Are online hotel-booking services that can't set the room price 'room remarketers' that must collect New York hotel sales tax?

Plain-English summary

Two foreign-based online booking services let travelers reserve hotel rooms (including in New York) through their websites. Each collects a non-refundable deposit (typically 10%) -- plus, in one case, a small reservation fee and optional cancellation-protection fee -- and keeps it as its charge for booking, IT, and advertising services. The hotel sets the room price, and the traveler pays all other charges directly to the hotel. They asked whether they're room remarketers who must collect New York hotel sales tax.

The Office of Counsel concluded they are not room remarketers (and not hotel operators), so they need not collect the tax:

• New York taxes the rent for hotel occupancy (Tax Law section 1105(e)), and "persons required to collect tax" include any hotel operator -- which includes a room remarketer (sections 1131(1), 1101(c)(3)).
• A "room remarketer" (section 1101(c)(8)) arranges occupancy for rent in an amount it determines, directly or indirectly. The Department's guidance is explicit: businesses that reserve rooms but can't set/mark up the rent (the hotel fixes it) are not room remarketers (TSB-M-10(10)S).
• These services don't determine the rent -- the hotel does. Setting the deposit or a reservation fee is not determining rent. So they're not room remarketers, and they're not hotel operators (they don't operate a building for lodging).
• Result: they don't collect the State/local hotel sales tax or the NYC unit fee (section 1104). The hotel operator and the occupant remain jointly liable for those amounts.
• The opinion doesn't address any locally imposed and administered hotel occupancy tax.

What this means for you

Online travel agencies / booking platforms

The dividing line is who sets the rent. If the hotel fixes the room price and you only earn a booking fee or deposit you keep, you're a nontaxable booking agent, not a room remarketer -- you don't collect NY hotel sales tax. If you set or mark up the room price the guest pays, you likely are a room remarketer and must collect.

Hotels working with agents

When the booking agent isn't a remarketer, the hotel and guest stay jointly liable for the sales tax on the full rent -- make sure that tax is collected on the room charge.

Local hotel taxes are separate

This covers only the state-administered sales tax and NYC unit fee. City/county hotel occupancy taxes that localities run themselves are not addressed -- check those separately.

Common questions

Q: We keep a 10% deposit -- does that make us a room remarketer?
A: No. Setting the deposit (or a reservation fee) isn't determining the room rent. The hotel sets the rent, so you're not a room remarketer.

Q: Who collects the sales tax on the room then?
A: The hotel. The hotel operator and the occupant remain jointly liable for the sales tax on the full rent (and the NYC unit fee, if applicable).

Q: When WOULD a booking site have to collect?
A: When it determines (sets or marks up) the rent the guest pays -- then it's a room remarketer and a person required to collect tax.

Q: Does this cover NYC or county hotel taxes?
A: No. It addresses only the state-administered sales tax and NYC unit fee, not locally administered hotel occupancy taxes.

Citations and references

• Tax Law section 1105(e) (sales tax on hotel room occupancy)
• Tax Law section 1101(c)(8) (definition of room remarketer)
• Tax Law section 1101(c)(3) (operator of a hotel; includes room remarketer)
• Tax Law section 1104 (New York City hotel unit fee)
• Tax Law section 1131(1) (persons required to collect tax)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2015.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a15_43s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-15(43)S
Sales Tax
November 13, 2015

Office of Counsel

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S131022A

The Department of Taxation and Finance received Petitions for Advisory Opinions from
REDACTED (Petitioner 1) and REDACTEDREDACTED (Petitioner 2). Petitioners ask
whether they qualify as room remarketers for sales tax purposes.
We conclude that Petitioners are not required to collect State and local sales and use taxes
because the Petitioners do not meet the definition of “hotel operator” or “room remarketer” under
the New York Tax Law.
Facts
Petitioners 1 and 2 are both located outside of the United States and run similar services
of booking hotel rooms for travelers, including many rooms in New York State. Neither
Petitioner operates or maintains an inventory of rooms on its own behalf. Similarly, Petitioners
do not directly purchase hotel rooms in New York State for resale. However, Petitioners’
employees meet with employees of larger hotels at their locations within New York State.
Through its website, Petitioner 1 facilitates the online purchase and reservation of hotel
rooms by third party customers (travelers). Petitioner 1 enters into a standard license agreement
with hotel operators to provide information technology and advertising services, including listing
rooms on its website. Occasionally, Petitioner 1 licenses property management software, only
available electronically, to the hotel operators free of charge. At the time of booking, Petitioner
1 collects a non-refundable deposit at a fixed percentage of the reservation, typically 10% of the
total value of the online reservation. This reservation deposit is retained by Petitioner 1 as a
charge for IT and advertising services. Prior to December 2013, when reservations were booked
through its website, Petitioner 1 also collected a flat, non-refundable reservation fee, usually in
the amount of $2 per reservation. Alternatively, the traveler could purchase a “gold card” for
$10, which would cover all of the reservation fees within a 12-month period. The traveler also
had the option of paying a cancellation protection fee. In the event that a traveler who purchased
this fee cancelled a reservation, the traveler could apply his or her deposit to a future booking.
Beginning in December 2013, Petitioner 1 ceased charging the $2 reservation fee and no
longer offered the gold card for sale. The cancellation protection fee was also replaced with two
types of bookings – non-flexible and standard flexible. If a traveler cancels a non-flexible

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TSB-A-15(43)S
Sales Tax
November 13, 2015

booking, his or her deposit is forfeited. If a traveler cancels a standard flexible booking, the
deposit may be credited toward another booking within 6 months after cancellation.
Petitioner 2 enters into contracts with hotel operators to act as a booking agent. The hotel
operators determine the price of the rooms and Petitioner 2 markets the rooms on its website and
allows travelers to make reservations there. At the time of the booking, Petitioner 2 collects
from the traveler a non-refundable deposit at a fixed percentage of the total value of the
reservation, typically set at 10%. The deposit is retained by Petitioner 2 as its charge for the
services it provides to the hotel room operators. The traveler also has the option of paying a
payment protection fee, which is either a fixed amount or a percentage of the deposit. In the
event the traveler who pays this fee cancels a reservation, the deposit is refunded in the form it
was originally made (e.g., credit card).
Neither Petitioner determines the cost of the hotel reservations; these are set by the hotel
operators. All other costs associated with the traveler’s stay are paid directly to the hotel
operators. After collecting the deposit, Petitioners have no further obligation with respect to the
traveler and cancelations must be made by contacting the hotel operator directly.

Analysis
With certain exceptions not relevant here, Tax Law § 1105(e)(1) imposes sales tax on “the
rent for every occupancy of a room or rooms in a hotel in this state.” In addition, occupancy of a
unit within a hotel located in New York City is subject to a fee of $1.50 per day, unless the
occupant is a permanent resident or the rent is less than $2.00 per day. See Tax Law § 1104. A
“unit” is a room or a suite of rooms that is normally rented to the same occupant(s) at the same
time and billed as a single unit. See TSB-M-05(2)S.
“Persons required to collect tax” include “every vendor of tangible personal property or
services; every recipient of amusement charges; and every operator of a hotel.” Tax Law §
1131(1). An “operator” of a hotel is “[a]ny person operating a hotel” and includes “a room
remarketer and such room remarketer shall be deemed to operate a hotel or portion thereof, with
respect to which such person has the rights of a room remarketer.” Tax Law § 1101(c)(3).
Tax Law § 1101(c)(8) defines a “room remarketer” as “[a] person who reserves, arranges
for, conveys, or furnishes occupancy, whether directly or indirectly, to an occupant for rent in an
amount determined by the room remarketer, directly or indirectly, whether pursuant to a written
or other agreement. Such person's ability or authority to reserve, arrange for, convey, or furnish
occupancy, directly or indirectly, and to determine rent therefor, shall be the “rights of a room
remarketer.”

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TSB-A-15(43)S
Sales Tax
November 13, 2015

“Businesses, such as travel agencies, that reserve rooms on behalf of their
customers and do not have the right to determine the amount of rent that their customer
pays for the room (i.e., the rent is fixed and determined by the hotel, and is not allowed to
be marked-up by the business that reserves the room on behalf of its customer), are not
room remarketers . . . .” TSB-M-10(10)S
Petitioners charge the hotels a fee for their booking services and the full charge
for the occupancy of a room is determined by and paid to the hotel operator. Petitioners
do not have the right to determine the rent for occupancy, either directly or indirectly.
The fact that Petitioners set the amount of the deposit and Petitioner 1 sets the amount of
the reservation fee does not constitute determining rent for the purposes of the room
remarketer definition. See TSB-A-04(6)S. Accordingly, Petitioners are not room
remarketers under the Tax Law. Neither are Petitioners hotel operators, because they are
not operating a building or portion thereof for the lodging of guests. Therefore,
Petitioners are not required to collect the sales tax imposed by § 1105(e), or the unit fee
for hotel occupancy within New York City.
Under these circumstances, the hotel operator and the occupant remain jointly
liable for the sales tax on the full amount of rent for any occupancies in New York State
that are arranged through Petitioners, and on the unit fee, if the occupancy is within New
York City, unless some exemption applies. See Tax Law §§ 1104, 1105(e).
Finally, we note that this opinion does not address Petitioners’ liability under any
locally imposed and administered hotel occupancy tax.

DATE: November 13, 2015

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.