Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This rule explains the taxation of persons operating
hotels, motels, bed and breakfast facilities, and similar businesses that
provide lodging and related services to transient tenants.
(a)
References to related rules.
The department of revenue (department) has adopted other rules that may contain
additional relevant information:
(i) WAC
458-20-111
(Advances and reimbursements);
(ii)
WAC
458-20-118
(Sale or rental of real estate, license to use real estate);
(iii) WAC
458-20-159
(Consignees, bailees, factors, agents and auctioneers);
(iv) WAC
458-20-165
(Laundry, dry cleaning, linen and uniform supply, and self-service and
coin-operated laundry services);
(v) WAC
458-20-167
(Educational institutions, school districts, student organizations, and private
schools);
(vi) WAC
458-20-168
(Hospitals, nursing homes, assisted living facilities, adult family homes and
similar health care facilities);
(vii) WAC
458-20-187
(Coin operated vending machines, amusement devices and service machines);
and
(viii) WAC
458-20-245
(Taxation of competitive telephone service, telecommunications service, and
ancillary service).
(b)
Examples. This rule includes examples that identify a set of facts
and then state a conclusion. The examples are only a general guide. The
department will evaluate each case on its particular facts and circumstances
and apply both this rule and other statutory and common law
authority.
(2) This rule
explains the business and occupation (B&O) tax, retail sales tax, special
hotel/motel tax, the convention and trade center tax, the tourism promotion
area charge, and the taxation of emergency housing furnished to homeless
people.
(a) This rule applies to persons
operating hotels, motels, short-term rentals, and the following businesses:
(i) Trailer camps and recreational vehicle
parks that rent space to transient tenants for house trailers, campers,
recreational vehicles, mobile homes, tents, and similar
accommodations.
(ii) Educational
institutions that sell overnight lodging to persons other than students.
Information regarding educational institutions is provided in WAC
458-20-167
(Educational institutions, school districts, student organizations, and private
schools).
(iii) Private lodging
houses, dormitories, bunkhouses, and similar accommodations operated by or on
behalf of a business or school solely for the accommodation of employees of the
business or students of the school, which are not held out to the public as a
place where sleeping accommodations may be obtained.
(b) This rule does not apply to persons
operating the following businesses:
(i)
Hospitals, sanitariums, nursing homes, rest homes, and similar institutions.
Information regarding operating these establishments is provided in WAC
458-20-168
(Hospitals, nursing homes, assisted living facilities, adult family homes and
similar health care facilities).
(ii) Apartments or condominiums where the
rental is for one month or more. Information regarding rentals for one month or
more and the distinction between a rental of real estate and the license to use
real estate is provided in WAC
458-20-118
(Sale or rental of real estate, license to use real estate).
(3)
Transient
tenant defined. The term "transient tenant" as used in this rule means
any guest, resident, or other occupant to whom lodging and other services are
furnished under a license to use real property for less than one month, or less
than thirty continuous days if the rental period does not begin on the first
day of the month. Providing lodging for a continuous period of one month or
more to a guest, resident, or other occupant is a rental or lease of real
property. It is presumed that when lodging is provided for a continuous period
of one month or more, or thirty continuous days or more if the rental period
does not begin on the first day of the month, the guest, resident, or other
occupant purchasing the lodging is a nontransient upon the thirtieth day
without regard to a specific lodging unit occupied throughout the continuous
thirty-day period. An occupant who contracts in advance and remains in
continuous occupancy for the initial thirty days will be considered a
nontransient from the first day of occupancy provided in the
contract.
(4)
Business and
occupation tax (B&O). Where lodging is sold to a nontransient
tenant, the transaction is a rental of real estate and not subject to B&O
tax. See WAC
458-20-118
(Sale or rental of real estate, license to use real estate). Sales of lodging
and related services to transient tenants are subject to B&O tax, including
transactions that may have been identified or characterized as membership fees
or dues.
(a)
Retailing
classification. Gross income derived from the following activities
provided to transient tenants is subject to the retailing B&O tax:
* Rental of rooms for lodging;
* Rental of radio and television sets;
* Rental of rooms, space, and facilities not for lodging, such
as ballrooms, display rooms, meeting rooms, and similar accommodations;
* Automobile parking or storage; and
* Sale or rental of tangible personal property at retail. More
information regarding retail sales is provided in subsection (5) of this rule
discussing retail sales tax.
(b)
Service and other activities
classification. Commissions, amounts derived from accommodations not
available to the public, and certain lump sum fees charged for multiple
services are taxable under the service and other activities classification of
the B&O tax. Gross income derived from the following business activities
also is subject to service and other B&O tax.
(i) Commission income received by hotels,
motels, and similar businesses from other businesses providing a service to
their tenants. The following are examples of commission income that is subject
to the service and other activities B&O tax.
(A) Commission income received from acting as
a laundry agent for tenants when someone other than the hotel provides the
laundry service. Information regarding these commissions is provided in WAC
458-20-165
(Laundry, dry cleaning, linen and uniform supply, and self-service and
coin-operated laundry services).
(B) Commission income received from telephone
companies for long distance telephone calls when the hotel or motel merely acts
as an agent and commission income received from coin-operated telephones.
Information regarding these commissions is provided in WAC
458-20-159
(Consignees, bailees, factors, agents and auctioneers) and WAC
458-20-245
(Taxation of competitive telephone service, telecommunications service, and
ancillary service).
Refer to subsection (5) of this rule for a discussion of
telephone service fees subject to retail sales tax.
(C) Commission income or license fees for
permitting a satellite antenna to be installed on the premises or for
permitting a broadcaster or cable operator to make sales to the transient
tenants staying at the hotel or motel are subject to service and other
activities B&O tax.
(D)
Commission income from the rental of videos for use by tenants staying at the
hotel or motel when the hotel or motel operator is making the sales as an agent
for a seller.
(E) Commission income
received from the operation of amusement devices. Information regarding
amusement devices is provided in WAC
458-20-187
(Coin operated vending machines, amusement devices and service
machines).
(ii) Gross
income derived from the following business activities is subject to the service
and other activities B&O tax.
(A) The
rental of sleeping accommodations by private lodging houses (including
dormitories, bunkhouses, and similar accommodations) operated by or on behalf
of a business for its employees, which are not held out to the public as a
place where sleeping accommodations may be obtained.
(B) Deposits retained by the lodging business
as a penalty charged to a transient tenant for failure to timely cancel a
reservation.
(5)
Retail sales tax. Persons
providing lodging and other services generally must collect and remit retail
sales tax on the gross selling price of the lodging and other services. They
must pay retail sales or use tax on all items they purchase for use in
providing their services.
(a)
Lodging. All fees charged for lodging and related services to
transient tenants are retail sales. Included are fees charged for vehicle
parking and storage and for space and other facilities, including fees charged
by a trailer camp for utility services.
(i) A
tenant who does not contract in advance to stay at least thirty days is not
entitled to a refund of retail sales tax if the rental period later extends
beyond thirty days.
Example: Assume a tenant rents the same motel room on a weekly
basis. Further assume the tenant continues to extend occupancy on a weekly
basis until the tenant finally exceeds thirty days. Under these assumed facts,
the tenant is considered a transient for the first twenty-nine days of
occupancy and must pay retail sales tax on the rental fees. The rental fees are
exempt from retail sales tax beginning on the thirtieth day. The tenant is not
entitled to a refund of retail sales taxes paid on the rental fees for the
first twenty-nine days.
(ii) A business providing transient-tenant
lodging must complete the "transient rental income" information section of the
combined excise tax return. The four digit location code must be listed along
with the gross income received from transient-tenant lodging subject to retail
sales tax for each facility located within a participating city or
county.
(b)
Meals
and entertainment. All fees charged for food, beverages, and
entertainment activities are retail sales subject to retail sales tax.
(i) Fees charged for related services
including, but not limited to, room service, banquet room services, and service
charges and gratuities that are agreed to in advance by customers or added to
their bills by the service provider are subject to retail sales tax.
(ii) If meals sold under a promotion such as
a "two meals for the price of one," the taxable selling price is the actual
amount received as payment for the meals.
(iii) Meals sold to employees are subject to
retail sales tax. Information regarding meals furnished to employees is
provided in WAC
458-20-119
(Sales by caterers and food service contractors).
(iv) Sale of food and other items sold
through vending machines are retail sales. Information regarding income from
vending machines and the distinction between taxable and nontaxable sales of
food products is provided in WAC
458-20-187
(Coin operated vending machines, amusement devices and service machines) and
WAC
458-20-244
(Food and food ingredients).
(v)
When a lump sum fee is charged to nontransient tenants for providing both
lodging and meals, retail sales tax must be collected upon the fair selling
price of such meals. Unless accounts are kept showing the fair selling price,
the tax will be computed upon double the cost of the meals served. The cost
includes the price paid for food and drinks served, the cost of preparing and
serving meals, and all other costs incidental thereto, including an appropriate
portion of overhead expenses.
(vi)
Cover fees charged for dancing and other entertainment activities are retail
sales.
(vii) Fees charged for
providing extended television reception to transient tenants are retail
sales.
(c)
Laundry
services. Fees charged for laundry services provided by a hotel/motel in
the hotel's name are retail sales. Fees charged to tenants for self-service
laundry facilities are not retail sales, but the gross income derived from
these fees is subject to service and other activities B&O tax.
(d)
Telephone charges. Telephone
and "message service" fees charged to transient tenants are retail sales, but
commission income received from telephone companies for long distance telephone
calls when the hotel or motel merely acts as an agent is not subject to retail
sales tax.
If the hotel or motel is acting as an agent for a telephone
service provider that provides long distance telephone service to the transient
tenant, the actual telephone fees charged are not taxable income to the hotel
or motel. These amounts are advances and reimbursements. Information on
advances and reimbursements is provided in WAC
458-20-111
(Advances and reimbursements). Any additional fee added by the hotel or motel
to the actual long distance telephone fee, however, is a retail sale.
(e)
Telephone lines.
If the hotel or motel leases telephone lines and then provides telephone
services for a fee to either its transient or nontransient tenants, these fees
are retail sales. In this case the hotel or motel is in the telephone business.
Information regarding the telephone business is provided in WAC
458-20-245
(Taxation of competitive telephone service, telecommunications service, and
ancillary service). The hotel or motel may give a reseller permit for purchases
made to the provider of the leased lines and is not subject to the payment of
retail sales tax to the provider of the leased lines.
(f)
Rentals. Renting tangible
personal property such as movies and sports equipment is a retail
sale.
(g)
Purchases of
tangible personal property for use in providing lodging and related
services. All purchases of tangible personal property for use in
providing lodging and related services are retail sales. The fee charged for
lodging and related services is for services rendered and not for the resale of
any tangible property.
(i) Purchases subject
to retail sale tax include, but are not limited to, beds, room furnishings,
linens, towels, soap, shampoo, restaurant equipment, and laundry supply
services. Purchases, such as small toiletry items, are included even though
they may be provided for guests to take home if not used.
(ii) Sales of prepared meals or other
prepared items are subject to retail sales tax. Information regarding the sales
of food products is provided in WAC
458-20-244
(Food and food ingredients).
(h)
Sales to the United States
government. Sales made directly to the United States government are not
subject to retail sales tax. Sales to employees of the federal government are
taxable even if the employee ultimately will be reimbursed for the lodging fee.
(i)
Payment by government voucher or
check. If the lodging fee is paid by United States government voucher or
United States government check payable directly to the hotel or motel, the sale
is presumed to be a tax-exempt sale made directly to the federal
government.
(ii)
Charges to
government credit card. Various United States government contracted
credit cards are used to make payment for purchases of goods and services by or
for the United States government. Specific information about determining when a
purchase by government credit card is a tax-exempt purchase by the United
States government is available via the department's internet web site at
http://dor.wa.gov. (See the department's
lodging industry guide.) For specific information about determining when
payment is the direct responsibility of the United States government or the
employee, you may contact the department's taxpayer services division at
http://dor.wa.gov/content/ContactUs/
or:
Department of Revenue
Taxpayer Services
P.O. Box 47478
Olympia, WA 98504-7478
(6)
Special hotel/motel tax.
Some locations in the state impose special hotel/motel taxes. (These taxes are
imposed under chapters 67.28 and 36.100 RCW.) If a business is in one of those
locations, an additional tax is charged and reported under the special
hotel/motel portion of the tax return. The four digit location code, the
gross-selling price for providing the lodging, and the tax rate must be
completed for each location where the lodging is provided. The tax applies
without regard to the number of lodging units except that the tax imposed under
RCW
36.100.040(1) applies only
if there are forty or more lodging units. The tax only applies to the fee
charged for the rooms used for lodging by transient tenants. Additional fees
charged for telephone services, laundry, or other incidental charges are not
subject to the special hotel/motel tax. Nor is the fee charged for use of
meeting rooms, banquet rooms, or other special use rooms subject to this tax.
The tax applies, however, to fees charged for use of camping and recreational
vehicle sites.
(7)
Convention
and trade center tax. Subject to the exemptions in (b) of this
subsection, businesses located in King County selling lodging to transient
tenants including, but not limited to, any short-term rental, must charge their
customers the convention and trade center tax and report the tax under the
"convention and trade center" portion of the combined excise tax return.
(a) The convention and trade center tax
applies only to the fees charged for the rooms, or camping or recreational
vehicle sites, used to provide lodging for transient tenants. Each campsite is
considered a single unit.
Additional fees charged for telephone services, laundry, or
other incidental charges are not subject to the convention and trade center
tax. Fees charged for the use of meeting rooms, banquet rooms, or other special
use rooms are also not subject to the convention and trade center tax.
(b) Exemptions. The following are
exempt from the convention and trade center tax:
(i) A business in a town with a population of
less than three hundred people that has fewer than sixty rooms that are
available or being used to provide lodging to transient tenants, regardless of
whether the business also rents units to nontransient tenants and the combined
number of transient and nontransient lodging units is sixty rooms or
more;
(ii) Businesses classified as
hostels;
(iii) Any lodging that is
concurrently subject to a tax on engaging in the business of being a short-term
rental operator imposed by a city in which a convention and trade center is
located;
(iv) Any lodging that is
operated by a university health care system exclusively for family members of
patients; and
(v) Any lodging that
is operated as a charity described in (c)(iii)(B) of this subsection, is
otherwise exempted in this subsection, or is emergency lodging to homeless
people as described in subsection (9) of this rule.
(c) Definitions. The definitions in this
subsection apply to the convention and trade center tax:
(i) "Hostel" means a structure or facility
where a majority of the rooms for sleeping accommodations are hostel
dormitories containing a minimum of four standard beds designed for
single-person occupancy within the facility. Hostel accommodations are
supervised and must include at least one common area and at least one common
kitchen for guest use.
(ii) "Hostel
dormitory" means a single room, containing four or more standard beds designed
for single-person occupancy, used exclusively as nonprivate communal sleeping
quarters, generally for unrelated persons, where such persons independently
acquire the right to occupy individual beds, with the operator supervising and
determining which bed each person will occupy.
(iii) "Short-term rental" means a lodging
use, that is not a hotel or motel, in which a short-term rental operator offers
or provides a dwelling unit, or portion thereof, to a guest or guests for a fee
for fewer than thirty consecutive nights. The term "short-term rental" does not
include:
(A) A dwelling unit, or portion
thereof, that the same person uses for thirty or more consecutive nights;
and
(B) A dwelling unit, or portion
thereof, that is operated by an organization or government entity that is
registered as a charitable organization with the secretary of state, state of
Washington, and/or is classified by the federal Internal Revenue Service as a
public charity or a private foundation, and provides temporary housing to
individuals who are being treated for trauma, injury, or disease and/or their
family members.
(d) The four digit location code,
gross-selling price for the lodging, and the tax rate must be completed for
each location where the lodging is provided.
(8)
Tourism promotion area
charge. A legislative authority as defined in
RCW
35.101.010 may impose a charge on the
activity of providing lodging by a business located in the tourism promotion
area, except for temporary medical housing that is exempt under
RCW
82.08.997 (Exemptions-Temporary medical
housing). The charge is administered by the department and must be collected by
the business providing the lodging from the transient tenant. The charge is not
subject to the sales tax rate limitations of
RCW
82.14.410. To determine whether your lodging
business must collect and remit the charge, refer to the special notices for
tourism promotion areas at http://dor.wa.gov/content/GetA
FormOrPublication/PublicationBySubject/tax_sn_main.aspx or the lodging industry
guide at http://dor.wa.gov/content/
doingbusiness/BusinessTypes/Industry/lodging/.
(9)
Providing emergency lodging to
homeless people. The fee charged for providing emergency lodging to
homeless people purchased via a shelter voucher program administered by cities,
towns, counties, or private organizations that provide emergency food and
shelter services is exempt from the retail sales tax, the convention and trade
center tax, and the special hotel/motel tax. This form of payment does not
influence the required minimum of transient rooms available for use as
transient-lodging units under the "convention and trade center tax" or under
the "special hotel/motel tax."
Statutory Authority:
RCW
82.32.300 and
82.01.060. 10-22-067, §
458-20-166, filed 10/29/10, effective 11/29/10. Statutory Authority:
RCW
82.32.300. 94-05-001, § 458-20-166,
filed 2/2/94, effective 3/5/94; 92-05-064, § 458-20-166, filed 2/18/92,
effective 3/20/92; 88-20-014 (Order 88-6), § 458-20-166, filed 9/27/88;
83-07-033 (Order ET 83-16), § 458-20-166, filed 3/15/83. Statutory
Authority:
RCW
82.01.060(2) and
82.32.300. 78-07-045 (Order ET
78-4), § 458-20-166, filed 6/27/78; Order ET 70-3, § 458-20-166 (Rule
166), filed 5/29/70, effective 7/1/70.