V equipment and takes from the hotel a resale exemption certificate, Form ST-10. Subsequently, the hotel bills the guest for A/V equipment (along with charges for rooms, meals, etc.). You indicate that in this instance the hotel charges the tax on the total billing.
In regard to this second method of operation, I understand that one of your hotel customers was subject to a sales and use tax audit and was instructed not to provide an ST-10 to the Taxpayer when contracting for the provision of A/V equipment requested by hotel guests. Further, the Taxpayer was also contacted and instructed not to accept a resale exemption certificate from its hotel customers. In effect, the hotel was told that it must pay the tax on its rentals of A/V equipment from the Taxpayer and also charge the tax when billing its guests.
The Taxpayer questions these instructions and suggests that its contract with the hotel is an exempt sale for resale.
RULING
Code of Virginia § 58.1-603 imposes the tax on the "gross proceeds derived from the sale or charges for rooms, lodgings or accommodations furnished to transients...." § 58.1-602 defines "gross proceeds" to mean "the charges made or voluntary contributions received for the lease or rental of tangible personal property or for furnishing services...."
The department interprets these statutes through Virginia Regulation (VR) 63-10-48 which indicates that "the tax applies to the sale or charge for any rooms ... furnished to transients by any hotel..." The regulation further indicates that "any additional charges made in connection with the rental of a room ... are deemed to be part of the charge for the room and are subject to the tax." Accordingly, charges by a hotel for A/V equipment provided to guests are taxable. Further, these charges are taxable regardless of whether or not the hotel separately states them on the guest's bill.
In regard to a hotel's purchases, the regulation indicates that "purchases of furniture, linens, carpeting, drapes, and other tangible personal property by such businesses are taxable at the time of purchase." Hence, hotels may not purchase these items exempt of the tax for resale regardless that the total charge made to guests for accommodations is also taxable.
In this regard, Code of Virginia § 58.1-604 imposes the tax on tangible personal property used or consumed in Virginia, and hotels are the users and consumers of such items in providing accommodations to the public. Further, the courts have held that a hotel's purchase of televisions, beds and other furnishings are taxable (and not for resale) since charges paid by hotel guests are for lodging and accommodations and not for specific items which are in the room. Therefore, the tax paid by hotels for furnishings and the tax charged by hotels for accommodations do not constitute double taxation, but rather two taxes levied on separate and distinct transactions. See, for example, the enclosed Telerent Leasing Corporation v. High, 8 N.C. App. 179, 174 S. E.2d 11 (1970).
These types of furnishings, however, are distinguishable from the A/V equipment in the instant case in a number of ways: i) The rental of the A/V equipment is negotiated for, requested by and provided to the guest separately and apart from the rental of a conference or meeting room; ii) the price charged by the hotel for the accommodation will not depend on any A/V equipment provided to guests; and iii) the hotel makes a separate charge to the guest for providing A/V equipment and collects the tax on that charge.
Accordingly, and under these specific conditions, the Taxpayer's provision of A/V equipment to hotels for subsequent rental to guests is an exempt sale for resale, and the Taxpayer may continue accepting resale certificates of exemption from its hotel customers. However, any provision of A/V equipment for the hotel's own use (e.g., for marketing or training purposes) is taxable to the hotel, and the Taxpayer may not take an exemption certificate in such cases.
If you have any further questions regarding this issue, you may contact********* Tax Policy at****************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8195I
Rulings of the Tax Commissioner