Tax Type
Retail Sales and Use Tax
Description
Hotel cancellation fee is not subject to the retail sales and use tax
Topic
Clarification
Collection of Tax
Taxable Transactions
Date Issued
01-13-2010
January 13, 2010
Dear *****:
This is in response to your letter submitted on behalf of the ***** (the "Taxpayer") in which you request a ruling regarding the application of Virginia's retail sales and use tax to hotel cancellation fees.
FACTS
The Taxpayer rents individual hotel rooms and takes advance reservations. If the customer wishes to cancel the reservation, a fee is charged if the customer does not do so by a specified date and time. The fee is nominal and at no time after the cancellation is the customer charged the full price for the room.
DETERMINATION
Title 23 of the Virginia Administrative Code 10-210-730 states 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 sales tax. In this case, however, because the customer is never charged for the room and has no right to its possession, the cancellation fee cannot be considered an additional charge made in connection with the room rental. The cancellation fee is merely a penalty charge to the customer for failure to comply with an established deadline. In accordance with the above regulation, the hotel cancellation fee is not subject to the retail sales and use tax.
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 regulation cited above is available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any questions about this response, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AR/1-3816408669.M
Rulings of the Tax Commissioner