Was a Kansas hotel's fixed monthly charge taxable when a hospital rented five rooms for a sleep laboratory rather than ordinary overnight lodging?

Plain-English summary

The hotel's $6,000 monthly charge was subject to Kansas retailers' sales tax even though the five rooms were used as a hospital sleep laboratory rather than ordinary guest rooms.

The hotel entered a three-year contract reserving five rooms exclusively for a hospital. The hospital planned to use them for sleep studies and keep privately owned computers, cameras, oxygen concentrators, monitors, and furniture in the rooms. The hotel would provide a bed and chair, linens, and daily cleaning.

The Department applied K.S.A. 79-3603(g), which imposed sales tax on gross receipts from the service of renting rooms by hotels. The letter gave a direct answer: the contract amount was taxable.

The ruling did not create an exception based on the hospital's medical use or the fact that the rooms did not fit an ordinary description of “sleeping rooms.” The transaction remained a hotel renting rooms for a fixed charge.

What this means for you

Hotels leasing rooms for specialized uses

A long-term or block-room contract can remain a taxable hotel-room rental even when the customer uses the rooms for testing, equipment, offices, or another specialized purpose.

Hospitals and medical providers

Contracting for rooms inside a hotel does not become exempt merely because the rooms support medical services. The customer's use must be evaluated separately from the hotel's taxable room-rental service.

Contract and billing teams

Identify the entire fixed room charge as the amount addressed by this ruling. The Department taxed the $6,000 monthly contract payment as hotel room-rental gross receipts.

Common questions

Q: How many rooms did the hospital rent?
A: Five rooms reserved exclusively for the hospital.

Q: What was the contract price?
A: A fixed $6,000 per month for three years.

Q: Did using the rooms as a sleep lab make the rent exempt?
A: No. The Department applied the hotel-room-rental tax to the contract amount.

Q: What did the hotel provide?
A: A bed and chair, linens, and daily cleaning; the hospital supplied its own medical and computer equipment and furniture.

Citations and references

• K.S.A. 79-3603(g) — tax on gross receipts from renting rooms by hotels

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2004-062

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

December 29, 2004

XXXX
XXXX
XXXX

Re: Private Letter Ruling Request Dated December 27, 2004

Dear XXXX:

This responds to the above referenced correspondence, in which you state:

“I am writing to request a Private Letter Ruling for AAAA, which is a hotel located in BBBB. They are entering into a three-year contract with CCCC, where the hospital will rent a block of five rooms for a fixed monthly amount of $6,000. The rooms will be used for a sleep laboratory by the hospital, which does not comply with the ordinary term “sleeping rooms” as referred to in the statute. These rooms are set aside for use by CCCC only, and will house the hospital’s privately-owned equipment, such as computers, cameras, oxygen concentrators, monitors and furniture. The hotel is supplying the bed and a chair, as well as linens and daily cleaning.”

You ask whether the contract amount will be subject to sales tax. The answer is yes. K.S.A. 2003 Supp. 79-3603(g) imposes sales tax on the “gross receipts from the service of renting of rooms by hotels.”

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Very truly yours,

Richard L. Cram

Date Composed: 01/04/2005 Date Modified: 01/04/2005

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