If a business pays for an employee's hotel room for more than thirty days, does the hotel still have to charge sales tax on that rental?

Subject

Taxation of Hotel Rooms where Individuals Reside more than 30 Days

Plain-English summary

The Missouri Department of Revenue ruled that a hotel room rented to the same person (or the same group of people) for thirty consecutive days or more is exempt from sales tax as a 'permanent resident' stay -- and that exemption applies regardless of whether an individual or a business pays for the room.

Applicant rents hotel rooms to both businesses and individuals, with some stays lasting up to and beyond thirty days. Applicant asked whether it should charge sales tax on a rental of thirty days or more when the payment comes from a business rather than the individual actually staying in the room.

The Department said no, as long as the same individual (or the same group of individuals) stays in the room for more than thirty consecutive days. Under Section 144.020.1(6), RSMo, sales tax applies to charges for hotel and motel rooms generally. But 12 CSR 10-110.220.3(B) exempts a 'permanent resident' from tax on lease or rental payments, and 12 CSR 10-110.220.2 defines a permanent resident as an individual who contracts in advance for a room for thirty consecutive days or more and who actually stays that long -- noting specifically that 'businesses do not qualify as permanent residents.'

Putting those pieces together, the Department concluded that taxability turns on the character of the individual or individuals actually occupying the room, not on the character of whoever pays for it. If a single natural person or an identical group of natural persons occupies a room for thirty or more consecutive days, that rental is not subject to sales tax -- even if a business paid for it.

What this means for you

Hotels and lodging providers

If your business rents rooms to guests who stay thirty or more consecutive days, you should look at who is actually occupying the room, not who is paying the invoice, when deciding whether to charge sales tax. As long as the same individual or identical group of individuals occupies the room for the full thirty-plus day period, the rental qualifies for the permanent-resident exemption under 12 CSR 10-110.220 -- even if a corporate client, employer, or other business entity is the one being billed.

Businesses paying for employee lodging

If your company pays for an employee's extended hotel stay, this ruling indicates the hotel should not add sales tax to that bill once the stay reaches thirty consecutive days, provided the same employee (or same group of employees) occupies the room the whole time. The business itself cannot be a 'permanent resident' under 12 CSR 10-110.220.2 -- the exemption depends on the natural person actually staying there, not on the entity paying.

Accountants and tax professionals

When reviewing lodging expenses or advising a hotel client on room-tax collection, confirm two things under this ruling: (1) whether the occupant of the room stayed (or was contracted in advance to stay) thirty consecutive days or more, and (2) whether that occupant was the same individual or identical group throughout. A change in payer does not defeat the exemption, but a change in who physically occupies the room could. Also remember this is a letter ruling binding only as to the requesting Applicant for three years, so confirm your client's facts match before relying on it.

Common questions

Q: Does a hotel have to charge sales tax on a room rented for more than thirty days if a business pays for it?
A: No, as long as the same individual stays in the room for more than thirty consecutive days. The taxability depends on who occupies the room, not on who pays.

Q: Can a business itself qualify as a 'permanent resident' for this exemption?
A: No. 12 CSR 10-110.220.2 defines a permanent resident as an individual who contracts in advance for and actually stays in a room for thirty consecutive days or more, and specifically states that businesses do not qualify as permanent residents.

Q: What if a company books a room for thirty-plus days but a different employee stays there each week?
A: The ruling's reasoning turns on the same individual or an identical group of natural persons actually remaining in the room for the full thirty-consecutive-day period. The ruling does not address a rotating-occupant scenario, so that fact pattern was not decided here.

Q: Is simply reserving a room for thirty days enough, even if the guest checks out early?
A: The regulation requires the individual to actually remain a guest for thirty consecutive days or more -- the ruling notes that "a permanent reservation for any room is not synonymous with permanent resident."

Q: What statute and regulations does this ruling rely on?
A: Section 144.020.1(6), RSMo (the sales tax on hotel and motel room charges), and 12 CSR 10-110.220.2 and .3(B) (defining 'permanent resident' and exempting permanent residents from tax on room rentals).

Q: Can another hotel operator rely on this ruling for its own guests?
A: Not automatically. This is a Missouri letter ruling, binding on the Department only as to the requesting Applicant, only for three years from its date, and only so long as the facts and law remain unchanged. Another business should confirm its facts match and consult a tax professional.

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8194

Original ruling text

Dear Applicant:

This is a letter ruling issued by the Director of Revenue under section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your request received by the General Counsel's Office via email communication on April 7, 2022.

The facts as presented in your letter ruling request are summarized as follows:

Applicant provides hotel room rental to businesses and individuals.  Rooms may be rented for periods of time up to and exceeding thirty days.  Applicant receives payments from both individuals (natural persons) and businesses for its room rentals.

ISSUE:

Should Applicant charge sales tax for room rentals equal to or exceeding thirty days in duration if the rental is paid by a business instead of an individual?

RESPONSE:

No, as long as the same individual stays in the room for more than thirty days.  The taxability of a room rental for a period of thirty consecutive days or more depends upon the character of the individual or individuals actually staying in that room, not upon the character of the payment.

Section 144.020.1(6) imposes a sales tax "on the amount of sales or charges for all rooms, meals and drinks furnished at any hotel, motel, tavern, inn, restaurant, eating house, drugstore, dining car, tourist cabin, tourist camp or other place in which rooms, meals or drinks are regularly served to the public."

12 CSR 10-110.220.3(B) provides that "a permanent resident is not subject to tax on their lease or rental payments.  A permanent reservation for any room is not synonymous with permanent resident."

12 CSR 10-110.220.2 defines permanent resident as "an individual who contracts in advance for a room for a period of thirty consecutive days or more and who actually remains a guest for thirty consecutive days or more.  Businesses do not qualify as permanent residents."

Therefore, the taxability of a room rental for a period of more than thirty consecutive days depends upon the character of the individual or individuals actually staying in that room, not upon the character of the payment.  If a room is occupied by a single natural person or an identical group of natural persons for the duration of a room rental lasting thirty or more consecutive days then that rental will not be subject to sales tax - regardless of the identity of the person paying for that rental.

This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals.  If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change.  For this reason, the interpretation set forth above should be reviewed on a regular basis.  Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

Should additional information be needed, please contact Associate Counsel Stephen S. Krogmeier, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, (573)-751-0961.

Sincerely,

Wayne Wallingford