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Sales and Use Tax Issues Specific to Hotel Occupancy

Les Rosenbaum 08.01.2015 | Berdon Resources

Imposition and Definitions

The tax law imposes the New York State and local sales tax on the rent for every occupancy of a room or rooms in a hotel, motel, or similar establishment at the combined state and local rate in effect at the location of the establishment unless:

1.    The occupancy is by a permanent resident,

2.    The premises are occupied solely as a place of assembly, or

3.    The occupancy charge is two dollars or less per day.

The following definitions apply to the applicable Sales Tax Law and Regulations:                                                                         

  • Hotel:  A building all or any portion of which is regularly used and kept open for the lodging of guests. The term includes apartment hotels, motels, boarding houses, and clubs, whether or not meals are served.
  • Occupancy: The right to use or possess a room in a hotel.
  • Occupant: A person who, for consideration, uses, possesses, or has the right to use or possess any room in a hotel under any lease, concession, permit, right of access, license to use, or other agreement.
  • Permanent Resident: Any occupant of any room or rooms in a hotel for at least ninety (90) consecutive days is a permanent resident.  However, for New York City local sales tax purposes, an occupant qualifies as a permanent resident upon one hundred eighty (180) consecutive days of occupancy.  Within New York City, the first 90 days of occupancy are taxed at the 8.875% combined state and local tax rate while the 91st through 180th days are taxed at the 4.50% local rate only.  Upon 180 days of continuous occupancy in New York City, no sales tax applies.
  • Place Of Assembly: A room or suite or rooms used by a group for meetings, recreation, education, business or religious purposes.  It must not contain sleeping accommodations, or be used as sleeping or living quarters. A suite or rooms is not a place of assembly if any room has sleeping accommodations, even though some of the rooms may be used for meetings, since the occupant has the right to use all the rooms.
  • Room: Any part of a hotel that is available or let out for any purpose other than as a place of assembly.  This includes dormitory-type sleeping facilities such as those furnished at ski lodges, dude ranches, and similar establishments.

Exempt Occupancy

Sales tax should be charged on all taxable occupancies, unless a properly completed (i.e., entries in all appropriate blanks) New York State exemption document is presented to the operator of the hotel/motel not later than 90 days after the last day of the first period of occupancy.

Exemption documents may be accepted from the following organizations or individuals:

  1. Employees of New York State or any of its political subdivisions, and employees of the United States government when they are on official business.  (Other states’ exemption forms are not acceptable.)
  2. The United Nations and any international organizations of which the United States is a member.
  3. Certain religious, charitable or educational organizations, organizations of past or present members of the armed forces of the United States, certain Indian nations or tribes, health maintenance organizations, and rural electric cooperatives, which have received exempt organization certificates from the New York State Department of Taxation and Finance.
  4. Diplomatic missions or personnel who hold a Tax Exemption Card or Mission Tax Exemption Card authorized by the United States Department of State.
  5. Qualified members of Indian nations or tribes.

Questions

  1. How does an employee of New York State or its municipalities, instrumentalities or agencies on official business establish tax exemption with a hotel operator? The agency must issue a governmental purchase order or other appropriate documentation, which the operator should attach to the file copy of the invoice.
  2. How do federal employees on official business establish exemption from sales tax on hotel occupancy? Federal employees must give the hotel operator a governmental purchase order or other appropriate documentation.
  3. How do diplomatic missions or personnel of foreign governments establish proof of exemption? They must present a valid Tax Exemption Card or Mission Tax Exemption Card authorized by the United State Department of State and a properly completed Certificate of Sales Tax Exemption for Diplomatic Missions and Personnel (Form number DTF-950 or DTF-951.)
  4. When a tax exempt organization, such as a church, rents rooms for its own use or for occupancy by its officers and employees in the conduct of organizational activities, how does the organization prove its exempt status? The organization must furnish the hotel with an Exempt Organization Certification (Form ST-119.1).
  5. If the organization reserves rooms for its members who are charged separately for the occupancy by the hotel, may each occupant submit a Form ST-119.1 to receive tax exemption? No. Being a member of an exempt organization does not entitle the individual to the organization’s exempt status. Therefore, the hotel must collect the appropriate tax.
  6. A tax-exempt organization rents rooms from a hotel which it in turn resells to its members.  Is the hotel required to collect sales tax?  Is the organization required to collect sales tax? If the tax-exempt organization submits a Form ST-119.1 to the hotel operator, no tax is due on the hotel’s charge to the organization. The tax exempt organization does not have to collect tax on the charge makes to its members because it is not the operator of the hotel.

Questions?  Contact Les Rosenbaum, Principal, Berdon State & Local Tax Group at 212.699.6703 | lrosenbaum@berdonllp.com                                                                                                                                                            

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