Tax Type
Retail Sales and Use Tax
Description
Hotel and motel accommodations furnished to federal employees
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
05-07-1987
May 7, 1987
Re: Request for Ruling/Sales and Use Tax
Dear ********************
This will refer to your letter of March 30, 1987 to the Attorney General, in which you question the applicability of the Virginia sales tax to hotel and motel accommodations furnished to federal employees. The Attorney General's office has requested that I respond to your letter.
Pursuant to §58.1-608.18 of the Code of Virginia, tangible personal property for use or consumption by the federal government is exempted from the sales and use tax. Furthermore, on constitutional grounds Virginia may not levy a sales tax directly on the United States. As such, any purchase of tangible personal property or rental of a hotel roam that is paid for directly by the United States will be exempt from the sales tax. In this instance, however, payment for the rooms is made by employees of the federal government.
Virginia Regulation 630-10-45 (copy enclosed) addresses 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:
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- 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 travelling pursuant to official government orders.
I would note that this has been the consistent policy of the department since the inception of the sales tax in 1966. This is evidenced by the enclosed 1969 letter of former State Tax Commissioner C. H. Morrissett. The application of the tax to room rentals by the federal government and its employees is addressed on page 3 of Commissioner Morrissett's letter. In addition, the letter addresses in detail the rationale behind the department's policy. Quite simply, a room rental by a federal employee is not a rental directly by the federal government.
As you will note in the final paragraph of the enclosed 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 is still valid today, thus the hotel in which you stayed properly charged you the sales tax. Problems may be avoided in the future, however, by having the hotel or motel bill your agency directly or by paying your hotel or motel bill with a federal credit card or check.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner