Current through Register Vol. 48, No. 38, September 20, 2024
a) Nature and Rate of Tax
1) The Hotel Operators' Occupation Tax Act
imposes a tax upon persons engaged in the business of renting, leasing or
letting rooms in a hotel at the rate of 5% of 94% of the gross rental receipts
from the renting, leasing or letting, excluding, however, from the gross rental
receipts, the proceeds of the renting, leasing or letting to permanent
residents of that hotel (i.e., from persons who occupy or have the right to
occupy such rooms for at least 30 consecutive days).
2) There is also imposed an additional tax
upon persons engaged in the business of renting, leasing or letting rooms in a
hotel at the rate of 1% of 94% of the gross rental receipts from the renting,
leasing or letting, excluding, however, from gross rental receipts, the
proceeds of the renting, leasing or letting to permanent residents of that
hotel.
3) A hotel is any kind of
building in which the public may, for a consideration, obtain living quarters
or sleeping or housekeeping accommodations (e.g., hunting lodges, camps,
cabins, and third-party platform rentals of apartments, houses and rooms). (For
a more complete definition of "hotel", see Section
480.105.)
4) The exclusion for permanent residents
means that the tax is imposed on the business of renting rooms for use as
living quarters, or for sleeping or housekeeping accommodations, when renting
is done on a transient basis.
5)
The tax is an occupation tax whose legal incidence is on the lessor of the
rooms. Nevertheless, persons subject to the tax imposed by the Hotel Operators'
Occupation Tax Act may reimburse themselves for their tax liability under the
Act by separately stating the tax as an additional charge that may be stated in
combination, in a single amount, with any locally imposed hotel operators'
occupation tax.
6) Any amount added
to a taxable rental charge and collected because of the tax also represents a
portion of the gross rental receipts that are subject to the tax. However, the
tax rate, instead of being a flat 6% of total receipts, has been adjusted by
the General Assembly to be 5% of 94% plus 1% of 94% of total receipts, in order
to avoid the payment of tax on amounts added to rental charges because of the
tax.
7) Persons who engage in the
business of renting, leasing or letting of rooms that are not subject to tax
under the Hotel Operators' Occupation Tax Act (e.g., the rentals are only to
permanent residents or the rentals are exempt as provided in subsection (b)(8))
are not required to register and remit the tax imposed by the Hotel Operators'
Occupation Tax Act.
b)
Scope of the Tax - Examples of Taxability and Exemption
1) Since the Hotel Operators' Occupation Tax
is imposed on receipts from renting rooms for living quarters, or for sleeping
or housekeeping accommodations, the tax does not apply to the receipts from the
renting of rooms for other purposes, such as for use as display rooms or sample
rooms, as meeting rooms, as offices or as private dining rooms.
2) Since the tax is limited to the renting of
rooms to the "public", a private club that restricts its renting of rooms to
its members and their guests would not be liable for the tax on its rental
receipts from those rooms.
3) The
business of renting rooms to the public for use as living quarters, or for
sleeping or housekeeping accommodations, is subject to the tax even if the
person paying for the room may be a church (except as provided in subsection
(b)(8)), charity or school or some other kind of nonprofit organization, and
even if the person paying for the room may be a governmental agency or
instrumentality (federal, State or local, or even a foreign
government).
4) There is no
exemption simply because the lessor of the rooms is a nonprofit organization,
such as a church (except as provided in subsection (b)(8)), charity or school.
However, a college or other school is not subject to the tax on its receipts
from renting rooms to its students for use as living quarters or for sleeping
or housekeeping accommodations because this is not the renting of the rooms to
the "public". Nevertheless, if the school rents rooms for these purposes to
persons who are not enrolled with the school in courses of study for credit,
that renting is not being done to students, but is being done to the "public",
and the school incurs Hotel Operators' Occupation Tax liability on its rental
receipts from this activity, if the lessees do not qualify as permanent
residents.
5) Likewise, the renting
of rooms on a transient basis to the public for use as living quarters or
sleeping or housekeeping accommodations when the lessor is a charitable
organization, such as the Y.M.C.A. or the Y.W.C.A., is subject to the Hotel
Operators' Occupation Tax.
6) If an
operator should make a separate and specific charge for the use of bedding or
other facilities furnished in connection with the use of a room as living
quarters or for sleeping or housekeeping accommodations, the operator's
additional receipts from this source are subject to the Hotel Operators'
Occupation Tax. However, that tax does not apply to the operator's receipts
from selling food, beverages or other tangible personal property, nor to
receipts from the selling of tickets to theatre performances or other similar
activities, nor to other receipts that are not in any way reasonably connected
with or attributable to the renting, leasing or letting of rooms for use as
living quarters or for sleeping or housekeeping accommodations; provided that
exemption for nontaxable receipts cannot be claimed unless supported by proper
books and records as provided for in Section 4 of the Hotel Operators'
Occupation Tax Act and in Section
480.115.
7) The Hotel Operators' Occupation Tax is not
imposed upon gross rental receipts for which the hotel operator is prohibited
from obtaining reimbursement for the tax from the customer by reason of a
federal treaty (Section 3 of the Act). Under the Vienna Convention, some
foreign diplomats are not required to pay reimbursement charges that are
similar in nature to taxes.
A) The exemption
for rentals to certain diplomatic personnel applies only to diplomatic
personnel possessing certain types of diplomatic tax exemption cards issued by
the U.S. Department of State, Office of Foreign Missions. There are 2 types of
diplomatic tax exemption cards: personal tax exemption cards and mission tax
exemption cards. For each of these categories, 2 types of color-coded cards are
issued: a blue-striped card that allows an individual or mission to make
purchases exempt from all sales and use taxes and taxes on hotel rooms and a
striped card of one of several other colors (yellow, green, red, or red-green)
that allows an individual or mission to make tax-exempt purchases in all
purchase categories except for the restricted purchase categories printed on
the colored stripe. In June 2011, the Office of Foreign Missions began issuing
newly designed diplomatic tax exemption cards. In addition, the American
Institute in Taiwan/Washington issues Mission Tax Exemption Cards and Personal
Tax Exemption Cards to officials of the Taipei Economic and Cultural
Representative Office. For examples of these cards, see 86 Ill. Adm. Code
130.Illustration A.
B) In
documenting this exemption, a hotel operator must obtain the mission's name,
the card holder's name, the exemption number, the expiration date, and a
photocopy of the diplomatic card.
8) Exemption from Hotel Operators' Occupation
Tax
A)
Effective July 1, 2017, the
Hotel Operators' Occupation Tax is not imposed upon gross rental receipts
received by an entity that is organized and operated exclusively for religious
purposes and possesses an active Exemption Identification Number (ExIN) issued
by the Department pursuant to the Retailers' Occupation Tax Act when acting as
a hotel operator renting, leasing, or letting rooms:
i)
in furtherance of the purposes for
which it is organized; or
ii)
to entities that:
* are organized and operated exclusively for religious
purposes;
* possess an active ExIN issued by the Department
pursuant to the Retailers' Occupation Tax Act; and
* rent the rooms in furtherance of the purposes for
which they are organized.
B)
No gross rental receipts are
exempt under subsection (b)(8)(A) unless the hotel operator obtains the active
ExIN from the exclusively religious entity to whom it is renting and maintains
that number in its books and records.
C)
Gross rental receipts from all
rentals other than those described in subsection (b)(8)(A) are subject to the
tax imposed by the Hotel Operators' Occupation Tax Act, unless otherwise exempt
under that Act. [35 ILCS
145/3 (d-5)]
EXAMPLE 1: A religious organization is organized and operated
exclusively for religious purposes and has an active ExIN. It operates a
retreat center and organizes and conducts a 3-day marriage counseling seminar
and rents rooms to the participants of the seminar. The seminar is in
furtherance of its organizational purposes. The receipts from these rentals are
not subject to the Hotel Operators' Occupation Tax under subsection
(b)(8)(A).
EXAMPLE 2: Religious Organization A is organized and operated
exclusively for religious purposes and has an active ExIN. It operates a
retreat center and rents a block of rooms to Religious Organization B.
Religious Organization B is organized and operated exclusively for religious
purposes, possesses an active ExIN, and provides rooms to the participants of a
spiritual seminar it has organized and will conduct. The seminar furthers the
organizational purposes of Organization B. Organization A's receipts from these
rentals are not subject to the Hotel Operators' Occupation Tax under subsection
(b)(8)(A). In this Example, if the rooms are paid for by the individual
participants and not by Organization B, Organization A must keep records
demonstrating that the individual to whom the room was rented was a participant
in the seminar conducted by Organization B. If Organization A does not keep
these records, the receipts from those rentals are taxable.
EXAMPLE 3: Religious Organization A is organized and operated
exclusively for religious purposes and has an active ExIN. It operates a
retreat center. Religious Organization A's organizational documents demonstrate
it is organized, in part, to partner with school districts to provide
one-on-one support to students to help them overcome the educational and
societal challenges they face both in and out of school. Organization B is a
not-for-profit organization that provides funds and support to school districts
that serve at-risk students. Religious Organization A rents a block of rooms to
Organization B for participants attending a seminar conducted by Organization B
for educators of at-risk youth. Because the seminar conducted by Organization B
is in furtherance of Organization A's organizational purposes, the receipts
from the rental to Organization B are not subject to the Hotel Operators'
Occupation Tax under subsection (b)(8). In this Example, Religious Organization
A must keep records demonstrating that the seminar was in furtherance of its
organizational purposes (e.g., a copy of its charter, mission statement, and by
laws, as well as any brochures or agendas pertaining to the seminar). In
addition, if the rooms are paid for by the individual participants and not by
Organization B, Religious Organization A must keep records demonstrating that
the individual was a participant in the seminar conducted by Organization B
(e.g., a copy of the seminar's sign-in sheet).
EXAMPLE 4: A religious organization operates a retreat center,
is organized and operated exclusively for religious purposes, and has an active
ExIN. It rents a block of rooms to persons attending a wedding reception at the
center or rents a block of rooms to a not-for-profit organization that conducts
a sports-medicine seminar. The receipts from either of these rentals do not
qualify for the exemption in subsection (b)(8)(A) because the rentals are
neither made in furtherance of the organizational purposes of the religious
organization operating the retreat center, nor made to a religious organization
organized and operated exclusively for religious purposes that has an active
ExIN.
D) Records
i) When a religious organization that has an
active ExIN operates a retreat center, conducts an event in furtherance of its
organizational purposes, and rents rooms to persons attending that event, the
religious organization must obtain and maintain the following: documents
demonstrating the nature of the event (e.g., brochures, pamphlets, or agendas
of the event); documents demonstrating how the rental of the rooms was in
furtherance of its organizational purposes (e.g., a copy of the religious
organization's mission statement or charter); and the dates of the room
rentals.
ii) When a religious
organization that has an active ExIN operates a retreat center and rents rooms
to an entity organized and operated exclusively for religious purposes with an
active ExIN that conducts an event in furtherance of its organizational
purposes, the religious organization operating the retreat center must obtain
and maintain the following: the name, address, and phone number or email of the
renting religious organization conducting the event; the renting religious
organization's active ExIN; documents demonstrating the nature of the event
(e.g., brochures, pamphlets, or agendas of the event); a certification that the
room rentals were in furtherance of the organizational purposes of the renting
religious organization; the dates of the room rentals; and any contracts
between the retreat center and the religious organization that rented the
rooms.
iii) When a religious
organization that has an active ExIN operates a retreat center and is not
conducting an event at the center but rents to another organization that
conducts an event that furthers the organizational purposes of the retreat
center's religious organization, the religious organization operating the
retreat center must obtain and maintain the following: the name, address, and
phone number or email of the renting organization conducting the event;
documents demonstrating the nature of the event (e.g., brochures, pamphlets, or
agendas); a certification by the religious organization operating the retreat
center that the room rentals by the renting organization were in furtherance of
the retreat center's organizational purposes, and documents demonstrating how
the rental of the rooms was in furtherance of the retreat center's
organizational purposes (e.g., the retreat center's mission statement or
charter); the dates of the room rentals; and any contracts between the
religious organization operating the retreat center and the renting
organization conducting the event.
c) How to Compute Applicable Tax Rate or
Effective Date of New Tax
1) For the purposes
of the Hotel Operators' Occupation Tax Act, any tax liability incurred in
respect to the renting, leasing or letting of rooms in a hotel shall be
computed by applying, to the gross receipts from the renting, leasing or
letting, the tax rate in effect as of the date the lessee occupies a specific
room or rooms or becomes irrevocably liable to pay rent for the right to occupy
a specific room or rooms. Deposits paid in advance shall be deemed to be
received as rental receipts when the specific room or rooms to which the
deposit is applied as rent shall be deemed to be rented, leased or let within
the meaning of the preceding sentence.
2) Likewise, when something that has been
exempted becomes taxable as to room renting, leasing or letting that occurs on
or after some particular date, the date of renting, leasing or letting for this
purpose shall be deemed to be the date when the lessee occupies a specific room
or rooms or becomes irrevocably liable to pay rent for the right to occupy a
specific room or rooms.
