When a vacation-rental booking agent takes a commission out of what the guest pays for a Colorado short-term rental, is sales/lodging tax calculated on the full amount the guest paid, including the agent's commission?

Plain-English summary

A company markets and books Colorado vacation-rental properties for property managers (it doesn't manage the properties itself). A guest finds a rental through the company's website or by phone, pays the company the advertised rate, and the company forwards the payment to the property manager minus a commission it keeps. The question: when the lodging tax is calculated, does the taxable amount include the commission the booking company retained?

The Department's answer is yes. Colorado taxes "the entire amount charged to any person for rooms or accommodations" rented for 30 days or less (§ 39-26-704(4); § 39-26-104(1)(f)). The statute defines the taxable furnishing of accommodations broadly enough to include a "person acting in a representative capacity" — and a booking agent collecting the guest's payment fits that description. Because the tax is calculated on the price paid by the customer, and the commission is simply a slice of that same payment the guest made, the commission is part of the taxable base. The agent doesn't get to carve its commission out as a separate, untaxed service.

In short: it's the full advertised rate the guest pays that's taxed, regardless of how the money is later split between the booking agent and the property manager.

What this means for you

Vacation-rental booking agents and OTAs

Calculate lodging tax on the entire amount the guest pays you, not on the net you forward to the property manager after taking your cut. Your commission is inside the taxable room charge. Make sure your tax collection is built on the gross guest payment so you're not under-collecting.

Property managers and rental owners

Even though the booking agent keeps a commission, the tax base is the full rate the guest paid. Coordinate with your booking partners on who collects and remits the lodging tax so the full guest payment is covered once and correctly — and confirm the agent isn't taxing only the net amount it passes through to you.

Accountants advising short-term-rental clients

The driver is the breadth of § 39-26-102(11) ("person acting in a representative capacity") combined with the "entire amount charged" rule in § 39-26-704(4). How the consideration is internally allocated between agent and manager doesn't shrink the tax base. Watch the home-rule-city caveat — many resort and mountain towns are self-collected and run their own lodging taxes.

Common questions

Q: Is a vacation-rental booking agent's commission subject to Colorado sales/lodging tax?
A: Yes — it's part of the taxable room charge. Tax is figured on the entire amount the guest pays, and the commission is just a portion of that payment, so it's included in the tax base.

Q: Do I tax the gross guest payment or the net I forward to the owner?
A: The gross. Colorado taxes the entire amount charged to the guest for the accommodation; the commission split between agent and property manager doesn't reduce the taxable amount.

Q: Does it matter that the booking agent doesn't own or manage the property?
A: No. The statute reaches a "person acting in a representative capacity" who furnishes accommodations, which covers a booking agent collecting the guest's payment.

Q: Can I rely on this letter?
A: Only as general guidance. A General Information Letter is not binding on the Department and makes no specific determination. For a binding answer on your facts, request a private letter ruling — and check the lodging tax rules of any self-collected home-rule city.

Citations and references

Statutes and rules:
- § 39-26-104(1)(f), C.R.S. (tax on living accommodations rented 30 days or less)
- § 39-26-102(11), C.R.S. (furnishing of rooms/accommodations, including by a person acting in a representative capacity)
- § 39-26-104(1), C.R.S. (sales tax calculated on the price paid)
- § 39-26-704(4), C.R.S. (tax on the entire amount charged for rooms/accommodations)

Source

• Landing page: Colorado Sales & Use Tax Letter Rulings
• Original PDF: GIL-16-007.pdf

Original ruling text

Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]

GIL-16-007
May 18, 2016
XXXXXXXXXXXXXXX
Attn: XXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
Dear XXXXXXXXXXX,
You submitted on behalf of XXXXXXXXXXXXX (“Company”) a request for guidance on whether
Company is liable for sales tax on commission paid to Company for living accommodations.
The Colorado Department of Revenue (“Department”) issues general information letters and
private letter rulings. A general information letter provides a general overview of the relevant tax
issues and is not binding on the Department. A private letter ruling provides a specific
determination for a specific set of facts, is binding on the Department but not on the taxpayer, and
requires payment of a fee. For more information about general information letters and private
letter rulings, please see Department Rule 1 CCR 201-1, 24-35-103.5.
The Department treats your request as a general information letter. It is important to remember
that general information letters, such as this one, are general discussions of tax law and are not a
determination of the tax consequence of any particular action or inaction. If you would like the
Department to issue a private letter ruling on the issues you raise, you must submit a new request
and provide the fee in compliance with Department Rule 1 CCR 201-1, 24-35-103.5.
Issue
Does the calculation of sales tax on living accommodations booked by Company include the
commission retained by Company?
Background
Company is a professional marketing and booking agent for vacation rental properties located in
Colorado. Company is responsible for marketing and booking of properties on behalf of property
managers. Company does not provide management services. Customers contact Company,
either through Company’s website or by calling the Company. In either case, customers identify
the living accommodations that they would like to book and pay Company the advertised rate.
Company notifies the property management company of the booking and forwards the customer’s
payment, less an amount that Company retains for as a commission.
Structure of Analysis
To determine whether Company is required to collect sales tax on the commission, the Department
will examine the following questions:
1. Is the service described taxable under § 39-26-104(1), C.R.S.?

a. Is the service the furnishing of living accommodations taxable under § 3926-104(1)(f), C.R.S.?
b. Is Company an entity identified in § 39-26-102(11), C.R.S. as one who is
furnishing living accommodations?
2. How is sales tax calculated pursuant to § 39-26-104(1), C.R.S.?
Discussion
Colorado levies sales tax on the entire amount charged to any person for rooms or
accommodations for a period of thirty days or less (emphasis added).1 The taxable sale of a room
or accommodation is defined as,
the furnishing [of] rooms or accommodations by any person, ..., or person acting in
a representative capacity or any other combination of individuals by whatever name
known to a person who for consideration uses, possesses, or has the right to use or
possess any room ... under any concession, permit, right of access, license to use,
or other agreement, or otherwise.2
Company appears to be acting in a representative capacity to the property managers and, as such,
falls within the application of this statute.
Sales tax is calculated on the price paid by the customer.3 Colorado’s sales tax statute expressly
provides that “there is levied and there shall be collected and paid a tax . . . [o]n the entire amount
charged to any person for rooms or accommodations as designated in section 39-26-102(11).”4
That portion of the customer’s payment taken by Company as a commission is part of the price
paid by the customer and, therefore, is included in the sales tax calculation.
Miscellaneous
This letter represents the good faith opinion of Department personnel who are knowledgeable on
state taxes issues. However, the Department does not make a specific determination here on any
of the issues raised and the Department is not bound by this general information letter.
The Department administers state and state-administered local sales and use taxes. This letter
does not address sales and use taxes administered by home-rule cities and home-rule
counties. You may wish to consult with local governments which administer their own sales or use
taxes about the applicability of those taxes. Visit our web site at www.colorado.gov/tax for more
information about state and local sales taxes.
Enclosed is a redacted version of this letter. Pursuant to statute and regulation, this redacted letter
will be made public within 60 days of the date of this letter. Please let me know in writing within
that 60 day period whether you have any suggestions or concerns about this redacted letter.
Sincerely,

Office of Tax Policy
Colorado Department of Revenue

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4

2

§ 39-26-104(1)(f), C.R.S. and § 39-26-704(4), C.R.S.
§ 39-26-102(11), C.R.S.
§ 39-26-104(1), C.R.S.
§ 39-26-104(f), C.R.S. (emphasis added).
DR 4010A (06/11/14)