Tax Type
Retail Sales and Use Tax
Description
Hotel; Toiletries and amenities; Equipment for hotel guests
Topic
Exemptions
Property Subject to Tax
Date Issued
12-16-1998
December 16, 1998
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****
This is in response to your letter in which you seek correction of a sales and use tax assessment issued to ***** (the "Taxpayer') for the period October 1992 through May 1996. I note that the assessment of uncontested issues has been paid.
FACTS
The Taxpayer is a full service resort comprised of guest rooms, meeting/function rooms, a health club, golf course, and several restaurants. The Taxpayer is open to the public and provides services and accommodations to individuals and groups.
The Taxpayer contests the assessment associated with two groups of transactions. The first issue is the rental of equipment and other tangible personal property rented by the Taxpayer from vendors and subsequently provided to guests. The second issue is the application of the tax to purchases of toiletries and other amenities for use in guest rooms.
Each of these transactions will be addressed separately below.
DETERMINATION
Equipment Rentals
The Taxpayer occasionally receives requests from guests to provide certain equipment and other items. This includes computer and business equipment, pool table and game tables, plants, a grand piano, and certain other items. The Taxpayer rents these items from outside vendors for the sole purpose of providing them to guests for an additional charge. You indicate that the charges made to guests for these items are separately stated and the tax is imposed on such charges. Pursuant to Public Document 95-287 (11/8/95), the Taxpayer maintains that these items may be rented from suppliers exempt of the tax for resale.
In Public Document 95-287, the department determined that a hotel could rent audio/visual equipment exempt for resale under certain conditions. In that case the hotel contracted with an A/V contractor for equipment that was then made available to hotel guests. The department determined that the hotel could use a resale exemption for the rental of equipment from the AN contractor provided that: (1) the rental of the equipment is negotiated for, requested by and provided to guests separately and apart from the rental of a room; (2) the price charged by the hotel for any accommodation does not depend on the equipment provided to guests; and (3) the hotel makes a separate charge to the guest for providing the equipment and collects the tax on that charge.
Provided that the same conditions are met, the resale exemption will also apply to the contested items in the instant case.
Toiletries and Amenities
The specific items in this case include soaps, sponges, lotions, shower caps, bath oils, and chocolates. These amenities are provided in guest rooms and the cost thereof is included in the room rate. The Taxpayer points out that such items, unlike furniture and linens, are consumable by the guest and generally do not remain for the next guest's use. Accordingly, you suggest that the consumable nature of these items, and the subsequent taxable charge for accommodations, makes their purchase exempt for resale.
P.D. 92-120 (6/29/92) indicates that purchases of amenities for use in guest rooms are taxable. There appears to be little reason to revise this policy. First, regardless that these items are usually consumed by guests, there is no separate charge on the guests' bill. Further, I understand that the price of the accommodation is not dependent on the guests' decision to use or not use these items. Accordingly, these items are provided as an integral part of the accommodations and as such are purchased for the Taxpayer's own use or consumption. These amenities may not be purchased exempt for resale.
Summary
The audit will be returned to the audit staff so that the assessment may be revised in accordance with this determination. A revised bill will be issued to the Taxpayer as soon as practicable. Because of the delay in my response, interest on the taxable amenities will accrue only through sixty days from the date of your appeal. No additional interest will accrue to the revised assessment provided payment is made within 30 days.
If you have any questions regarding this letter, please contact ***** in the department's Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12786I
Rulings of the Tax Commissioner