If I rent out my property through a third-party booking platform, am I responsible for Hotel Operators' Occupation Tax if the platform fails to remit it?

Plain-English summary

This Illinois General Information Letter answers a narrow but common question for short-term rental hosts: if you rent out a room, house, or unit through a third-party booking platform, and that platform collects and is supposed to remit the Hotel Operators' Occupation Tax on your behalf, who is on the hook if the platform defaults?

The Department's answer is that the Hotel Operators' Occupation Tax Act imposes the tax on persons "engaged in the business of renting, leasing or letting rooms in a hotel," and a "hotel" is broadly defined to include any building where the public can obtain living quarters or sleeping accommodations for a fee. Under the statute's definitions of "rent" and "occupancy" (35 ILCS 145/2(6) and 145/2(3)), the tax obligation runs to the owner/host of the accommodation being rented — not to the third-party platform that merely facilitates the booking.

There is one exception carved out in the letter: some third-party platforms enter into a direct agreement with the Illinois Department of Revenue under which the platform itself agrees to remit the Hotel Operators' Occupation Tax on behalf of its hosts. When such an agreement exists, the Department will look to the platform for that tax liability. But absent that kind of agreement, the legal responsibility to pay the tax stays with the owner/host, and hosts are told to contact their platform directly to find out whether it has such an arrangement with the Department.

As with all GILs, this letter does not create binding Department policy and simply points the requester to the statute and existing regulations — it is not a ruling on a specific taxpayer's facts.

What this means for you

Short-term rental hosts using platforms like Airbnb or Vrbo

You, not the platform, are generally the party legally liable for Hotel Operators' Occupation Tax on your rental income, unless your specific platform has an agreement with the Illinois Department of Revenue to collect and remit that tax for you. Don't assume the platform's tax collection feature protects you if it fails to actually pay the state — check directly with the platform about whether it has entered into a remittance agreement with the Department.

Business owners and accountants advising rental property owners

When evaluating a client's exposure, look past whether a platform "shows" tax being collected on a guest folio, and confirm whether that platform is legally obligated to remit tax to Illinois under an agreement with the Department. If it is not, your client (the owner/host) remains the taxpayer of record and bears responsibility for any shortfall, including a platform's default.

Tax professionals researching liability chains

This GIL is a useful pointer to the statutory definitions that establish liability — "hotel" (35 ILCS 145/2(1)), "rent" (35 ILCS 145/2(6)), and "occupancy" (35 ILCS 145/2(3)) — but it does not itself resolve any specific taxpayer's facts, since it is non-binding and the underlying request (whether "COMPANY" or the requester would be liable if "COMPANY1" defaulted) suggests a multi-party or reseller arrangement whose details are otherwise redacted.

Common questions

Q: If I rent my property through a booking platform and the platform collects a "tax" from guests but never pays Illinois, am I still liable?
A: Based on this letter, yes — unless that platform has an agreement with the Illinois Department of Revenue to remit Hotel Operators' Occupation Tax on your behalf, the legal tax obligation belongs to the owner/host, not the platform.

Q: How do I know if my booking platform has an agreement with the Department to remit the tax for me?
A: The letter instructs hosts to contact the platform directly to determine whether it has entered into such an agreement with the Illinois Department of Revenue.

Q: What counts as a "hotel" under this tax?
A: The Hotel Operators' Occupation Tax Act defines "hotel" broadly as any building or buildings where the public may, for consideration, obtain living quarters, sleeping, or housekeeping accommodations — this can include short-term rental properties, not just traditional hotels or motels.

Q: Is this letter a binding ruling I can rely on for my own situation?
A: No. This is a General Information Letter (GIL), not a Private Letter Ruling. It is not a statement of Department policy and is not binding on the Department, even for the person who requested it. It merely points to the relevant statutes and regulations.

Q: What was the original question that prompted this letter?
A: The requester asked for confirmation that "COMPANY or myself would not be held responsible if COMPANY1 defaulted of Hotel/Motel tax collected and submitted to the State by COMPANY1" — the exact relationship between COMPANY and COMPANY1 is redacted, but the Department's general answer places responsibility on the owner/host absent a remittance agreement between the Department and the remitting party.

Citations and references

• 35 ILCS 145/2(1) (Hotel Operators' Occupation Tax Act definition of "hotel")
• 35 ILCS 145/2(6) (Hotel Operators' Occupation Tax Act definition of "rent")
• 35 ILCS 145/2(3) (Hotel Operators' Occupation Tax Act definition of "occupancy")
• 86 Ill. Adm. Code 480.101 (Hotel Operators' Occupation Tax regulations)
• 2 Ill. Adm. Code 1200.110 (procedures for Private Letter Rulings)
• 2 Ill. Adm. Code 1200.120 (General Information Letters)

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2020.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2020/st20-0020-gil.pdf

Original ruling text

ST 20-0020-GIL 10/02/2020

HOTEL OPERATORS’ TAX

This letter discusses the Hotel Operators’ Tax Act. See 86 Ill. Adm. Code 480.101. (This is a
GIL.)

October 2, 2020

Dear Xxxx:
This letter is in response to your letter received in our office March 1, 2019, in which you
requested information. The Department issues two types of letter rulings. Private Letter Rulings
(“PLRs”) are issued by the Department in response to specific taxpayer inquiries concerning the
application of a tax statute or rule to a particular fact situation. A PLR is binding on the Department,
but only as to the taxpayer who is the subject of the request for ruling and only to the extent the facts
recited in the PLR are correct and complete. Persons seeking PLRs must comply with the
procedures for PLRs found in the Department’s regulations at 2 Ill. Adm. Code 1200.110. The
purpose of a General Information Letter (“GIL”) is to direct taxpayers to Department regulations or
other sources of information regarding the topic about which they have inquired. A GIL is not a
statement of Department policy and is not binding on the Department. See 2 Ill. Adm. Code
1200.120. You may access our website at www.tax.illinois.gov to review regulations, letter rulings
and other types of information relevant to your inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
I am requesting confirmation that COMPANY or myself would not be held responsible if
COMPANY1 defaulted of Hotel/Motel tax collected and submitted to the State by
COMPANY1.
DEPARTMENT’S RESPONSE:
The Hotel Operators' Occupation Tax Act imposes a tax upon persons engaged in the
business of renting, leasing or letting rooms in a hotel, as defined in the Act. The Hotel Operators’
Occupation Tax Act defines “hotel” to include any building or buildings in which the public may, for
consideration, obtain living quarters, sleeping or housekeeping accommodations. See 35 ILCS
145/2(1). The Hotel Operators’ Occupation Tax Act defines “rent” as “the consideration received for
occupancy, valued in money, whether received in money or otherwise, including all receipts, cash,
credits and property or services of any kind or nature.” See 35 ILCS 145/2(6). The definition of “rent”
must be read in conjunction with the term “occupancy.” The Hotel Operators’ Occupation Tax Act
defines “occupancy” as “the use or possession, or the right to the use or possession, of any room or
rooms in a hotel for any purpose, or the right to the use or possession of the furnishings or to the
services and accommodations accompanying the use and possession of the room or rooms.” See 35
ILCS 145/2(3).
Therefore, in the context of the provision of short-term accommodations that are rented
through the use of a third-party platform, like the platform you mentioned in your letter, the third-party

ST 20-0020-GIL
Page 2
platform is not liable for The Hotel Operators’ Occupation Tax. Rather, the tax obligation is on the
owner/host of the accommodations which are being rented. However, there are situations where a
third-party platform agrees to remit the Hotel Operators’ Occupation Tax on behalf of the owner/host.
In those situations, the third-party platform would enter into an agreement with the Department
wherein the third-party platform agrees to remit taxes imposed on the rentals on its platform. Based
on the agreement with the third-party platform, the Department would look to the third-party platform
for any Hotel Operators’ Occupation Tax liability. Those renting on a third-party platform should
contact that platform to determine if that platform has entered into such an agreement with the
Department.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,

Debra M. Boggess
Associate Counsel
DMB:rkn